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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 20-F





(Mark One)



| ̈ | Registration statement pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934
|- | ------------------------------------------------------------------------------------------------

or



|x | Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended December 31, 2011

or



| ̈ | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from
 to

or



| ̈ | Shell company report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | -------------------------------------------------------------------------------------------

Date of event requiring this shell company report

Commission file number 001-15128

United Microelectronics Corporation

(Exact Name of Registrant as Specified in its Charter)





Taiwan, Republic of China

(Jurisdiction of Incorporation or Organization)

No. 3 Li-Hsin Road
II, Hsinchu Science Park,

Hsinchu City, Taiwan, Republic of China

(Address of Principal Executive Offices)

Peter Courture, +1 (650) 968-8855, peter@courture.com,

978
Highlands Circle, Los Altos, CA 94024, USA

(Name, Telephone, E-mail and/or Facsimile number and Address of Company
Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:



|                                                       |  |  |  |                                          
|------------------------------------------------------ |  |  |  | -----------------------------------------
|Title of Each Class                                    |  |  |  | Name of Each Exchange on which Registered
|                                                       |  | 
|American Depositary Shares, as evidenced by American   |  |  |  | New York Stock Exchange                  
|                                                       |  | 
|Depositary Receipts, each representing 5 Common Shares |  |  |  |                                          





Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

Indicate the number
of outstanding shares of each of the Issuers classes of capital or common stock as of the close of the period covered by the annual report.

13,084,341,565 Common Shares of Registrant issued as of December 31, 2011 (including 457,934,400 treasury shares)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.    Yes  x    No   ̈

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934.    Yes   ̈    No  x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    Yes  x    No   ̈

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes   ̈    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  x       
         Accelerated filer   ̈                
Non-accelerated filer   ̈

Indicate by check mark which basis of
accounting the registrant has used to prepare the financial statements included in this filing: U.S. GAAP   ̈

International Financial Reporting Standards as issued by the International Accounting Standards Board   ̈    Other  x

Indicate by check mark which financial statement item the registrant has elected
to follow.    Item 17   ̈    Item 18  x

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities
Exchange Act of 1934).    Yes   ̈    No  x









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UNITED MICROELECTRONICS CORPORATION

FORM 20-F ANNUAL REPORT

FISCAL YEAR ENDED DECEMBER 31, 2011

Table of Contents



|                                                                                      |  |      |     | 
|------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                      |  | Page |    
|                                                                                      | 
|SUPPLEMENTAL INFORMATION                                                              |  |      | 1   | 
|                                                                                      | 
|PART I                                                                                |  |      | 3   | 
|                                                                                      | 
|ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                         |  |      | 3   | 
|                                                                                      | 
|ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE                                       |  |      | 3   | 
|                                                                                      | 
|ITEM 3. KEY INFORMATION                                                               |  |      | 3   | 
|                                                                                      | 
|ITEM 4. INFORMATION ON THE COMPANY                                                    |  |      | 25  | 
|                                                                                      | 
|ITEM 4A. UNRESOLVED STAFF COMMENTS                                                    |  |      | 43  | 
|                                                                                      | 
|ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                  |  |      | 44  | 
|                                                                                      | 
|ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                    |  |      | 63  | 
|                                                                                      | 
|ITEM 7. MAJOR STOCKHOLDERS AND RELATED PARTY TRANSACTIONS                             |  |      | 67  | 
|                                                                                      | 
|ITEM 8. FINANCIAL INFORMATION                                                         |  |      | 68  | 
|                                                                                      | 
|ITEM 9. THE OFFER AND LISTING                                                         |  |      | 69  | 
|                                                                                      | 
|ITEM 10. ADDITIONAL INFORMATION                                                       |  |      | 72  | 
|                                                                                      | 
|ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                   |  |      | 90  | 
|                                                                                      | 
|ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                       |  |      | 93  | 
|                                                                                      | 
|PART II                                                                               |  |      |     | 
|                                                                                      | 
|ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUINCIES                              |  |      |     | 
|                                                                                      | 
|ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |  |      |     | 
|                                                                                      | 
|ITEM 15. CONTROLS AND PROCEDURES                                                      |  |      |     | 
|                                                                                      | 
|ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT                                            |  |      | 97  | 
|                                                                                      | 
|ITEM 16B. CODE OF ETHICS                                                              |  |      | 97  | 
|                                                                                      | 
|ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES                                      |  |      | 97  | 
|                                                                                      | 
|ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                  |  |      | 98  | 
|                                                                                      | 
|ITEM 16E. PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS       |  |      | 98  | 
|                                                                                      | 
|ITEM 16F. CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT                                |  |      | 98  | 
|                                                                                      | 
|ITEM 16G. CORPORATE GOVERNANCE                                                        |  |      | 98  | 
|                                                                                      | 
|ITEM 16H. MINE SAFETY DISCLOSURE                                                      |  |      | 98  | 
|                                                                                      | 
|PART III                                                                              |  |      | 99  | 
|                                                                                      | 
|ITEM 17. FINANCIAL STATEMENTS                                                         |  |      | 99  | 
|                                                                                      | 
|ITEM 18. FINANCIAL STATEMENTS                                                         |  |      | 99  | 
|                                                                                      | 
|ITEM 19. EXHIBITS                                                                     |  |      | 100 | 



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SUPPLEMENTAL INFORMATION

The references to United Microelectronics, we, us, our, our company and
the Company in this annual report refer to United Microelectronics Corporation and its consolidated subsidiaries, unless the context suggests otherwise. The references to Taiwan and R.O.C. refer to Taiwan,
Republic of China. The references to shares and common shares refer to our common shares, par value NT$10 per share, and ADSs refers to our American depositary shares, each representing five common shares. The
ADSs are issued under the Deposit Agreement, dated as of October 21, 2009, as amended, supplemented or modified from time to time, among United Microelectronics, JPMorgan Chase Bank, N.A. and the holders and beneficial owners from time to time
of American Depositary Receipts issued thereunder. R.O.C. GAAP means the generally accepted accounting principles in the Republic of China and U.S. GAAP means the generally accepted accounting principles in the United States.
Any discrepancies in any table between totals and sums of the amounts listed are due to rounding.

We publish our financial
statements in New Taiwan dollars, the lawful currency of the R.O.C. In this annual report, NT$ and NT dollars mean New Taiwan dollars, $, US$ and U.S. dollars mean United States dollars,
¥ means Japanese Yen, and  means EURO.

FORWARD-LOOKING STATEMENTS IN THIS ANNUAL REPORT
MAY NOT BE REALIZED

Our disclosure and analysis in this annual report contain or incorporate by reference some
forward-looking statements. Our forward-looking statements contain information regarding, among other things, our financial condition, future expansion plans and business strategy. We have based these forward-looking statements on our current
expectations and projections about future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. Although we believe that these expectations and projections are reasonable, such
forward-looking statements are inherently subject to risks, uncertainties and assumptions about us, including, among other things:



| |  |  | our dependence on frequent introduction of new product services and technologies based on the latest developments;
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | the intensely competitive semiconductor, communications, consumer electronics and computer industries and markets;
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | risks associated with our international business activities;
| | - |  | ------------------------------------------------------------



| |  |  | our dependence on key personnel;
| | - |  | --------------------------------



| |  |  | general economic and political conditions, including those related to the semiconductor, communications, consumer electronics and computer industries;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | natural disasters, such as earthquakes and droughts, which are beyond our control;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | possible disruptions in commercial activities caused by natural and human-induced disasters and outbreaks of contagious diseases;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



| |  |  | fluctuations in foreign currency exchange rates;
| | - |  | ------------------------------------------------



| |  |  | additional disclosures we make in our previous and future Form 20-F annual reports and Form 6-K periodic reports to the U.S. Securities and Exchange
Commission; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | those other risks identified in the Item 3. Key InformationD. Risk Factors section of this annual report.
| | - |  | ------------------------------------------------------------------------------------------------------------



1



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The words may, will, is/are likely to,
anticipate, believe, estimate, expect, intend, plan and similar expressions are intended to identify a number of these forward-looking statements. We do not and will not
undertake the obligation to update or revise any forward-looking statements contained in this annual report whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this annual report might not occur and our actual results could differ materially from those anticipated in these forward-looking statements.

GLOSSARY



|                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ASIC               |  | Application Specific Integrated Circuit. A custom-designed integrated circuit that performs specific functionswhich would otherwise require a number of off-the-shelf integrated
circuits to perform.                                                                                                                                                                                                                                                                                                                                                                         
|                   | 
|Cell               |  | Semiconductor structure in an electrical state which can store a bit of information, mainly used as the building block of memory array.                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                   | 
|Die                |  | A piece of a semiconductor wafer containing the circuitry of an unpackaged single chip.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                   | 
|DRAM               |  | Dynamic Random Access Memory. A type of volatile memory product that is used in electronic systems to store data and program instructions. It is the most common type of RAM and must
be refreshed with electricity hundreds of times per second or else it will fade away.                                                                                                                                                                                                                                                                                                   
|                   | 
|FPGA               |  | Field Programmable Gate Array. A programmable integrated circuit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                   | 
|Integrated Circuit |  | Entire electronic circuit built on a single piece of solid substrate and enclosed in a small package. The package is equipped with leads needed to electrically integrate the
integrated circuit with a larger electronic system. Monolithic and hybrid integrated circuits are distinguished by the type of substrate used.                                                                                                                                                                                                                                                  
|                   | 
|Interconnect       |  | The conductive path made from copper or aluminum that is required to achieve connection from one circuit element to the other circuit elements within a circuit.                                                                                                                                                                                                                                                                                                                                                                                                              
|                   | 
|Mask               |  | Photomask. A piece of glass on which an integrated circuit circuitry design is laid out.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                   | 
|Memory             |  | A group of integrated circuits that a computer uses to store data and programs, such as ROM, RAM, DRAM and SRAM.                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                   | 
|Micron             |  | A unit of spatial measurement that is one-millionth of a meter.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                   | 
|Nanometer          |  | A unit of spatial measurement that is one-billionth of a meter.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                   | 
|PC                 |  | Personal computer.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                   | 
|RAM                |  | Random Access Memory. A type of volatile memory forming the main memory of a computer where applications and files are run.                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                   | 
|ROM                |  | Read-Only Memory. Memory that is programmed by the manufacturer and cannot be changed. Typically, ROM is used to provide start-up data when a computer is first turned
on.                                                                                                                                                                                                                                                                                                                                                                                                    
|                   | 
|Scanner            |  | A photolithography tool used in the production of semiconductor devices. This camera-like step-and-scan tool projects the image of a circuit from a master image onto a
photosensitized silicon wafer.                                                                                                                                                                                                                                                                                                                                                                        
|                   | 
|Semiconductor      |  | A material with electrical conducting properties in between those of metals and insulators. Essentially, semiconductors transmit electricity only under certain circumstances, such
as when given a positive or negative electric charge. Therefore, a semiconductors ability to conduct can be turned on or off by manipulating those charges and this allows the semiconductor to act as an electric switch. The most common
semiconductor material is silicon, used as the base of most semiconductor chips today because it is relatively inexpensive and easy to create.



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|                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|------------------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|SoC                      |  | System-on-Chip. A chip that incorporates functions currently performed by several chips on a cost effectivebasis.                                                                                                                                                                                                                                                                                                                                                           
|                         | 
|SOI                      |  | Silicon-On-Insulator. Silicon wafer consisting of a thin layer of oxide, on top of which semiconductor devices are built.                                                                                                                                                                                                                                                                                                                                                   
|                         | 
|SRAM                     |  | Static Random Access Memory. A type of volatile memory product that is used in electronic systems to store data and program instructions. Unlike the more common DRAM, it does not
need to be refreshed.                                                                                                                                                                                                                                                                    
|                         | 
|Transistor               |  | Tri-terminal semiconductor device in which input signal (voltage or current depending on the type of transistor) controls output current. An individual circuit that can amplify
or switch electric current. This is the building block of all integrated circuits.                                                                                                                                                                                                         
|                         | 
|Volatile memory          |  | Memory products which lose their data content when the power supply is switched off.                                                                                                                                                                                                                                                                                                                                                                                        
|                         | 
|Wafer                    |  | Thin, round, flat piece of silicon that is the base of most integrated circuits.                                                                                                                                                                                                                                                                                                                                                                                            
|                         | 
|8-inch wafer equivalents |  | Standard unit describing the equivalent amount of 8-inch wafers produced after conversion, used to quantify levels of wafer production for purposes of comparison. Figures of
8-inch wafer equivalents are derived by converting the number of wafers of all dimensions (e.g., 6-inch, 8-inch and 12-inch) into their equivalent figures for 8-inch wafers. 100 6-inch wafers are equivalent to 56.25 8-inch wafers. 100 12-inch wafers
are equivalent to 225 8-inch wafers.

PART I



|ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
|------- | -----------------------------------------------------

Not applicable.



|ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE
|------- | ---------------------------------------

Not applicable.



|ITEM 3. | KEY INFORMATION
|------- | ---------------



|A. | Selected Financial Data
|-- | -----------------------

The selected balance sheet data as of December 31, 2010 and 2011 and the selected statements of income and cash flow data for the
years ended December 31, 2009, 2010 and 2011 are derived from our audited consolidated financial statements included elsewhere in this annual report. The selected balance sheet data as of December 31, 2007, 2008 and 2009 and the selected
statements of income and cash flow data for the years ended December 31, 2007 and 2008 are derived from our audited consolidated financial statements not included in this annual report.

Our financial statements have been prepared and presented in accordance with R.O.C. GAAP, which differs in many material respects from
U.S. GAAP. For the discussion of these differences, see Note 35 to our audited consolidated financial statements included elsewhere in this annual report. Some of the items in the statements of income, cash flow and balance sheets have been
reconciled to U.S. GAAP and are set forth below. The summary financial data set forth below should be read in conjunction with Item 5. Operating and Financial Review and Prospects and our financial statements and the notes to those
statements included elsewhere in this annual report.



3



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|                                                              |  |                                                  |         |   |      |  |         |      |  |  |         |   |  |      |         |   |     |  |         |   |  |  |        |  
|------------------------------------------------------------- |  | ------------------------------------------------ | ------- | - | ---- |  | ------- | ---- |  |  | ------- | - |  | ---- | ------- | - | --- |  | ------- | - |  |  | ------ | -
|                                                              |  | Year Ended December 31,                          |        
|                                                              |  | 2007                                             |         |   | 2008 |  |         | 2009 |  |  | 2010    |   |  | 2011 |        
|                                                              |  | NT$                                              |         |   | NT$  |  |         | NT$  |  |  | NT$     |   |  | NT$  |         |   | US$ | 
|                                                              |  | (in millions, except per share and per ADS data) |        
|Consolidated Statement of Income Data:                        |  |                                                  |         |   |      |  |         |      |  |  |         |   |  |      |         |   |     |  |         |   |  |  |        |  
|R.O.C. GAAP                                                   |  |                                                  |         |   |      |  |         |      |  |  |         |   |  |      |         |   |     |  |         |   |  |  |        |  
|Net operating revenues                                        |  |                                                  | 113,311 |   |      |  | 96,814  |      |  |  | 91,390  |   |  |      | 126,442 |   |     |  | 116,703 |   |  |  | 3,855  |  
|Cost of goods sold                                            |  |                                                  | (90,072 | ) |      |  | (84,102 | )    |  |  | (75,975 | ) |  |      | (89,518 | ) |     |  | (95,417 | ) |  |  | (3,152 | )
|                                                              |  |                                                  |         |   |      |  |         |      |  |  |         |   |  |      |         |   |     |  |         |   |  |  |        |  
|Gross profit                                                  |  |                                                  | 23,239  |   |      |  | 12,712  |      |  |  | 15,415  |   |  |      | 36,924  |   |     |  | 21,286  |   |  |  | 703    |  
|                                                              |  |                                                  |         |   |      |  |         |      |  |  |         |   |  |      |         |   |     |  |         |   |  |  |        |  
|                                                              |  |                                                  |         |   |      | 
|Operating expenses:                                           |  |                                                  |         |   |      |  |         |      |  |  |         |   |  |      |         |   |     |  |         |   |  |  |        |  
|Sales and marketing                                           |  |                                                  | (4,069  | ) |      |  | (3,483  | )    |  |  | (2,800  | ) |  |      | (2,566  | ) |     |  | (3,369  | ) |  |  | (111   | )
|General and administrative                                    |  |                                                  | (3,724  | ) |      |  | (3,055  | )    |  |  | (2,724  | ) |  |      | (3,598  | ) |     |  | (3,342  | ) |  |  | (111   | )
|Research and development                                      |  |                                                  | (9,631  | ) |      |  | (8,274  | )    |  |  | (8,044  | ) |  |      | (8,740  | ) |     |  | (9,395  | ) |  |  | (310   | )
|                                                              |  |                                                  |         |   |      |  |         |      |  |  |         |   |  |      |         |   |     |  |         |   |  |  |        |  
|Total operating expenses                                      |  |                                                  | (17,424 | ) |      |  | (14,812 | )    |  |  | (13,568 | ) |  |      | (14,904 | ) |     |  | (16,106 | ) |  |  | (532   | )
|                                                              |  |                                                  |         |   |      |  |         |      |  |  |         |   |  |      |         |   |     |  |         |   |  |  |        |  
|Operating income (loss)                                       |  |                                                  | 5,815   |   |      |  | (2,100  | )    |  |  | 1,847   |   |  |      | 22,020  |   |     |  | 5,180   |   |  |  | 171    |  
|Net non-operating income (loss)                               |  |                                                  | 13,855  |   |      |  | (19,886 | )    |  |  | (174    | ) |  |      | 3,364   |   |     |  | 4,200   |   |  |  | 139    |  
|                                                              |  |                                                  |         |   |      |  |         |      |  |  |         |   |  |      |         |   |     |  |         |   |  |  |        |  
|Income (Loss) before income tax and minority interests        |  |                                                  | 19,670  |   |      |  | (21,986 | )    |  |  | 1,673   |   |  |      | 25,384  |   |     |  | 9,380   |   |  |  | 310    |  
|Income tax expense                                            |  |                                                  | (2,809  | ) |      |  | (997    | )    |  |  | (651    | ) |  |      | (1,606  | ) |     |  | (913    | ) |  |  | (30    | )
|Extraordinary gain                                            |  |                                                  |        |   |      |  |        |      |  |  | 649     |   |  |      | 68      |   |     |  |        |   |  |  |       |  
|                                                              |  |                                                  |         |   |      |  |         |      |  |  |         |   |  |      |         |   |     |  |         |   |  |  |        |  
|Net income (loss)                                             |  |                                                  | 16,861  |   |      |  | (22,983 | )    |  |  | 1,671   |   |  |      | 23,846  |   |     |  | 8,467   |   |  |  | 280    |  
|                                                              |  |                                                  |         |   |      |  |         |      |  |  |         |   |  |      |         |   |     |  |         |   |  |  |        |  
|                                                              |  |                                                  |         |   |      | 
|Attributable to:                                              |  |                                                  |         |   |      |  |         |      |  |  |         |   |  |      |         |   |     |  |         |   |  |  |        |  
|the Company                                                   |  |                                                  | 16,962  |   |      |  | (22,320 | )    |  |  | 3,874   |   |  |      | 23,899  |   |     |  | 10,610  |   |  |  | 351    |  
|minority interests                                            |  |                                                  | (101    | ) |      |  | (663    | )    |  |  | (2,203  | ) |  |      | (53     | ) |     |  | (2,143  | ) |  |  | (71    | )
|                                                              |  |                                                  |         |   |      | 
|Earnings (Losses) per share:(1)(2)                            |  |                                                  |         |   |      |  |         |      |  |  |         |   |  |      |         |   |     |  |         |   |  |  |        |  
|Basic                                                         |  |                                                  | 1.03    |   |      |  | (1.70   | )    |  |  | 0.31    |   |  |      | 1.91    |   |     |  | 0.84    |   |  |  | 0.03   |  
|Diluted(4)                                                    |  |                                                  | 1.00    |   |      |  | (1.70   | )    |  |  | 0.30    |   |  |      | 1.87    |   |     |  | 0.81    |   |  |  | 0.03   |  
|Shares used in earnings (losses) per share calculation:(2)    |  |                                                  |         |   |      |  |         |      |  |  |         |   |  |      |         |   |     |  |         |   |  |  |        |  
|Basic                                                         |  |                                                  | 16,464  |   |      |  | 13,111  |      |  |  | 12,699  |   |  |      | 12,496  |   |     |  | 12,561  |   |  |  | 12,561 |  
|Diluted(4)                                                    |  |                                                  | 16,943  |   |      |  | 13,170  |      |  |  | 12,786  |   |  |      | 12,768  |   |     |  | 13,241  |   |  |  | 13,241 |  
|Earnings (Losses) per ADS:(2)                                 |  |                                                  |         |   |      |  |         |      |  |  |         |   |  |      |         |   |     |  |         |   |  |  |        |  
|Basic                                                         |  |                                                  | 5.15    |   |      |  | (8.50   | )    |  |  | 1.55    |   |  |      | 9.55    |   |     |  | 4.20    |   |  |  | 0.15   |  
|Diluted(4)                                                    |  |                                                  | 5.00    |   |      |  | (8.50   | )    |  |  | 1.50    |   |  |      | 9.35    |   |     |  | 4.05    |   |  |  | 0.15   |  
|                                                              |  |                                                  |         |   |      | 
|U.S. GAAP                                                     |  |                                                  |         |   |      |  |         |      |  |  |         |   |  |      |         |   |     |  |         |   |  |  |        |  
|Net operating revenues                                        |  |                                                  | 113,311 |   |      |  | 96,814  |      |  |  | 91,390  |   |  |      | 126,442 |   |     |  | 116,703 |   |  |  | 3,855  |  
|Cost of goods sold                                            |  |                                                  | (92,012 | ) |      |  | (85,923 | )    |  |  | (76,209 | ) |  |      | (89,929 | ) |     |  | (95,594 | ) |  |  | (3,158 | )
|Operating income (loss)                                       |  |                                                  | (19,992 | ) |      |  | (22,431 | )    |  |  | (2,323  | ) |  |      | 21,394  |   |     |  | 2,573   |   |  |  | 85     |  
|Net income (loss)                                             |  |                                                  | (9,398  | ) |      |  | (29,632 | )    |  |  | 364     |   |  |      | 23,544  |   |     |  | 6,605   |   |  |  | 218    |  
|                                                              |  |                                                  |         |   |      | 
|Attributable to:                                              |  |                                                  |         |   |      |  |         |      |  |  |         |   |  |      |         |   |     |  |         |   |  |  |        |  
|the Company                                                   |  |                                                  | (9,264  | ) |      |  | (28,955 | )    |  |  | 2,572   |   |  |      | 23,616  |   |     |  | 8,746   |   |  |  | 289    |  
|noncontrolling interests                                      |  |                                                  | (134    | ) |      |  | (677    | )    |  |  | (2,208  | ) |  |      | (72     | ) |     |  | (2,141  | ) |  |  | (71    | )
|Other comprehensive income (loss) attributable to the Company |  |                                                  | (4,863  | ) |      |  | (25,239 | )    |  |  | 24,540  |   |  |      | (8,629  | ) |     |  | (9,551  | ) |  |  | (316   | )
|Comprehensive income (loss) attributable to the Company       |  |                                                  | (14,127 | ) |      |  | (54,194 | )    |  |  | 27,112  |   |  |      | 14,987  |   |     |  | (805    | ) |  |  | (27    | )
|                                                              |  |                                                  |         |   |      | 
|Earnings (Losses) per share:(1)(3)                            |  |                                                  |         |   |      |  |         |      |  |  |         |   |  |      |         |   |     |  |         |   |  |  |        |  
|Basic                                                         |  |                                                  | (0.63   | ) |      |  | (2.25   | )    |  |  | 0.21    |   |  |      | 1.91    |   |     |  | 0.71    |   |  |  | 0.02   |  
|Diluted(4)                                                    |  |                                                  | (0.63   | ) |      |  | (2.25   | )    |  |  | 0.20    |   |  |      | 1.90    |   |     |  | 0.68    |   |  |  | 0.02   |  
|                                                              |  |                                                  |         |   |      | 
|Shares used in earnings (losses) per share calculation:(3)    |  |                                                  |         |   |      |  |         |      |  |  |         |   |  |      |         |   |     |  |         |   |  |  |        |  
|Basic                                                         |  |                                                  | 14,599  |   |      |  | 12,870  |      |  |  | 12,538  |   |  |      | 12,335  |   |     |  | 12,400  |   |  |  | 12,400 |  
|Diluted(4)                                                    |  |                                                  | 14,599  |   |      |  | 12,870  |      |  |  | 12,560  |   |  |      | 12,399  |   |     |  | 12,859  |   |  |  | 12,859 |  
|                                                              |  |                                                  |         |   |      | 
|Earnings (Losses) per ADS:(3)                                 |  |                                                  |         |   |      |  |         |      |  |  |         |   |  |      |         |   |     |  |         |   |  |  |        |  
|Basic                                                         |  |                                                  | (3.17   | ) |      |  | (11.25  | )    |  |  | 1.03    |   |  |      | 9.57    |   |     |  | 3.53    |   |  |  | 0.12   |  
|Diluted(4)                                                    |  |                                                  | (3.17   | ) |      |  | (11.25  | )    |  |  | 1.02    |   |  |      | 9.52    |   |     |  | 3.40    |   |  |  | 0.11   |  



4



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##### Table of Contents

|                                                     |  |                                                  |         |    |      |  |         |      |  |  |         |    |  |      |         |   |     |  |         |   |  |  |        |  
|---------------------------------------------------- |  | ------------------------------------------------ | ------- | -- | ---- |  | ------- | ---- |  |  | ------- | -- |  | ---- | ------- | - | --- |  | ------- | - |  |  | ------ | -
|                                                     |  | Year Ended December 31,                          |        
|                                                     |  | 2007                                             |         |    | 2008 |  |         | 2009 |  |  | 2010    |    |  | 2011 |        
|                                                     |  | NT$                                              |         |    | NT$  |  |         | NT$  |  |  | NT$     |    |  | NT$  |         |   | US$ | 
|                                                     |  | (in millions, except per share and per ADS data) |        
|Consolidated Balance Sheet Data:                     |  |                                                  |         |    |      |  |         |      |  |  |         |    |  |      |         |   |     |  |         |   |  |  |        |  
|R.O.C. GAAP                                          |  |                                                  |         |    |      |  |         |      |  |  |         |    |  |      |         |   |     |  |         |   |  |  |        |  
|Current assets                                       |  |                                                  | 81,111  |    |      |  | 68,888  |      |  |  | 102,363 |    |  |      | 93,769  |   |     |  | 84,058  |   |  |  | 2,777  |  
|Long-term investment                                 |  |                                                  | 69,813  |    |      |  | 32,441  |      |  |  | 55,227  |    |  |      | 47,179  |   |     |  | 38,574  |   |  |  | 1,274  |  
|Property, plant and equipment                        |  |                                                  | 137,219 |    |      |  | 108,410 |      |  |  | 89,596  |    |  |      | 132,762 |   |     |  | 149,324 |   |  |  | 4,933  |  
|Total assets                                         |  |                                                  | 299,558 |    |      |  | 216,399 |      |  |  | 253,638 |    |  |      | 280,887 |   |     |  | 279,832 |   |  |  | 9,245  |  
|Current liabilities                                  |  |                                                  | 45,357  |    |      |  | 13,033  |      |  |  | 35,246  |    |  |      | 45,445  |   |     |  | 42,906  |   |  |  | 1,417  |  
|Long-term debt (excluding current portion)           |  |                                                  | 7,495   |    |      |  | 8,130   |      |  |  | 767     |    |  |      | 6,799   |   |     |  | 21,095  |   |  |  | 697    |  
|Total liabilities                                    |  |                                                  | 56,561  |    |      |  | 24,740  |      |  |  | 39,542  |    |  |      | 55,751  |   |     |  | 67,707  |   |  |  | 2,237  |  
|Stockholders equity                                 |  |                                                  | 242,997 |    |      |  | 191,659 |      |  |  | 214,096 |    |  |      | 225,136 |   |     |  | 212,125 |   |  |  | 7,008  |  
|U.S. GAAP                                            |  |                                                  |         |    |      |  |         |      |  |  |         |    |  |      |         |   |     |  |         |   |  |  |        |  
|Cash and cash equivalents                            |  |                                                  | 47,678  |    |      |  | 40,017  |      |  |  | 54,413  |    |  |      | 51,034  |   |     |  | 49,062  |   |  |  | 1,621  |  
|Working capital(5)                                   |  |                                                  | 35,111  |    |      |  | 55,525  |      |  |  | 67,162  |    |  |      | 48,322  |   |     |  | 41,109  |   |  |  | 1,358  |  
|Total assets                                         |  |                                                  | 310,614 |    |      |  | 214,990 |      |  |  | 252,705 |    |  |      | 281,387 |   |     |  | 279,460 |   |  |  | 9,232  |  
|Total liabilities                                    |  |                                                  | 56,795  |    |      |  | 24,099  |      |  |  | 39,465  |    |  |      | 56,264  |   |     |  | 68,820  |   |  |  | 2,273  |  
|Stockholders equity                                 |  |                                                  | 253,819 |    |      |  | 190,891 |      |  |  | 213,240 |    |  |      | 225,123 |   |     |  | 210,640 |   |  |  | 6,959  |  
|                                                     | 
|                                                     |  | Year Ended December 31,                          |        
|                                                     |  | 2007                                             |         |    | 2008 |  |         | 2009 |  |  | 2010    |    |  | 2011 |        
|                                                     |  | NT$                                              |         |    | NT$  |  |         | NT$  |  |  | NT$     |    |  | NT$  |         |   | US$ | 
|                                                     |  | (in millions, except per share and per ADS data) |        
|Other Consolidated Data:                             |  |                                                  |         |    |      |  |         |      |  |  |         |    |  |      |         |   |     |  |         |   |  |  |        |  
|R.O.C. GAAP                                          |  |                                                  |         |    |      |  |         |      |  |  |         |    |  |      |         |   |     |  |         |   |  |  |        |  
|Cash flow:                                           |  |                                                  |         |    |      |  |         |      |  |  |         |    |  |      |         |   |     |  |         |   |  |  |        |  
|Capital expenditure                                  |  |                                                  | 28,299  |    |      |  | 11,515  |      |  |  | 17,618  |    |  |      | 61,323  |   |     |  | 53,326  |   |  |  | 1,762  |  
|Cash provided by operating activities                |  |                                                  | 48,124  |    |      |  | 45,251  |      |  |  | 32,422  |    |  |      | 53,495  |   |     |  | 41,654  |   |  |  | 1,376  |  
|Cash used in investing activities                    |  |                                                  | (21,844 | )  |      |  | (11,423 | )    |  |  | (19,229 | )  |  |      | (57,779 | ) |     |  | (55,120 | ) |  |  | (1,821 | )
|Cash provided by (used in) financing activities      |  |                                                  | (72,694 | )  |      |  | (34,380 | )    |  |  | 4,944   |    |  |      | (10,174 | ) |     |  | 9,923   |   |  |  | 328    |  
|Net increase (decrease) in cash and cash equivalents |  |                                                  | (46,175 | )  |      |  | 889     |      |  |  | 17,586  |    |  |      | (14,882 | ) |     |  | (2,201  | ) |  |  | (73    | )
|Gross profit margin                                  |  |                                                  | 20.5    | %  |      |  | 13.1    | %    |  |  | 16.9    | %  |  |      | 29.2    | % |     |  | 18.2    | % |  |  | 18.2   | %
|Operating profit (loss) margin                       |  |                                                  | 5.1     | %  |      |  | (2.2    | )%   |  |  | 2.0     | %  |  |      | 17.4    | % |     |  | 4.4     | % |  |  | 4.4    | %
|Net profit (loss) margin                             |  |                                                  | 15.0    | %  |      |  | (23.0   | )%   |  |  | 4.2     | %  |  |      | 18.9    | % |     |  | 9.1     | % |  |  | 9.1    | %
|Capacity utilization rate (on an actual basis)       |  |                                                  | 81.9    | %  |      |  | 70.7    | %    |  |  | 69.4    | %  |  |      | 93.7    | % |     |  | 78.6    | % |  |  | 78.6   | %
|Dividends declared per share(6)                      |  |                                                  | 0.7     |    |      |  | 1.2     |      |  |  |        |    |  |      | 0.5     |   |     |  | 1.11    |   |  |  | 0.04   |  
|                                                     |  |                                                  |         |    |      | 
|U.S. GAAP                                            |  |                                                  |         |    |      |  |         |      |  |  |         |    |  |      |         |   |     |  |         |   |  |  |        |  
|Cash flow:                                           |  |                                                  |         |    |      |  |         |      |  |  |         |    |  |      |         |   |     |  |         |   |  |  |        |  
|Capital expenditure                                  |  |                                                  | 28,299  |    |      |  | 11,515  |      |  |  | 17,618  |    |  |      | 61,323  |   |     |  | 53,326  |   |  |  | 1,762  |  
|Cash provided by operating activities                |  |                                                  | 45,785  |    |      |  | 44,953  |      |  |  | 32,422  |    |  |      | 53,495  |   |     |  | 41,654  |   |  |  | 1,376  |  
|Cash provided by (used in) investing activities      |  |                                                  | 10,360  |    |      |  | (19,973 | )    |  |  | (22,419 | )  |  |      | (46,277 | ) |     |  | (54,891 | ) |  |  | (1,813 | )
|Cash provided by (used in) financing activities      |  |                                                  | (70,354 | )  |      |  | (34,081 | )    |  |  | 4,944   |    |  |      | (10,174 | ) |     |  | 9,923   |   |  |  | 328    |  
|Net increase (decrease) in cash and cash equivalents |  |                                                  | (13,971 | )  |      |  | (7,661  | )    |  |  | 14,396  |    |  |      | (3,379  | ) |     |  | (1,971  | ) |  |  | (65    | )
|Gross profit margin                                  |  |                                                  | 18.8    | %  |      |  | 11.3    | %    |  |  | 16.6    | %  |  |      | 28.9    | % |     |  | 18.1    | % |  |  | 18.1   | %
|Operating profit (loss) margin                       |  |                                                  | (17.6   | )% |      |  | (23.2   | )%   |  |  | (2.5    | )% |  |      | 16.9    | % |     |  | 2.2     | % |  |  | 2.2    | %
|Net profit (loss) margin                             |  |                                                  | (8.2    | )% |      |  | (29.9   | )%   |  |  | 2.8     | %  |  |      | 18.7    | % |     |  | 7.5     | % |  |  | 7.5    | %



|(1) | Earnings (Losses) per share is calculated by dividing net income (loss) by the weighted average number of shares outstanding during the year.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Retroactively adjusted for all subsequent stock dividends; retroactively adjusted for employee stock bonus before 2008.
|--- | -----------------------------------------------------------------------------------------------------------------------

|(3) | Retroactively adjusted for the capital reduction completed in 2007 and all subsequent stock dividends.
|--- | ------------------------------------------------------------------------------------------------------

|(4) | Diluted securities include convertible bonds and employee stock options, if any.
|--- | --------------------------------------------------------------------------------

|(5) | Working capital equals current assets minus current liabilities.
|--- | ----------------------------------------------------------------

|(6) | Dividends declared per share are in connection with earnings and accumulated additional paid-in capital.
|--- | --------------------------------------------------------------------------------------------------------



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Currency Translations and Exchange Rates

In portions of this annual report, we have translated New Taiwan dollar amounts into U.S. dollars for the convenience of readers. The rate
we used for the translations was NT$30.27 = US$1.00, which was the noon buying rate as certified for customs purposes by the Federal Reserve Bank of New York on December 30, 2011. The translation does not mean that New Taiwan dollars could actually
be converted into U.S. dollars at that rate. The following table shows the noon buying rates for New Taiwan dollars expressed in New Taiwan dollar per US$1.00. On April 20, 2012, the noon buying rate was NT$29.45 to US$1.00.



|                        |  |            |       |  |      |  |       |     |  |  |               |  |  |  |       | 
|----------------------- |  | ---------- | ----- |  | ---- |  | ----- | --- |  |  | ------------- |  |  |  | ----- | 
|                        |  | Average(1) |       |  | High |  |       | Low |  |  | At Period-End | 
|2007                    |  |            | 32.41 |  |      |  | 33.41 |     |  |  | 32.26         |  |  |  | 32.43 | 
|2008                    |  |            | 31.51 |  |      |  | 33.58 |     |  |  | 29.99         |  |  |  | 32.76 | 
|2009                    |  |            | 33.02 |  |      |  | 35.21 |     |  |  | 31.95         |  |  |  | 31.95 | 
|2010                    |  |            | 31.50 |  |      |  | 32.43 |     |  |  | 29.14         |  |  |  | 29.14 | 
|2011                    |  |            | 29.38 |  |      |  | 30.67 |     |  |  | 28.50         |  |  |  | 30.27 | 
|October                 |  |            | 30.26 |  |      |  | 30.67 |     |  |  | 29.86         |  |  |  | 29.91 | 
|November                |  |            | 30.22 |  |      |  | 30.43 |     |  |  | 30.02         |  |  |  | 30.31 | 
|December                |  |            | 30.25 |  |      |  | 30.38 |     |  |  | 30.10         |  |  |  | 30.27 | 
|2012 (through April 20) |  |            | 29.64 |  |      |  | 30.28 |     |  |  | 29.37         |  |  |  | 29.45 | 
|January                 |  |            | 29.99 |  |      |  | 29.61 |     |  |  | 30.28         |  |  |  | 29.61 | 
|February                |  |            | 29.53 |  |      |  | 29.37 |     |  |  | 29.65         |  |  |  | 29.37 | 
|March                   |  |            | 29.52 |  |      |  | 29.37 |     |  |  | 29.61         |  |  |  | 29.50 | 
|April (through 20)      |  |            | 29.49 |  |      |  | 29.55 |     |  |  | 29.45         |  |  |  | 29.45 | 

Source: Federal Reserve Statistical Release, Board of Governors of the Federal Reserve System.



|(1) | Determined by averaging the rates on the last business day of each month during the relevant period for annual periods and the rates on each business day for monthly
periods.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|B. | Capitalization and Indebtedness
|-- | -------------------------------

Not applicable.



|C. | Reasons for the Offer and Use of Proceeds
|-- | -----------------------------------------

Not applicable.



|D. | Risk Factors
|-- | ------------

Our
business and operations are subject to various risks, many of which are beyond our control. If any of the risks described below actually occurs, our business, financial condition or results of operations could be seriously harmed.



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Risks Related to Our Business and Financial Condition

A global recession and credit crisis may cause significant disruptions to our major customers businesses as well as to their ability to access
sources of liquidity. Demand for our products has been, and will continue to be, adversely affected by overall macroeconomic conditions.

Although the worldwide economic outlook began to improve in 2009, there have still been concerns that many large economies, such as those in North America and Europe, may experience another recession in
the near future. The sovereign debt crisis in Europe and political unrest in the Middle East and Asia could have a material adverse effect on the global macroeconomic situation. Should recession or disruption in these markets occur, the result may
reverberate, triggering global recession and/or financial crisis. A global recession and credit crisis could have significant negative impact on our businesses. Our key markets and our targeted markets, including the United States and China, as well
as other national economies, may enter a period of economic contraction or significantly slower economic growth in a global recession. In particular, a global economic crisis, weak consumer confidence, diminished consumer and business spending, and
asset depreciation may contribute to a significant slowdown in the market demand for semiconductors and semiconductor-based end-products, which may lead to a decrease in demand for our services. The combined effects of a global recession may have a
material adverse impact on our results of operations, cash flows and financial condition, which may cause the price of our ADSs to decline.

In addition, many of our customers may experience difficulty in obtaining credit in a deteriorating economic environment, and even if they are able to obtain credit, the cost of such financing may
increase and/or the time necessary to arrange such financing may be substantially prolonged. This lack of and increase in the cost of financing could have a material adverse effect on the financial condition of our customers. A protracted disruption
in the ability of our customers to access sources of liquidity could cause serious disruptions to or an overall deterioration in their businesses, which could lead to the inability or failure on their part to meet their payment obligations to us.

The seasonality and cyclical nature of the semiconductor industry and periodic overcapacity make us particularly
vulnerable to significant and sometimes prolonged economic downturns.

The semiconductor industry has historically
been highly cyclical and, at various times, has experienced significant downturns. Since most of our customers operate in semiconductor-related industries, variations in order levels from our customers can result in volatility in our revenues and
earnings. Because our business is, and will continue to be, largely dependent on the requirements of semiconductor companies for our services, downturns in the semiconductor industry will lead to reduced demand for our services.

Our net operating revenues are also typically affected by seasonal variations in market conditions that contribute to the fluctuation of
the average selling prices of semiconductor services and products. The seasonal sales trends for semiconductor services and products closely mirror those for consumer electronics, communication and computer sales. We generally experience seasonal
lows in the demand for semiconductor services and products during the first half of the year, primarily as a result of inventory correction by our customers. Any change in the general seasonal variations, which we cannot anticipate, may result in
materially adverse effects on our revenues, operations and businesses.

Our operating results fluctuate from quarter to
quarter, which makes it difficult to predict our future performance.

Our revenues, expenses and results of operations
have varied significantly in the past and may fluctuate significantly from quarter to quarter in the future due to a number of factors, many of which are beyond our control. Our business and operations have at times in the past been negatively
affected by, and are expected to continue to be subject to the risk of, the following factors:



| |  |  | the seasonality and cyclical nature of both the semiconductor industry and the markets served by our customers;
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | our customers adjustments in their inventory;
| | - |  | ----------------------------------------------



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| |  |  | the loss of a key customer or the postponement of orders from a key customer;
| | - |  | -----------------------------------------------------------------------------



| |  |  | the rescheduling and cancellation of large orders;
| | - |  | --------------------------------------------------



| |  |  | our ability to obtain equipment, raw materials, electricity, water and other required utilities on a timely and economic basis;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



| |  |  | outbreaks of contagious diseases, including severe acute respiratory syndrome, avian flu and swine flu;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | environmental events, such as fires and earthquakes, or industrial accidents; and
| | - |  | ---------------------------------------------------------------------------------



| |  |  | technological changes.
| | - |  | ----------------------

Due to the factors noted above and other risks discussed in this section, many of which are beyond our control, you should not rely on quarter-to-quarter comparisons to predict our future performance.
Unfavorable changes in any of the above factors may seriously harm our business, financial condition and results of operations. In addition, our operating results may be below the expectations of public market analysts and investors in some future
periods. In this event, the price of the shares or ADSs may underperform or fall.

A decrease in demand for or selling prices of
communication devices, consumer electronics and computer goods may decrease the demand for our services and reduce our margins.

Our customers generally use the semiconductors produced in our fabs in a wide variety of applications. We derive a significant percentage of our operating revenues from customers who use our manufacturing
services to make semiconductors for communication devices, consumer electronics, PCs and other computers. The semiconductor industry experienced several downturns due to recent major financial crises and natural disasters. These downturns resulted
in a reduced demand for our services and hence decreased our revenues and earnings. Any significant decrease in the demand for communication devices, consumer electronics, PCs or other computers may further decrease the demand for our services. In
addition, if the average selling prices of communication devices, consumer electronics, PCs or other computers decline significantly, we will be pressured to further reduce our selling prices, which may reduce our revenues and, therefore, reduce our
margins significantly. As demonstrated by downturns in demand for high technology products in the past, market conditions can change rapidly, without apparent warning or advance notice. In such instances, our customers will experience inventory
buildup and/or difficulties in selling their products and, in turn, will reduce or cancel orders for wafers from us. The timing, severity and recovery of these downturns cannot be predicted accurately or at all. When they occur, our business,
profitability and price of the shares and ADSs are likely to suffer.

Overcapacity in the semiconductor industry may reduce our
revenues, earnings and margins.

The prices that we can charge our customers for our services are significantly
related to the overall worldwide supply of integrated circuits and semiconductor products. The overall supply of semiconductor products is based in part on the capacity of other companies, which is outside of our control. For example, in light of
the current market conditions, some companies, including our largest competitors, have announced plans to increase capacity expenditures significantly. We believe such plans, if carried out as planned, will increase the industry-wide capacity and
are likely to result in overcapacity in the future. In periods of overcapacity, if we are unable to offset the adverse effects of overcapacity through, among other things, our technology and product mix, we may have to lower the prices we charge our
customers for our services and/or we may have to operate at significantly less than full capacity. Such actions could reduce our margin and weaken our financial condition and results of operations. We cannot give any assurance that an increase in
the demand for foundry services in the future will not lead to overcapacity in the near future, which could materially adversely affect our revenues, earnings and margins.



8



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##### Table of Contents

Any problem in the semiconductor outsourcing infrastructure can adversely affect our net operating
revenues and profitability.

Many of our customers depend on third parties to provide mask tooling, assembly and test
services. If these customers cannot timely obtain these services on reasonable terms, they may not order any foundry services from us. This may significantly reduce our net operating revenues and negatively affect our profitability.

We may be unable to implement new technology as it becomes available, which may result in our loss of customers and market share.

The semiconductor industry is developing rapidly and the related technology is constantly evolving. If we do not
anticipate the technology evolution and rapidly adopt new and innovative technology, we may not be able to produce sufficiently advanced services at competitive prices. There is a risk that our competitors may adopt new technology before we do,
resulting in our loss of market share. If we are unable to begin offering advanced services and processes on a competitive and timely basis, we may lose customers to our competitors providing similar technologies, which may cause our net operating
revenues to decline unless we can replace lost customers with new customers.

We may be unable to provide leading technology to our
customers if we lose the support of our technology partners.

Enhancing our manufacturing process technologies is
critical to our ability to provide services for our customers. We intend to continue to advance our process technologies through internal research and development and alliances with other companies. Although we have an internal research and
development team focused on developing new and improved semiconductor manufacturing process technologies, we are also dependent on some of our technology partners to advance certain process technology portfolios. In addition, we currently have
patent cross-licensing agreements with several companies, including LSI Logic Corporation, or LSI, and International Business Machines Corporation, or IBM. Some mask and equipment vendors also supply our technology development teams with masks and
equipment needed to develop more advanced processing technologies. If we are unable to continue any of our joint development arrangements, patent cross-licensing agreements and other agreements, on mutually beneficial economic terms, if we
re-evaluate the technological and economic benefits of such relationships, if we are unable to enter into new technology alliances and arrangements with other leading and specialty semiconductor companies, or if we fail to secure masks and equipment
from our vendors in a timely manner sufficient to support our ongoing technology development, we may be unable to continue providing our customers with leading edge mass-producible process technologies and may, as a result, lose important customers,
which would have a materially adverse effect on our businesses, results of operations and financial condition.

In addition,
some of our customers rely upon third party vendors, or IP Vendors, for the intellectual property they embed into their designs. Although we work and collaborate with IP Vendors with respect to such matters, there can be no guarantee that we will be
successful or that the vendors will deliver according to our requirements or the needs of our customers. Failures to meet the targets or to deliver on a timely basis could cause customers to cancel orders and/or shift capacity to other suppliers.

Our business may suffer if we cannot compete successfully in our industry.

The worldwide semiconductor foundry industry is highly competitive. We compete with dedicated foundry service providers such as Taiwan
Semiconductor Manufacturing Company Limited, Semiconductor Manufacturing International (Shanghai) Corporation and Globalfoundries Inc., as well as the foundry operation services of some integrated device manufacturers, such as IBM, Intel, Samsung
Electronics, or Samsung, and Toshiba Corporation, or Toshiba. Integrated device manufacturers principally manufacture and sell their own proprietary semiconductor products, but may also offer foundry services. Other competitors such as DongbuAnam
Semiconductor, Grace Semiconductor Manufacturing Corp., X-FAB Semiconductors Foundries AG and Silterra Malaysia Sdn. Bhd. have initiated efforts to expand and develop substantial additional foundry capacity. New entrants and consolidations in the
foundry business, such as the acquisition of Chartered Semiconductor by Globalfoundries in 2009, are likely to initiate a trend of competitive pricing and create potential overcapacity in legacy technology. Some of our competitors have greater
access to capital and substantially greater production, research and development, marketing and other resources than we do. As a result, these companies may be able to compete more aggressively over a longer period of time than we can.



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The principal elements of competition in the wafer foundry market include:



| |  |  | technical competence;
| | - |  | ---------------------



| |  |  | time-to-volume production and cycle time;
| | - |  | -----------------------------------------



| |  |  | time-to-market;
| | - |  | ---------------



| |  |  | research and development quality;
| | - |  | ---------------------------------



| |  |  | available capacity;
| | - |  | -------------------



| |  |  | manufacturing yields;
| | - |  | ---------------------



| |  |  | customer service and design support;
| | - |  | ------------------------------------



| |  |  | price;
| | - |  | ------



| |  |  | management expertise; and
| | - |  | -------------------------



| |  |  | strategic alliances.
| | - |  | --------------------

Our ability to compete successfully also depends on factors partially outside of our control, including product availability, intellectual property, or IP, including cell libraries that our customers
embed in their product designs, and industry and general economic trends. If we cannot compete successfully in our industry, our business may suffer.

We may not succeed in our efforts to acquire operations in China and Japan.

R.O.C. law prohibits Taiwan entities from investment in mainland China-based semiconductor manufacturers without government approval. In March 2005, the Chairman of Infoshine Technology Limited, or
Infoshine, the holding company which owned 100% of Hejian Technology (Suzhou) Co., Ltd., or Hejian, a semiconductor manufacturer owning an 8-inch fab in Suzhou, China, offered us 15% interest in Infoshine. Immediately after we received the offer, we
filed an application with the Investment Commission of the R.O.C. Ministry of Economic Affairs, or the R.O.C. MOEA, for its executive guidance and disclosed our receipt of this offer to the investors and the public.

On April 29, 2009, our Board of Directors approved a proposed acquisition at their 19th session of the board meeting. Pursuant to
the merger agreement, we proposed to pay the foreign owner of Infoshine stocks at the purchase price through a combination of issuance of securities in our company or in cash. In June 2009, our stockholders approved our proposed acquisition of
Infoshine at our stockholders meeting. Upon consummation of the acquisition: (i) our company would be the surviving corporation; (ii) Infoshine would cease its corporate existence; (iii) all the assets and liabilities of
Infoshine, along with its rights and obligations, would be assumed by our company in accordance with applicable laws; and (iv) with the previous proposed acquisition of 15% interest in Infoshine, our company would have obtained full ownership
of Hejian. Consummation of the acquisition and the realization of the 15% interest were however subject to the approval of the governmental authorities. Subsequent to our proposal, an investment regulation governing foreigners holdings of
Taiwanese securities, along with restrictions from the amended Operating Rules of the Taiwan Stock Exchange Corporation for issuing new shares to acquire foreign unlisted companies, precluded the issuance of common shares or ADR as exclusive payment
options. Furthermore, Hejians stockholders did not agree to accept cash-only payments. After considering contractual timeliness and changes of the overall environment after signing of the contract, our Board of Directors resolved at a meeting
on November 18, 2010 to terminate the acquisition agreement and issued a termination notice in accordance with that agreement.



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On March 16, 2011, our Board of Directors proposed an offer to the stockholders of Best
Elite International Limited, a British Virgin Islands corporation, or Best Elite, which owns 100% of the shares of Infoshine, thereby to obtain additional 30% ownership of Hejian by share purchase. We received approval from the Investment
Commission, Ministry of Economic Affairs, Executive Yuan to acquire the stake of Best Elite International Limited, the holding company of Hejian. The acquisition includes the 15.3% stake in trustee, plus an additional 20.4% through cash acquisition.
As of March 31, 2012, we have acquired 35.03% of the shares in Best Elite.

To continue searching for further integration, on
April 25, 2012, our Board of Directors proposed an offer to the stockholders of Best Elite, thereby to obtain 64.97% stake of Best Elite by share purchase, subject to approval by R.O.C. governmental authorities. However, we can not assure you that
we will be able to successfully consummate the acquisition of Best Elite or Hejian.

In October 2009, our board of directors
decided to obtain the common stock, preemptive rights and stock acquisition rights in UMC Japan, or UMCJ, through a tender offer to be made by our 100% owned subsidiary, Alpha Wisdom Limited, or AWL. After the tender offer which was held from
October 29, 2009 to December 14, 2009, 403,368 shares of UMCJ were purchased, and we and AWL together held 94.79% of UMCJ shares. UMCJ then delisted from the Jasdaq Securities Exchange in accordance with its listing rules on March 19,
2010.

Since not all of the outstanding equity securities of UMCJ were acquired in the tender offer, we initiated certain
squeeze-out procedures as provided in the Japanese Companies Act. Pursuant to such procedures, as of the end of 2010, we, together with AWL, owned 100% of UMCJ. On May 19, 2011, we acquired the remaining shares of UMCJ from AWL, and AWL filed
for liquidation on August 30, 2011.

One of the former stockholders of UMCJ challenged the acquisition price and filed an
action for appraisal rights under Japanese law. An action for appraisal rights would not enjoin or hinder the acquisition, as the shareholder would only be eligible to obtain additional compensation if the action is successful. On August 25,
2011, the Japanese courts finally denied the action for appraisal rights, thereby closing the case in favor of UMC and UMCJ.

We compete for business on a global basis, and we believe it is necessary to establish and develop operations in multiple strategic
geographic regions. We cannot assure you that the mergers and acquisitions we have undertaken will be closed successfully or that they will be fully closed on the terms we proposed. The failure to close these transactions or the failure to close
them on terms as favorable as we have entered into and announced may impair our ability to realize the benefits we intend to achieve and have a material and adverse effect on our operations and business.

We may not be able to successfully integrate the operations to be acquired in Japan with our global activities.

Even after we successfully close the acquisition of UMCJ, we may not be able to integrate their operations with our current operations in
accordance with the manners or the schedule or under the economic conditions we plan or target. In order to realize the benefits we expect from these transactions, we need to integrate the operations of the acquired facilities with our current
facilities. Our ability to integrate the operations and facilities of UMCJ is dependent upon a number of factors, including:



| |  |  | technical competence of UMCJ;
| | - |  | -----------------------------



| |  |  | management and engineering abilities of UMCJ;
| | - |  | ---------------------------------------------



| |  |  | our ability to adapt UMCJ to our processes, practices and management approaches;
| | - |  | --------------------------------------------------------------------------------



| |  |  | our ability to optimize the process, equipment, capacity, customer and technology mix in our global operations;
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | communication and coordination between different locations; and
| | - |  | ---------------------------------------------------------------



| |  |  | cultural compatibility.
| | - |  | -----------------------



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Failure to successfully integrate the operations of UMCJ in the time frame we plan, or at
all, will adversely affect the benefits we expect to enjoy and may have material adverse effects on our business and operations.

Our
profit margin may substantially decline if we are unable to continuously improve our manufacturing yields, maintain high capacity utilization and optimize the technology mix of our silicon wafer production.

Our ability to maintain our profitability depends, in part, on our ability to:



| |  |  | maintain our capacity utilization, that is, the wafer-out quantity of 8-inch wafer equivalents divided by estimated total 8- inch equivalent capacity
in a specified period. The estimated capacity numbers may differ depending upon equipment delivery schedules, pace of migration to more advanced process technologies and other factors affecting production ramp-ups;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | maintain or improve our manufacturing yield, that is, the percentage of usable manufactured devices on a wafer; and
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | optimize the technology mix of our production, that is, the relative number of wafers manufactured utilizing different process technologies.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------

Our manufacturing yields directly affect our ability to attract and retain customers, as well as the price
of our services. Our capacity utilization affects our operating results because a large percentage of our operating costs are fixed. Our technology mix affects utilization of our equipment and process technologies, as well as the prices we can
charge, either of which can affect our margins. If we are unable to continuously improve our manufacturing yields, maintain high capacity utilization or optimize the technology mix of our wafer production, our profit margin may substantially
decline.

We may not be able to implement our planned growth if we are unable to obtain the financing necessary to fund the substantial
capital expenditures we expect to incur.

Our business and the nature of our industry require us to make substantial
capital expenditures leading to a high level of fixed costs. We expect to incur significant capital expenditures in connection with our growth plans. These capital expenditures will be made in advance of any additional sales to be generated by new
or upgraded fabs as a result of these expenditures. Given the fixed-cost nature of our business, we have in the past incurred, and may in the future incur, operating losses if our revenues do not adequately offset our capital expenditures.
Additionally, our actual expenditures may exceed our planned expenditures for a variety of reasons, including changes in:



| |  |  | our growth plan;
| | - |  | ----------------



| |  |  | our process technology;
| | - |  | -----------------------



| |  |  | market conditions;
| | - |  | ------------------



| |  |  | interest rates;
| | - |  | ---------------



| |  |  | exchange rate fluctuations; and
| | - |  | -------------------------------



| |  |  | prices of equipment.
| | - |  | --------------------

We cannot assure you that additional financing will be available on satisfactory terms, if at all. If adequate funds are not available on satisfactory terms, we may be forced to curtail our expansion
plans or delay the deployment of our services, which could result in a loss of customers and limit the growth of our business.



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We depend on a small number of customers for a significant portion of our net operating revenues and a
loss of some of these customers would result in the loss of a significant portion of our net operating revenues.

We
have been largely dependent on a small number of customers for a substantial portion of our business. In 2011, our top ten customers accounted for 60.3% of our net operating revenues. We expect that we will continue to be dependent upon a relatively
limited number of customers for a significant portion of our net operating revenues. We cannot assure you that our net operating revenues generated from these customers, individually or in the aggregate, will reach or exceed historical levels in any
future period. Loss or cancellation of business from significant changes in scheduled deliveries to, or decreases in the prices of services sold to, any of these customers could significantly reduce our net operating revenues.

Our customers generally do not place purchase orders far in advance, which makes it difficult for us to predict our future revenues, adjust
production costs and allocate capacity efficiently on a timely basis.

Our customers generally do not place purchase
orders far in advance. In addition, due to the cyclical nature of the semiconductor industry, our customers purchase orders have varied significantly from period to period. As a result, we do not typically operate with any significant backlog,
except in periods of extreme capacity shortage such as that experienced in late 2009 and early 2010. The lack of significant backlog and the unpredictable length and timing of semiconductor cycles make it difficult for us to forecast our revenues in
future periods. Moreover, our expense levels are based in part on our expectations of future revenues and we may be unable to adjust costs in a timely manner to compensate for revenue shortfalls. We expect that in the future our net operating
revenues in any quarter will continue to be substantially dependent upon purchase orders received in that quarter.

Our inability to
obtain, preserve and defend intellectual property rights could harm our competitive position.

Our ability to compete
successfully and achieve future growth will depend, in part, on our ability to protect our proprietary technology and to secure critical processing technology that we do not own at commercially reasonable terms. We cannot assure you that in the
future we will be able to independently develop, or secure from any third party, the technology required for upgrading our production facilities or for meeting our customer needs. Our failure to successfully obtain such technology may seriously harm
our competitive position.

Our ability to compete successfully also depends on our ability to operate without infringing on
the proprietary rights of others. We have no means of knowing what patent applications have been filed in the United States or in certain other countries until months after they are filed. The semiconductor industry, because of the complexity of the
technology used and the multitude of patents, copyrights and other overlapping intellectual property rights, is characterized by frequent litigation regarding patent, trade secret and other intellectual property rights. It is common for patent
owners to assert their patents against semiconductor manufacturers. We have received from time to time communications from third parties asserting patents that cover certain of our technologies and alleging infringement of intellectual property
rights of others, and we expect to continue to receive such communications in the future. See Item 4. Information on the Company  B. Business Overview  Litigation for more details of our ongoing litigation. In the event any
third party was to make a valid claim against us or against our customers, we could be required to:



| |  |  | seek to acquire licenses to the infringed technology which may not be available on commercially reasonable terms, if at all;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | discontinue using certain process technologies, which could cause us to stop manufacturing certain semiconductors;
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | pay substantial monetary damages; and/or
| | - |  | ----------------------------------------



| |  |  | seek to develop non-infringing technologies, which may not be feasible.
| | - |  | -----------------------------------------------------------------------

Any one of these developments could place substantial financial and administrative burdens on us and hinder our business. Litigation,
which could result in substantial costs to us and diversion of our resources, may also be necessary to enforce our patents or other intellectual property rights or to defend us or our customers against claimed infringement of the rights of others.
If we fail to obtain necessary licenses or if litigation relating to patent infringement or other intellectual property matters occurs, it could hurt our reputation as a technology leader in our industry and prevent us from manufacturing particular
products or applying particular technologies, which could reduce opportunities to generate revenues.



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Our company was fined for violations of the Act Governing Relations Between Peoples of the Taiwan Area
and the Mainland Area in connection with our alleged involvement in the operation of Hejian.

Hejian, a semiconductor
manufacturer in Suzhou, China, was set up in December 2001. Soon after the establishment of Hejian, various rumors circulated that Hejian was set up by us. We immediately denied these rumors and clarified that we did not provide any capital nor did
we transfer any technology to Hejian.

Our company was found by the R.O.C. MOEA to be in violation of the Act Governing
Relations Between Peoples of the Taiwan Area and the Mainland Area and fined in the amount of NT$5 million for an alleged illegal investment in Hejian. Our appeal to the R.O.C. MOEA in relation to such fines was denied in late 2006. We filed an
administrative lawsuit in December 2006 with the Taipei Administrative High Court to challenge the R.O.C. MOEA fine. In July 2007, the Taipei Administrative High Court revoked the R.O.C. MOEAs decision and ruled in our favor. In August 2007,
the R.O.C. MOEA filed an appeal with the Supreme Administrative Court. On December 10, 2009, the Supreme Administrative Court reversed the decision of, and remanded the case to, the Taipei High Administrative Court for a new trial on our
administrative lawsuit. On July 21, 2010, the Taipei High Court ruled against us and we appealed to the Supreme Administrative Court on August 23, 2010. The Supreme Administrative Court rejected our appeal on December 19, 2011 and
ruled against us. Since we already paid the fine on January 29, 2007, the case has been closed.

Our operations and business will
suffer if we lose one or more of our key personnel without adequate replacements.

Our future success to a large
extent depends on the continued service of our Chairman and key executive officers. We do not carry key person insurance on any of our personnel. If we lose the services of any of our Chairman or key executive officers, it could be difficult to find
and integrate replacement personnel in a short period of time, which could harm our operations and the growth of our business.

We may
have difficulty attracting and retaining skilled employees, who are critical to our future success.

The success of
our business depends upon attracting and retaining experienced executives, engineers and other employees to implement our strategy. The competition for skilled employees is intense. We expect demand for personnel in Taiwan to increase in the future
as new wafer fabrication facilities and other businesses are established in Taiwan. We also expect demand for experienced personnel in other locations to increase significantly as our competitors establish and expand their operations. Some of our
competitors are willing to offer better compensation than that we do to our executives, engineers and other employees. We do not have long-term employment contracts with any of our employees. If we were unable to retain our existing personnel or
attract, assimilate and recruit new experienced personnel in the future, it could seriously disrupt our operations and delay or restrict the growth of our business.

Our transactions with affiliates and stockholders may hurt our profitability and competitive position.

We have provided foundry services to several of our affiliates and stockholders. These transactions were conducted on an arms- length basis. We currently do not provide any preferential treatment to
any of these affiliates and stockholders. However, we may in the future reserve or allocate our production capacity to these companies if there is a shortage of foundry services in the market to enable these companies to maintain their operations
and/or to protect our investments in them. This reservation or allocation may reduce our capacity available for our other customers, which may damage our relationships with other customers and discourage them from using our services. This may hurt
our profitability and competitive position.



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The differences between R.O.C. and U.S. accounting standards affect the amount of our net income.

Our financial statements are prepared under R.O.C. GAAP, which differ in certain significant respects from U.S. GAAP.
For a discussion of these differences, see Note 35 to our audited consolidated financial statements included elsewhere in this annual report. As a result, our net income attributable to us in 2009, 2010 and 2011 under U.S. GAAP was NT$2,572 million,
NT$23,616 million and NT$8,746 million (US$289 million), respectively, as compared to net income attributable to us under R.O.C. GAAP of, NT$3,874 million, NT$23,899 million and NT$10,610 million (US$351 million) in 2009, 2010 and 2011,
respectively.

The trend of adopting protectionist measures in certain countries, including the United States, could have a material
adverse impact on our results of operations and financial condition.

Governments in the United States, China and
certain other countries have implemented fiscal and monetary programs to stimulate economic growth as a result of the recent economic downturn, and many of these programs include protectionist measures that encourage the use of domestic products and
labor. Recent policy developments by the governments in China and elsewhere also suggest an increased unwillingness to allow international companies to invest in or acquire local businesses. Since many of our direct customers and other downstream
customers in the supply chain are located in or have operations in the countries where protectionist measures were adopted, such protectionist measures may have a material adverse effect on demand for our manufacturing services.

Any future outbreak of contagious diseases may materially and adversely affect our business and operations, as well as our financial condition and
results of operations.

Any future outbreak of contagious diseases, such as avian or swine influenza or severe acute
respiratory syndrome, may disrupt our ability to adequately staff our business and may generally disrupt our operations. If any of our employees is suspected of having contracted any contagious disease, we may under certain circumstances be required
to quarantine such employees and the affected areas of our premises. Therefore, we may have to temporarily suspend part of or all of our operations. Furthermore, any future outbreak may restrict the level of economic activity in affected regions,
including Taiwan, and affect the willingness and ability of our employees and customers to travel, which may also adversely affect our business and prospects. As a result, we cannot assure you that any future outbreak of contagious diseases would
not have a material adverse effect on our financial condition and results of operations.

Risks Relating to Manufacturing

Our manufacturing processes are highly complex, costly and potentially vulnerable to impurities and other disruptions that can significantly
increase our costs and delay product shipments to our customers.

Our manufacturing processes are highly complex,
require advanced and costly equipment and are continuously being modified to improve manufacturing yields and product performance. Impurities or other difficulties in the manufacturing process or defects with respect to equipment or supporting
facilities can lower manufacturing yields, interrupt production or result in losses of products in process. As system complexity has increased and process technology has become more advanced, manufacturing tolerances have been reduced and
requirements for precision have become even more demanding. Although we have been enhancing our manufacturing capabilities and efficiency, from time to time we have experienced production difficulties that have caused delivery delays and quality
control problems, as is common in the semiconductor industry. In the past we have encountered the following problems:



| |  |  | capacity constraints due to changes in product mix or the delayed delivery of equipment critical to our production, including scanners, steppers and
chemical stations;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | construction delays during expansions of our clean rooms and other facilities;
| | - |  | ------------------------------------------------------------------------------



| |  |  | difficulties in upgrading or expanding existing facilities;
| | - |  | -----------------------------------------------------------



| |  |  | manufacturing execution system or automatic transportation system failure;
| | - |  | --------------------------------------------------------------------------



| |  |  | unexpected breakdowns in our manufacturing equipment and/or related facilities;
| | - |  | -------------------------------------------------------------------------------



| |  |  | changing or upgrading our process technologies;
| | - |  | -----------------------------------------------



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##### Table of Contents

| |  |  | raw materials shortages and impurities; and
| | - |  | -------------------------------------------



| |  |  | delays in delivery and shortages of spare parts and in maintenance for our equipment and tools
| | - |  | ----------------------------------------------------------------------------------------------

Should these problems repeat, we may suffer delays in delivery and/or loss of business and revenues. In addition, we cannot guarantee
that we will be able to increase our manufacturing capacity and efficiency in the future to the same extent as in the past.

We may have
difficulty in ramping up production in accordance with our schedule, which could cause delays in product deliveries and decreases in manufacturing yields.

As is common in the semiconductor industry, we have from time to time experienced difficulties in ramping up production at new or existing facilities or effecting transitions to new manufacturing
processes. As a result, we have suffered delays in product deliveries or reduced manufacturing yields. We may encounter similar difficulties in connection with:



| |  |  | the migration to more advanced process technologies, such as 45/40 and 28 nanometer process technology;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | the joint development with vendors for more powerful tools (both in production and inspection) needed in the future to meet advanced process technology
requirements; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the adoption of new materials in our manufacturing processes.
| | - |  | -------------------------------------------------------------

We may face construction delays, interruptions, infrastructure failure and delays in upgrading or expanding existing facilities, or
changing our process technologies, any of which might adversely affect our production schedule. Our failure to achieve our production schedule could delay the time required to recover our investments and seriously affect our profitability.

Our production schedules could be delayed and we may lose customers if we are unable to obtain raw materials and equipment in a timely
manner.

We depend on our suppliers for raw materials. To maintain competitive manufacturing operations, we must
obtain from our suppliers, in a timely manner, sufficient quantities of quality materials at acceptable prices. Although we source our raw materials from several suppliers, a small number of these suppliers account for a substantial amount of our
supply of raw materials because of the consistent quality of these suppliers goods. For example, in 2011, we purchased a majority of our silicon wafers from four makers, Shin-Etsu Handotai Corporation, or Shin-Etsu, Siltronic AG, MEMC
Corporation and Sumco Group (including Sumco Corporation and Formosa Sumco Technology Corporation). We may have long-term contracts with most of our suppliers if necessary. From time to time, our suppliers have extended lead time or limited the
supply of required materials to us because of capacity constraints. Consequently, from time to time, we have experienced difficulty in obtaining the quantities of raw materials we need on a timely basis.

In addition, from time to time we may reject materials that do not meet our specifications, resulting in declines in output or
manufacturing yields. We cannot assure you that we will be able to obtain sufficient quantities of raw materials and other supplies in a timely manner. If the supply of materials is substantially diminished or if there are significant increases in
the costs of raw materials, we may be forced to incur additional costs to acquire sufficient quantities of raw materials to sustain our operations, which may increase our marginal costs and reduce profitability.

We also depend on a limited number of manufacturers and vendors that make and maintain the complex equipment we use in our manufacturing
processes. We also rely on these manufacturers and vendors to improve our technology to meet our customers demands as technology improves. In periods of unpredictable and highly diversified market demand, the lead time from order to delivery
of this equipment can be as long as six to twelve months. If there are delays in the delivery of equipment or in the availability or performance of necessary maintenance, or if there are increases in the cost of equipment, it could cause us to delay
our introduction of new manufacturing capacity or technologies and delay product deliveries, which may result in the loss of customers and revenues.



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##### Table of Contents

We may be subject to the risk of loss due to fire because the materials we use in our manufacturing
processes are highly flammable.

We use highly flammable materials such as silane and hydrogen in our manufacturing
processes and may therefore be subject to the risk of loss arising from fires. The risk of fire associated with these materials cannot be completely eliminated. We maintain insurance policies to reduce losses caused by fire, including business
interruption insurance. While we believe that our insurance coverage for damage to our property and business interruption due to fire is consistent with semiconductor industry practice, our insurance coverage is subject to deductibles and
self-insured retention and may not be sufficient to cover all of our potential losses. If any of our fabs were to be damaged or cease operations as a result of a fire, it would temporarily reduce manufacturing capacity and reduce revenues.

We and many of our customers and suppliers are vulnerable to natural disasters and other events outside of our control, which may
seriously disrupt our operations.

Most of our assets and many of our customers and suppliers are located in certain
parts of Taiwan. Our operations and the operations of our customers and suppliers are vulnerable to earthquakes, floods, droughts, power losses and similar events that affect the locations of our operations. The occurrence of any of these events
could interrupt our services and cause severe damages to wafers in process, or cause significant business interruptions. Although we maintain property damage and business interruption insurance for such risks, there is no guarantee that future
damages or business loss from earthquakes will be covered by such insurance, that we will be able to collect from our insurance carriers, should we choose to claim under our insurance policies, or that such coverage will be sufficient. In addition,
our manufacturing facilities have occasionally experienced insufficient power supplies, and our operations have been disrupted.

Our
operations may be delayed or interrupted and our business could suffer if we violate environmental, safety and health, or ESH, regulations.

The semiconductor manufacturing process requires the use of various gases, chemicals, hazardous materials and other substances such as solvents and sulfuric acid which may have an impact on the
environment. We are always subject to ESH regulations, and a failure to manage the use, storage, transportation, emission, discharge, recycling or disposal of raw materials or to comply with these ESH regulations could result in (i) regulatory
penalties, fines and other legal liabilities, (ii) suspension of production or delays in operation and capacity expansion, (iii) a decrease in our sales, (iv) an increase in pollution cleaning fees and other operation costs, or
(v) damage to our public image, any of which could harm our business. In addition, as ESH regulations are becoming more comprehensive and stringent, we may incur a greater amount of capital expenditures in technology innovation and materials
substitution in order to comply with such regulations, which may adversely affect our results of operations.

Climate change may
negatively affect our business.

There is increasing concern that climate change is occurring and may have dramatic
effects on human activity without aggressive remediation steps. A modest change in temperature would result in increased coastal flooding, changing precipitation patterns and increasing risk of extinction for the worlds species. Public
expectations for reductions in greenhouse gas emissions could result in increased energy, transportation and raw material costs.

Scientific examination of, political attention to and rules and regulations on issues surrounding the existence and extent of climate change may result in an increase in the cost of production due to
increase in the prices of energy and introduction of energy or carbon tax. Various regulatory developments have been introduced that focus on restricting or managing emissions of carbon dioxide, methane and other greenhouse gases. Enterprises may
need to purchase at higher costs emission credits, new equipment or raw materials with lower carbon footprints. These developments and further legislation that is likely to be enacted could affect our operations negatively. Changes in environmental
regulations, such those on the use of perfluorinated compounds, could increase our production costs, which could adversely affect our results of operation and financial condition.

In addition, more frequent droughts and floods, extreme weather conditions and rising sea levels could occur due to climate change. The
impact of such changes could be significant as most of our factories are located in islands including Taiwan and Singapore. For example, transportation suspension caused by extreme weather conditions could harm the distribution of our products.
Similarly, our operations depend upon adequate supplies of water, and extended or serious droughts may affect our ability to obtain adequate supplies of water and threaten our production. We cannot predict the economic impact, if any, of disasters
or climate change.



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##### Table of Contents

Disruptions in the international trading environment may seriously decrease our international sales.

A substantial portion of our net operating revenues is derived from sales to customers located in countries other
than Taiwan, Singapore and Japan where our fabs are located, which accounted for 37.4%, 35.5%, and 40.2% in 2009, 2010 and 2011, respectively, of our net operating revenues. We expect sales to customers outside of Taiwan, Singapore and Japan to
continue to represent a significant portion of our net operating revenues. The success and profitability of our international activities depend on certain factors beyond our control, such as general economic conditions, labor conditions, political
stability, tax laws, import duties and foreign exchange controls of the countries in which we sell our products, and the political and economic relationships between Taiwan, Singapore, Japan and these countries. As a result, our manufacturing
services will continue to be vulnerable to disruptions in the international trading environment, including adverse changes in foreign government regulations, political unrest and international economic downturns.

These disruptions in the international trading environment affect the demand for our manufacturing services and change the terms upon
which we provide our manufacturing services overseas, which could seriously decrease our international sales.

Political, Economic and
Regulatory Risks

We face substantial political risks associated with doing business in Taiwan, particularly due to the tense
relationship between the R.O.C. and the Peoples Republic of China, or the PRC, that could negatively affect the value of your investment.

Our principal executive offices and most of our assets and operations are located in Taiwan. Accordingly, our business, financial condition and results of operations and the market price of our shares and
the ADSs may be affected by changes in R.O.C. governmental policies, taxation, inflation or interest rates and by social instability and diplomatic and social developments in or affecting Taiwan which are outside of our control. Taiwan has a unique
international political status. Since 1949, Taiwan and the Chinese mainland have been separately governed. The PRC claims that it is the sole government in China and that Taiwan is part of China. Although significant economic and cultural relations
have been established between the R.O.C. and the PRC in the past few years, such as the adoption of the Economic Cooperation Framework Agreement and memorandum regarding cross-straight financial supervision, we cannot assure you that relations
between the R.O.C. and PRC will not become strained again. For example, the PRC government has refused to renounce the use of military force to gain control over Taiwan and, in March 2005, further passed an Anti-Secession Law that authorizes
non-peaceful means and other necessary measures should Taiwan move to gain independence from the PRC. Past developments in relations between the R.O.C. and the PRC have on occasions depressed the market prices of the securities of companies in the
R.O.C. Such initiatives and actions are commonly viewed as having a detrimental effect to reunification efforts between the R.O.C. and the PRC. Relations between the R.O.C. and the PRC and other factors affecting military, political or economic
conditions in Taiwan could materially and adversely affect our financial condition and results of operations, as well as the market price and the liquidity of our securities.

Our business, financial condition and results of operations have been affected by the global financial and economic crisis and may be further affected.

We and our customers rely on the strength of the global economy and global financial markets. We face risks attendant to changes in
customer demand in semiconductor industry, economic environments, changes in interest rates and instability in securities markets around the world, among other factors. The adverse economic conditions have affected and may continue to affect
customer spending generally, which will result in decreases in demand for our manufacturing services and have an adverse affect on our results of operations. For example, beginning in 2008, the United States, Europe and international markets have
experienced a significant decline in economic activity that has affected the semiconductor market. As a result, we were also severely affected by the financial and economic crisis. The crisis adversely affected our business and results of
operations. In addition, the current European debt crisis and related financial restructuring efforts in Europe, including in Greece, Italy, Spain, Portugal and Ireland, are contributing to instability in global financial markets, which
adversely affects consumer confidence, the cost of borrowing and economic activity. Similarly, disruptions from political instability in such regions as the Middle East and North Korea, could trigger instability in global financial markets with
similar adverse effects. As our business is significantly dependent on economic growth, if global macroeconomic economic conditions remain uncertain or deteriorate further, our financial condition and results of operations could be materially
adversely affected.



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Our business depends on the support of the R.O.C. government, and a decrease in this support may
increase our labor costs and decrease our net income after tax.

The R.O.C. government has been very supportive of
technology companies such as us. For instance, the R.O.C.s labor laws and regulations do not require employees of semiconductor companies, including our company, to be unionized, and permit these employees to work shifts of 10 hours each day
on a two-days-on, two-days-off basis. We cannot assure you, however, that these labor laws and regulations will not be changed in the future. In the event that the R.O.C. government requires our employees to be unionized or decreases the number of
hours our employees may work in a given day, our labor costs may increase significantly which could result in lower margins.

We, like many R.O.C. technology companies, have benefited from substantial tax incentives provided by the R.O.C. government. In 2011,
such incentives resulted in a tax credit in the amount of NT$279 million (US$9 million). Among the incentives broadly enjoyed by R.O.C. technology companies, various tax benefits granted under Chapter 2 and Article 70-1 of the Statute for Upgrading
Industries expired on December 31, 2009. Despite the fact that we can still enjoy the five-year tax holidays for the relevant investment plans approved by R.O.C. tax authority before the expiration of the Statute for Upgrading Industries, if
more incentives are curtailed or eliminated, our net income after tax attributable to us may decrease.

Our future tax obligations may
adversely affect our profitability.

The R.O.C. government enacted the R.O.C. Income Basic Tax Act, also known as the
Minimum Income Tax Statute, or the Statute, which became effective on January 1, 2006. This Statute imposes an alternative minimum tax, or AMT. The AMT is designed to remedy the current excessive tax incentives for individuals and
businesses. The AMT imposed under the Statute is a supplemental tax which is payable if the income tax payable pursuant to the R.O.C. Income Tax Act is below the minimum amount prescribed under the Statute. For the purpose of calculating the AMT,
the taxable income defined under the Statute includes most income that is exempted from income tax under various legislations, such as those providing tax holidays and investment tax credits. For businesses, the incomes which previously enjoyed
tax-exemption privileges under relevant tax regulations, such as the Act for the Establishment and Administration of the Science Parks and the Statute for Upgrading Industries, will be subject to the new AMT system for the calculation of business
taxpayers aggregate incomes. The AMT rate for business entities is 10%. Under the Statute, a company will be subject to a 10% AMT if its annual taxable income under the Statute exceeds NT$2 million. However, the Statute grandfathered certain
tax exemptions granted prior to the enactment of the AMT. For example, businesses already qualified for five-year tax holidays and having obtained the applicable permission issued by the competent authority before December 31, 2005 may continue
to enjoy tax incentives, and the income exempted thereunder will not to be added to the taxable income for the purpose of calculating the AMT, so long as the construction of their investment projects breaks ground within one year from
January 1, 2006 and is completed within three years commencing from the day immediately following their receipts of the applicable permission issued by the competent authority. As the tax exemption periods expire or in the event of an increase
in other taxable income subject to the Statute, such 10% AMT may adversely impact our net income after tax.

The trading price of the
shares and ADSs may be adversely affected by the general activities of the Taiwan Stock Exchange and U.S. stock exchanges, the trading price of our shares, increases in interest rates and the economic performance of Taiwan.

Our shares are listed on the Taiwan Stock Exchange. The trading price of our ADSs may be affected by the trading price of our shares on
the Taiwan Stock Exchange and the economic performance of Taiwan. The Taiwan Stock Exchange is smaller and, as a market, more volatile than the securities markets in the United States and a number of European countries. The Taiwan Stock Exchange has
experienced substantial fluctuations in the prices and volumes of sales of listed securities, and there are currently limits on the range of daily price movements on the Taiwan Stock Exchange. The Taiwan Stock Exchange is particularly volatile
during times of political instability, such as when relations between Taiwan and the PRC are strained. Moreover, the Taiwan Stock Exchange has experienced problems such as market manipulation, insider trading and payment defaults, and the government
of Taiwan has from time to time intervened in the stock market by purchasing stocks listed on the Taiwan Stock Exchange. The recurrence of these or similar problems could decrease the market price and liquidity of the shares and ADSs.



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From September 19, 2000, the commencement date of the listing of our ADSs on the New
York Stock Exchange, or the NYSE, to December 31, 2011, the daily reported closing prices of our ADSs ranged from US$14.88 per ADS to US$1.51 per ADS. The market price of the ADSs may also be affected by general trading activities on the U.S.
stock exchanges, which recently have experienced significant price volatility with respect to shares of technology companies. Fluctuation in interest rates and other general economic conditions may also have an effect on the market price of the
ADSs.

Currency fluctuations could increase our costs relative to our revenues, which could adversely affect our profitability.

More than half of our net operating revenues are denominated in currencies other than New Taiwan dollars, primarily
U.S. dollars and Japanese Yen. On the other hand, more than half of our costs of direct labor, raw materials and overhead are incurred in New Taiwan dollars. Although we hedge a portion of the resulting net foreign exchange position through the use
of foreign currency forward contracts, we are still affected by fluctuations in exchange rates among the U.S. dollar, the Japanese Yen, the New Taiwan dollar and other currencies. For example, during the period from August 31, 2010 to
February 15, 2011, the U.S. dollar depreciated 8.06% against the NT dollar. Any significant fluctuation in exchange rates may be harmful to our financial condition. In addition, fluctuations in the exchange rate between the U.S. dollar and the
New Taiwan dollar will affect the U.S. dollar value of the ADSs and the U.S. dollar value of any cash dividends we pay, which could have a corresponding effect on the market price of the ADSs.

Compliance with laws such as the US Conflict Minerals Law may affect our ability or the ability of our suppliers to purchase raw materials at an
effective cost.

Many industries rely on materials which are subject to regulation concerning certain minerals sourced
from the Democratic Republic of Congo or adjoining countries, including: Sudan; Uganda; Rwanda; Burundi; United Republic of Tanzania; Zambia; Angola; Congo; and Central African Republic. These minerals are commonly referred to as conflict minerals.
Conflict minerals which may be used in our industry or by our suppliers include Columbite-tantalite (derivative of tantalum [Ta]), Cassiterite (derivative of tin [Sn]), gold [Au], Wolframite (derivative of tungsten [W]), and Cobalt [Co]. Under
present U.S. regulations, we and our customers are required to survey and disclose whether our processes or products use or rely on conflict materials. The U.S. SEC proposed draft regulations that would require companies such as ours to disclose the
use of conflict materials and to take certain steps to verify those disclosures with its vendors. The SEC has not yet promulgated the final rules and regulations. Although we expect that we and our vendors will be able to comply with the
requirements of any new regulations promulgated by the SEC, there can be no guarantee that we will be able to gather all the information required. In addition, there is increasing public sentiment that companies should avoid using conflict materials
from the DRC and adjoining countries. Although we believe our suppliers do not rely on such conflict materials, there can be no guarantee that we will continue to be able to obtain adequate supplies of materials needed in our production from supply
chains outside the DRC and adjoining countries. A failure to obtain necessary information or to maintain adequate supplies of materials from supply chains outside the DRC and adjoining countries may delay our production, increasing the risk of
losing customers and business.

Similarly, many countries are considering regulations concerning disclosure and enforcement of
human rights within supply chains. Although our own operations comply with the employment and employee rights requirements under the laws of the countries where we have operations, such proposals extend to the operations of suppliers, wherever they
may be located. While we believe our suppliers comply with applicable human rights requirements, there can be no guarantee that they will continue to do so, or that we will be able to obtain the necessary information on their activities to comply
with whatever future requirements may be enacted.



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Data security and data privacy considerations and regulations may adversely affect our operations.

Our operations depend upon reliable and uninterrupted information technology services, including the integrity of our
web-based and electronic customer service systems. Although we have put in place what we believe are reasonable precautions to prevent accidental and/or malicious disruption of these services, there can be no assurance that our preventive measures
will preclude failure of the information technology, web-based and electronic customer service systems upon which our business depends. Disruption of these systems could adversely affect our ability to manufacture and to serve our customers.

In addition, in the course of our operations, we receive confidential information from and about our customers, vendors,
employees and partners. Although we take what we believe are reasonable precautions to protect such information from disclosure to or interruption, there are no guarantees our precautions will prevent accidental or malicious access to such
information. In the event of such access, our reputation could be adversely affected, customers and others may hesitate to entrust us with their confidential information, which would negatively affect our operations, and we would incur costs to
remedy the breach.

Moreover, many jurisdictions have proposed regulations concerning data privacy. Although we have taken
measures to comply with existing law and regulations in this regard, future laws may impose requirements that make our operations more expensive and/or less efficient. In addition, should we experience a breakdown in our systems or failure in our
precautions that results in a violation of such regulations, we may suffer adverse customer reaction and face governmental penalties.

Risks Related to the Shares and ADSs and Our Trading Markets

Restrictions on the ability to deposit shares into our ADS program may adversely affect the liquidity and price of the ADSs.

The ability to deposit shares into our ADS program is restricted by R.O.C. law. Under current R.O.C. law, no person or entity, including
you and us, may deposit shares into our ADS program without specific approval of the R.O.C. FSC except for the deposit of the shares into our ADS program and for the issuance of additional ADSs in connection with:



| | (1) | distribution of share dividends or free distribution of our shares;
| | --- | -------------------------------------------------------------------



| | (2) | exercise of the preemptive rights of ADS holders applicable to the shares evidenced by ADSs in the event of capital increases for cash; or
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | delivery of our shares which are purchased in the domestic market in Taiwan directly by the investor or through the depositary or are already in the possession of the
investor to the custodian for deposit into our ADS program, subject to the following conditions: (a) the re-issuance is permitted under the deposit agreement and custody agreement, (b) the depositary may accept deposit of those shares and
issue the corresponding number of ADSs with regard to such deposit only if the total number of ADSs outstanding after the issuance does not exceed the number of ADSs previously approved by the R.O.C. FSC, plus any ADSs issued pursuant to the events
described in (1) and (2) above and (c) this deposit may only be made to the extent previously issued ADSs have been withdrawn.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As a result of the limited ability to deposit shares into our ADS program, the prevailing market price of our ADSs on the NYSE may differ from the prevailing market price of the equivalent number of our
shares on the Taiwan Stock Exchange.



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Holders of our ADSs will not have the same proposal or voting rights as the holders of our shares,
which may affect the value of your investment.

Except for treasury shares and shares held by our subsidiaries which
meet certain criteria provided under the R.O.C. Company Act, each common share is generally entitled to one vote and no voting discount will be applied. However, except as described in this annual report and in the deposit agreement, holders of our
ADSs will not be able to exercise voting rights attached to the shares evidenced by our ADSs on an individual basis. Holders of our ADSs will appoint the depositary or its nominee as their representative to exercise the voting rights attached to the
shares represented by the ADSs. The voting rights attached to the shares evidenced by our ADSs must be exercised as to all matters brought to a vote of stockholders collectively in the same manner.

Moreover, holders of the ADSs do not have individual rights to propose any matter for stockholders votes at our stockholders
meetings. However, holders of at least 51% of the ADS outstanding at the relevant record date may request the depositary to submit to us one proposal per year for consideration at our annual ordinary stockholders meeting, provided that such
proposal meets certain submission criteria and limitations, including the language and the length of the proposal, the time of submission, the required certification or undertakings, and the attendance at the annual ordinary stockholders
meeting. A qualified proposal so submitted by the depositary will still be subject to review by our board of directors and there is no assurance that the proposal will be accepted by our board of directors for inclusion in the agenda of our annual
ordinary stockholders meeting. Furthermore, if we determine, at our discretion, that the proposal submitted by the depositary does not qualify, we have no obligation to notify the depositary or to allow the depositary to modify such proposal.

Furthermore, if holders of at least 51% of the ADSs outstanding at the relevant record date instruct the depositary to vote
in the same manner regarding a resolution, including election of directors, the depositary will appoint our Chairman, or his designee, to represent the ADS holders at the stockholders meetings and to vote the shares represented by the ADSs
outstanding in the manner so instructed. If by the relevant record date the depositary has not received instructions from holders of ADSs holding at least 51% of the ADSs to vote in the same manner for any resolution, then the holders will be deemed
to have instructed the depositary to authorize and appoint our Chairman, or his designee, to vote all the shares represented by ADSs at his sole discretion, which may not be in your interest.

The rights of holders of our ADSs to participate in our rights offerings may be limited, which may cause dilution to their holdings.

We may from time to time distribute rights to our stockholders, including rights to acquire our securities. Under the deposit agreement,
the depositary will not offer those rights to ADS holders unless both the rights and the underlying securities to be distributed to ADS holders are either registered under the Securities Act or exempt from registration under the Securities Act. We
are under no obligation to file a registration statement with respect to any such rights or underlying securities or to endeavor to cause such a registration statement to be declared effective. Accordingly, holders of our ADSs may be unable to
participate in our rights offerings and may experience dilution in their holdings.

Changes in exchange controls that restrict your
ability to convert proceeds received from your ownership of ADSs may have an adverse effect on the value of your investment.

Your ability to convert proceeds received from your ownership of ADSs depends on existing and future exchange control regulations of the Republic of China. Under the current laws of the Republic of China,
an ADS holder or the depositary, without obtaining further approvals from the R.O.C. Central Bank of China, or the CBC, or any other governmental authority or agency of the Republic of China, may convert NT dollars into other currencies, including
U.S. dollars, in respect of:



| |  |  | the proceeds of the sale of shares represented by ADSs or received as share dividends with respect to the shares and deposited into the depositary
receipt facility; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | any cash dividends or distributions received from the shares represented by ADSs.
| | - |  | ---------------------------------------------------------------------------------



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In addition, the depositary may also convert into NT dollars incoming payments for purchases
of shares for deposit in the depositary receipt facility against the creation of additional ADSs. If you withdraw the shares underlying your ADSs and become a holder of our shares, you may convert into NT dollars subscription payments for rights
offerings. The depositary may be required to obtain foreign exchange approval from the CBC on a payment-by-payment basis for conversion from NT dollars into foreign currencies of the proceeds from the sale of subscription rights of new shares.
Although it is expected that the CBC will grant approval as a routine matter, required approvals may not be obtained in a timely manner, or at all.

Under the Republic of China Foreign Exchange Control Law, the Executive Yuan of the Republic of China may, without prior notice but subject to subsequent legislative approval, impose foreign exchange
controls or other restrictions in the event of, among other things, a material change in international economic conditions.

Our public
stockholders may have more difficulty protecting their interests than they would as stockholders of a U.S. corporation.

Our corporate affairs are governed by our articles of incorporation and by laws governing R.O.C. corporations. The rights of our
stockholders to bring stockholders suits against us or our board of directors under R.O.C. law are much more limited than those of the stockholders of U.S. corporations. Therefore, our public stockholders may have more difficulty protecting
their interests in connection with actions taken by our management, members of our board of directors or controlling stockholders than they would as stockholders of a U.S. corporation. Please refer to Item 10. Additional InformationB.
Memorandum and Articles of AssociationRights to Bring Stockholders Suits included elsewhere in this annual report for a detailed discussion of the rights of our stockholders to bring legal actions against us or our directors under
R.O.C. law.

Holders of our ADSs will be required to appoint several local agents in Taiwan if they withdraw shares from our ADS program
and become our stockholders, which may make ownership burdensome.

Non-R.O.C. persons wishing to withdraw shares
represented by their ADSs from our ADS program and hold our shares represented by those ADSs are required to, among other things, appoint a local agent or representative with qualifications set forth by the R.O.C. FSC to open a securities trading
account with a local brokerage firm, pay R.O.C. taxes, remit funds and exercise stockholders rights. In addition, the withdrawing holders are also required to appoint a custodian bank with qualifications set forth by the R.O.C. FSC to hold the
securities in safekeeping, make confirmations, settle trades and report all relevant information. Without making this appointment and opening of the accounts, the withdrawing holders would not be able to subsequently sell our shares withdrawn from a
depositary receipt facility on the Taiwan Stock Exchange. Under R.O.C. law and regulations, except under limited circumstances, PRC persons are not permitted to withdraw the shares underlying the ADSs or to register as a stockholder of our company.
Under the Regulations Governing Securities Investment and Futures Trading in Taiwan by Mainland Area Investors promulgated by the R.O.C. Executive Yuan on April 30, 2009, as amended, only qualified domestic institutional investors, or QDIIs,
are permitted to withdraw the shares underlying the ADSs, subject to compliance with the withdrawal relevant requirements, and only QDIIs, and limited entities or individuals who meet the qualification requirements set forth therein are permitted to
own shares of an R.O.C. company listed for trading on the Taiwan Stock Exchange, provided that among other restrictions generally applicable to investments made by PRC persons, their shareholdings are subject to certain restrictions as set forth in
the abovementioned regulations and that such mainland area investors shall apply for a separate approval if their investment, individually or in aggregate, amounts to or exceeds 10 percent of the shares of any R.O.C. company.

You may not be able to enforce a judgment of a foreign court in the R.O.C.

We are a company limited by shares incorporated under the R.O.C. Company Act. Most of our assets and most of our directors and executive
officers and experts named in the registration statement are located in Taiwan. As a result, it may be difficult for you to enforce judgments obtained outside Taiwan upon us or such persons in Taiwan. We have been advised by our R.O.C. counsel that
any judgment obtained against us in any court outside the R.O.C. arising out of or relating to the ADSs will not be enforced by R.O.C. courts if any of the following situations shall apply to such final judgment:



| |  |  | the court rendering the judgment does not have jurisdiction over the subject matter according to R.O.C. law;
| | - |  | ------------------------------------------------------------------------------------------------------------



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| |  |  | the judgment or the court procedure resulting in the judgment is contrary to the public order or good morals of the R.O.C.;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | the judgment was rendered by default, except where the summons or order necessary for the commencement of the action was legally served on us within
the jurisdiction of the court rendering the judgment within a reasonable period of time or with judicial assistance of the R.O.C.; or
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | judgments of R.O.C. courts are not recognized in the jurisdiction of the court rendering the judgment on a reciprocal basis.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------

We may be considered a passive foreign investment company, which could result in adverse U.S. tax consequences for
U.S. investors.

We do not believe that we were a passive foreign investment company, or PFIC, for 2011 and we do not
expect to become one in the future, although there can be no assurance in this regard. Based upon the nature of our business activities, we may be classified as a passive foreign investment company for U.S. federal income tax purposes. Such
characterization could result in adverse U.S. tax consequences to you if you are a U.S. investor.

For example, if we are a
PFIC, our U.S. investors may become subject to increased tax liabilities under U.S. tax laws and regulations and will become subject to burdensome reporting requirements. The determination of whether or not we are a PFIC is made on an annual basis
and will depend on the composition of our income and assets from time to time. Specifically, for any taxable year we will be classified as a PFIC for U.S. tax purposes if either (i) 75% or more of our gross income in a taxable year is passive
income or (ii) the average percentage of our assets (which includes cash) by value in a taxable year which produce or are held for the production of passive income is at least 50%. The calculation of the value of our assets will be based, in
part, on the quarterly market value of shares and ADSs, which is subject to change. In addition, the composition of our income and assets will be affected by how, and how quickly, we spend the cash we have raised in prior offerings. See
TaxationU.S. Federal Income Tax Considerations For U.S. PersonsPassive Foreign Investment Company.



|ITEM 4. | INFORMATION ON THE COMPANY
|------- | --------------------------



|A. | History and Development of the Company
|-- | --------------------------------------

Our legal and commercial name is United Microelectronics Corporation, commonly known as UMC. We were incorporated under the R.O.C. Company Law as a company limited by shares in May 1980 and
our shares were listed on the Taiwan Stock Exchange in 1985. Our principal executive office is located at No. 3 Li-Hsin Road II, Hsinchu Science Park, Hsinchu, Taiwan, Republic of China, and our telephone number is 886-3-578-2258. Our Internet
website address is www.umc.com. The information on our website does not form part of this annual report. Our ADSs have been listed on the NYSE under the symbol UMC since September 19, 2000.

We are one of the worlds largest independent semiconductor foundries and a leader in semiconductor manufacturing process
technologies. Our primary business is the manufacture, or fabrication, of semiconductors, sometimes called chips or integrated circuits, for others. Using our own proprietary processes and techniques, we make
chips to the design specifications of our many customers. Our company maintains a diversified customer base across industries, including communication, consumer electronics, computer, memory and others, while continuing to focus on manufacturing for
high growth, large volume applications, including networking, telecommunications, internet, multimedia, PCs and graphics. We sell and market mainly wafers which in turn are used in a number of different applications by our customers. Percentages of
our net wafer sales derived from our products used in communication devices, consumer electronics, computer, memory and other applications were 54.1%, 27.9%, 15.0%, 1.1% and 1.9%, respectively, in 2011.



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We focus on the development of leading mass-producible manufacturing process technologies.
We were among the first in the foundry industry to go into commercial operation with such advanced capabilities as producing integrated circuits with line widths of 0.25, 0.18, 0.15, 0.13 micron and 90, 65 and 45/40 nanometer. Advanced technologies
have enabled electronic products, especially in relation to computer, communication and consumer products, to integrate their functions in new and innovative methods. Networking capabilities have allowed electronic products such as computers,
tablets, cell phones, televisions, PDAs, CD-ROMs and digital cameras to communicate with each other to exchange information. More powerful semiconductors are required to drive multimedia functions (e.g. processing visual data) and to resolve network
bandwidth issues. At the same time, the trend toward personal electronic devices has resulted in products that are becoming physically smaller and consume less power. Process technology must also shrink the volumes of products aggressively to cater
to this trend of integrating multiple functions, reducing the size of components needed for operation and lowering IC power consumption. Dedicated semiconductor foundries need to achieve this process improvement and at the same time develop multiple
process technologies to satisfy the varying needs of computer, communication and consumer products. We believe our superior process technologies will enable us to continue to offer our customers significant performance benefits for their products,
faster time-to-market production, cost savings and other competitive advantages.

We provide high quality service based on our
performance. In todays marketplace, we believe it is important to make available not only the most manufacturable processes, but also the best solutions to enable customers to design integrated circuits that include entire systems on a chip.
Through these efforts, we intend to be the foundry solution for SoC customer needs. To achieve this goal, we believe it is necessary to timely develop and offer the intellectual property and design support that customers need to ensure their
specific design blocks work with the other design blocks of the integrated circuit system in the manner intended. Accordingly, we have a dedicated intellectual property and design support team which focuses on timely development of the intellectual
property and process specific design blocks our customers need in order to develop products that operate and perform as intended. Our design service team actively cooperates with our customers and vendors of cell libraries and intellectual property
offerings to identify, early in the product/market cycle, the offerings needed to ensure that these coordinated offerings are available to our customers in silicon verified form in a streamlined and easy-to-use manner. As a result, we are able to
ensure the timely delivery of service offerings from the earliest time in the customer design cycle, resulting in a shorter time-to-volume production. We also provide our customers with real-time online access to their confidential production data,
resulting in superior communication and efficiency. We further address our customers needs using our advanced technology and proven methodology to achieve fast cycle time, high yield, production flexibility and close customer communication.
For example, we select and configure our clean rooms and equipment and develop our processes to maximize the flexibility in meeting and adapting to rapidly changing customer and industry needs. As a result, our cycle time, or the period from
customer order to wafer delivery, and our responsiveness to customer request changes are among the fastest in the dedicated foundry industry. We also provide high quality service and engineering infrastructure.

Our production capacity is comparable to that of certain largest companies in the semiconductor industry, and we believe our leading edge
and high volume capability is a major competitive advantage.

Our technology and service have attracted two principal types of
foundry industry customers: fabless design companies and integrated device manufacturers. Fabless design companies design, develop and distribute proprietary semiconductor products but do not maintain internal manufacturing capacity. Instead, these
companies depend on outside manufacturing sources. Integrated device manufacturers, in contrast, traditionally have integrated internally all functions  manufacturing as well as design, development, sales and distribution.

Our primary customers, in terms of our sales revenues, include premier integrated device manufacturers, such as Texas Instruments,
Infineon and STMicroelectronics, and leading fabless design companies, such as Xilinx, Broadcom, MediaTek, Realtek and Novatek. In 2011, our companys top ten customers accounted for 60.3% of our net operating revenues. We believe our success
in attracting these customers is a direct result of our commitment to high quality service and our intense focus on customer needs and performance.



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For the disclosure related to our acquisition of Hejian, the contents of the Form 6-K we
furnished to the Commission on April 29, 2009 (File No. 001-15128) are hereby incorporated by reference. At our annual stockholders meeting in 2009, the stockholders approved our proposed acquisition of Infoshine, the holding company
of Hejian, with the acquisition subject to our ability to obtain the approvals from the necessary authorities pursuant to relevant laws and regulations. Hejian is engaged in the

semiconductor foundry business and owns an 8- inch fab in Suzhou, China. Investment by an R.O.C. company in the PRC to engage in semiconductor foundry business is strictly regulated by the R.O.C.
government. Traditionally, only manufacturing of semiconductor wafers of 8 inches or smaller sizes is permitted, and the number of total investment projects in the semiconductor foundry business undertaken by R.O.C. companies, taken as a whole, is
subject to a quota. When our stockholders approved the acquisition, however, there was no quota available. In February 2010, the relevant restrictions were partially lifted, and the quota and the restriction on the size of semiconductor wafers
produced are not applicable if (i) an investment is made through merger or acquisition; (ii) the rest of the applicable requirements, such as the processing technology gap between the R.O.C. company and its investment target, shall be
satisfied; and (iii) the investment application is approved by the R.O.C. government, which approval is at the governments discretion. We plan to pursue approval of our acquisition of the holding company of Hejian, but there can be no
guarantee that we will successfully obtain such approval. Moreover, an investment regulation governing foreigners holdings of Taiwanese securities, along with restrictions from the amended Operating Rules of the Taiwan Stock Exchange
Corporation for issuing new shares to acquire foreign unlisted companies, presently precludes the issuance of common shares or ADRs as exclusive payment options for such an acquisition. Furthermore, Hejians stockholders have not agreed
to accept cash-only payments. On March 16, 2011, our Board of Directors proposed an offer to the stockholders of Best Elite International Limited, a British Virgin Islands corporation, or Best Elite, which owns 100% of the shares of Infoshine,
thereby to obtain additional 30% ownership of Hejian by share purchase. We received approval from the Investment Commission, Ministry of Economic Affairs, Executive Yuan to acquire the stake of Best Elite International Limited, the holding company
of Hejian. The acquisition includes the 15.3% stake in trustee, plus an additional 20.4% through cash acquisition. As of March 31, 2012, we have acquired 35.03% of the shares in Best Elite.

To continue searching for further integration, on April 25, 2012, our Board of Directors proposed an offer to the stockholders of Best
Elite, thereby to obtain 64.97% stake of Best Elite by share purchase, subject to approval by R.O.C. governmental authorities. However, we can not assure you that we will be able to successfully consummate the acquisition of Best Elite or Hejian.

For the disclosure related to our tender offer of UMCJ, the contents of the Forms 6-K we furnished to the Commission on
October 28, 2009 (File No. 001-15128) and December 21, 2009 (File No. 001-15128) are hereby incorporated by reference. After the tender offer which was held from October 29, 2009 to December 14, 2009, 403,368 shares of
UMCJ were purchased, and we and AWL together held 94.79% of UMCJ shares. UMCJ then delisted from the Jasdaq Securities Exchange in accordance with its listing rules on March 19, 2010. Since not all of the outstanding equity securities of UMCJ
were acquired, we initiated certain squeeze-out procedures as provided in the Japanese Companies Act. Pursuant to such procedures, as of the end of 2010, we, together with AWL, owned 100% of UMCJ. On May 19, 2011, we acquired the remaining
shares of UMCJ from AWL, and AWL filed for liquidation on August 30, 2011.

By owning 100% of UMCJ and proceeding with
integration, we expect UMCJ to reap the benefits of economies of scale and efficiency of operations through developing business on a global basis with our company. The reorganization and restructuring of UMCJ are also expected to increase the
efficiency of our operation and to increase our overall corporate value. We also believe the integration will be beneficial to UMCJs customers, as it is expected to enable UMCJ to offer more competitive globally-based services along with our
companys broader range of technology and more competitive production capabilities.

Please refer to Item 5.
Operating and Financial Review and ProspectsB. Liquidity and Capital Resources for a discussion of our capital expenditures in the past three years and the plan for the current year.

Our Strategy

To
maintain and enhance our position as a market leader, we have adopted a business strategy with a focus on a partnership business model designed to accommodate our customers business needs and objectives and to promote their interests as our
partners. We believe that our success and profitability are inseparable from the success of our customers. The goal in this business model is to create a network of partnerships or alliances among integrated device manufacturers, intellectual
property and design houses, as well as foundry companies. We believe that we and our partners will benefit from the synergy generated through such long-term partnerships or alliances and the added value to be shared among the partners. The key
elements of our strategy are:



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Operate as a Customer-Driven Foundry. We plan to operate as a customer-driven
foundry. The increasing complexity of 40- nanometer and more advanced technologies has impacted the entire chip industry, as ICs can now be designed with greater gate density and higher performance while incorporating the functions of an entire
system. These advanced designs have created a new

proliferating market of advanced mobile digital devices such as smart phones, which have
decreased in size but greatly increased in functionality. We collaborate closely with our customers as well as partners throughout the entire supply chain, including equipment, electronic design automation tool and intellectual property, or IP,
vendors to work synergistically toward each customers SoC solution. We also possess experience and know-how in system design and architecture to integrate customer designs with advanced process technologies and IP. We believe the result is a
higher rate of first-pass silicon success for our SoC solutions. Our customer-driven foundry solutions begin with a common logic-based platform, where designers can choose the process technologies and transistor options that best fit their specific
application. From there, technologies such as radio frequency complementary metal-oxide-semiconductor, or RF CMOS, and embedded Flash memories can be used to further fine-tune the process for customers individual needs. Furthermore, as IP has
become critical resources for SoCs, our portfolio includes basic design building blocks as well as more complex IP of optimized portability and cost, developed both internally and by third-party partners. With advanced technology, a broad IP
portfolio, system knowledge and advanced 300-millimeter manufacturing, we offer comprehensive solutions that help customers deliver successful results in a timely fashion.

Build up Customer-focused Partnership Business Model. We have focused on building partnership relationships with our customers, and we strive to help our customers achieve their objectives
through close cooperation. Unlike the traditional buy-and-sell relationship between a foundry and its customers, we believe our partnership business model will help us understand our customers requirements and, accordingly, better accommodate
our customers needs in a number of ways, such as customized processes and services that optimize the entire value chain (not just the foundry portion) and intellectual property-related support. We believe that this business model will enable
us to deliver our products to our customers at the earliest time our customers require for their design cycle, resulting in shorter time-to-market and time-to-volume production. Furthermore, we believe we will render more cost-effective services by
focusing our research and development expenditures on the specific requirements of our customers. We believe our partnership business model will help us not only survive a market downturn, but also achieve a better competitive position.

Continue to Focus on High Growth Applications and Customers. We believe one measure of a successful foundry company is the
quality of its customers. We focus our sales and marketing on customers who are established or emerging leaders in industries with high growth potential. Our customers include industry leaders such as Advanced Micro Devices, or AMD, Broadcom,
Marvell, Infineon, MediaTek, Novatek, Realtek, SanDisk, STMicroelectronics, Texas Instruments, Freescale and Xilinx. We seek to maintain and expand our relationships with these companies. We strive to demonstrate to these customers the superiority
and flexibility of our manufacturing, technology and service capabilities and to provide them with production and design assistance. We are also making efforts to further diversify our customer portfolio in order to maintain a balanced exposure to
different applications and different customers. We believe these efforts strengthen our relationships with our customers and enhance our reputation in the semiconductor industry as a leading foundry service provider.

Maintain Our Leading Position in Mass-Producible Semiconductor Technology and Selectively Pursue Strategic Investments in New
Technologies. We believe that maintaining and enhancing our leadership in mass-producible semiconductor manufacturing technology is critical to attract and retain customers. Our reputation for technological excellence has attracted both
established and emerging leaders in the semiconductor industries who work closely with us on technology development. In addition, we believe our superior processing expertise has enabled us to provide flexible production schedules to meet our
customers particular needs. We plan to continue building internal research and development expertise, to focus on process development and to establish alliances with leading and specialty semiconductor companies to accelerate access to
next-generation and specialized technologies. For example, we introduced our 28-nanometer technology to customers in 2011 to significantly increase the competitive advantages of our customers by providing better device performance in a smaller die
size. In 2011, we achieved more than 10 customers and tapeouts for our 28-nanometer technology in 2011 and delivered pilot production on this generation to our lead customer. We believe our progress in developing more advanced process technologies
has benefited our customers in the fields of computers, communications, consumer electronics and others with special preferences in certain aspects of the products, such as the ultimate performance, density and power consumption.



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We also recognize that every company has limited resources and that the foundry industry is
ever-evolving. Accordingly, we believe we should invest in new research and development technology intelligently and in a cost-effective manner to achieve the

ultimate output of the resulting technology. In doing so, we balance the rate of return of our research and development with the importance of developing a technology at the right time to enhance our
competitive edge without unduly diluting our profitability. We intend to avoid investments in technologies that do not present a commercial potential for volume production. We believe that to develop the earliest and most advanced semiconductor
technology without regard to its potential for near term volume production may prove costly to our operations and would not strengthen our competitive position. We perceive a benefit to defer investment in the premature equipment needed to claim the
earliest advanced technology and instead to purchase a more advanced and less expensive version of equipment from vendors who design such equipment based on pre-production lessons learned from the earliest technology.

Maintain Scale and Capacity Capabilities to Meet Customer Requirements, with a Focus on 12-inch Wafer Facilities for Future
Expansion. We believe that maintaining our foundry capacity with advanced technology and facilities is critical to the maintenance of our industry leadership. Our production capacity is currently among the largest of all semiconductor
foundries in the world. We intend to increase our 12-inch wafer production capacity to meet the needs of our customers and to fully capitalize on the expected growth of our industry. Our future capacity expansion plans will focus on 12-inch wafer
facilities in order to maintain our technology leadership. 12-inch wafers offer manufacturing advantages over 8-inch wafers due to, among other reasons, the greater number of chips on each wafer and the advantages only offered on newer 12-inch
capable equipment. In addition, 12-inch wafer facilities present a more cost-effective solution in achieving an economic scale of production. We intend to carefully monitor current market conditions in order to optimize the timing of our capital
spending.



|B. | Business Overview
|-- | -----------------

Manufacturing
Facilities

To maintain a leading position in the foundry business, we have placed great emphasis on achieving and
maintaining a high standard of manufacturing quality. As a result, we seek to design and implement manufacturing processes that produce consistent, high manufacturing yields to enable our customers to estimate, with reasonable certainty, how many
wafers they need to order from us. In addition, we continuously seek to enhance our production capacity and process technology, two important factors that characterize a foundrys manufacturing capability. Our large production capacity and
advanced process technologies enable us to provide our customers with volume production and flexible and quick-to-market manufacturing services. All of our fabs operate 24 hours per day, seven days per week. Substantially all maintenance at each of
the fabs is performed concurrently with production.

As a step in our continuing expansion of our manufacturing complex in the
Tainan Science Park in southern Taiwan, we completed the construction of our second 300mm fab in Taiwan in May 2009, and moved the equipment into this fab in July 2010. Total investments for this fab was around US$5 billion, with a maximum designed
monthly production capacity of approximately 35,000 (300mm) wafers.

The following table sets forth operational data of
each of our manufacturing facilities as of December 31, 2011.



|                                  |  |                       |  |                       |  |                       |  |                       |  |                       |  |                       |  |                       |  |                       |  |                       |  |                      
|--------------------------------- |  | --------------------- |  | --------------------- |  | --------------------- |  | --------------------- |  | --------------------- |  | --------------------- |  | --------------------- |  | --------------------- |  | --------------------- |  | ---------------------
|                                  |  | Fab 6A                |  | Fab 8A                |  | Fab 8C                |  | Fab 8D                |  | Fab 8E                |  | Fab 8F                |  | Fab 8S                |  | Fab 12A               |  | Fab 12i               |  | UMCJ                 
|Commencement of volume production |  | 1989                  |  | 1995                  |  | 1998                  |  | 2000                  |  | 1998                  |  | 2000                  |  | 2000                  |  | 2002                  |  | 2004                  |  | 1996                 
|                                  |  |                       |  |                       |  |                       |  |                       |  |                      
|Estimated full capacity(1)(2)     |  | 45,000waferspermonths |  | 68,000waferspermonths |  | 30,000waferspermonths |  | 31,000waferspermonths |  | 39,200waferspermonths |  | 32,500waferspermonths |  | 27,300waferspermonths |  | 46,862waferspermonths |  | 44,782waferspermonths |  | 20,000waferspermonths
|                                  |  |                       |  |                       |  |                       |  |                       |  |                      
|Wafer size                        |  | 6- inch(150mm)        |  | 8-inch(200mm)         |  | 8-inch(200mm)         |  | 8-inch(200mm)         |  | 8-inch(200mm)         |  | 8-inch(200mm)         |  | 8-inch(200mm)         |  | 12-inch(300mm)        |  | 12-inch(300mm)        |  | 8-inch(200mm)        



|(1) | Measured in stated wafer size.
|--- | ------------------------------

|(2) | The capacity of a fab is determined based on the capacity ratings given by manufacturers of the equipment used in the fab, adjusted for, among other factors, actual
output during uninterrupted trial runs, expected down time due to set up for production runs and maintenance and expected product mix.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

The following table sets forth the size and primary use of our facilities and whether such
facilities, including land and buildings, are owned or leased. Our land in the Hsinchu and Tainan Science Parks is leased from the R.O.C. government.



|                                                                                            |  |                                           |  |                             |  |                                              |  |                               
|------------------------------------------------------------------------------------------- |  | ----------------------------------------- |  | --------------------------- |  | -------------------------------------------- |  | ------------------------------
|Location                                                                                    |  | Size
(Land/Building)                      |  | Primary Use                 |  | Land(Owned or Leased)                        |  | Building(Owned or Leased)     
|                                                                                            |  | (in square meters)                        |  |                             |  |                                              |  |                               
|                                                                                            |  |                                           |  |                            
|Fab 6A, 10 Innovation 1st Rd.,
Hsinchu Science Park, Hsinchu, Taiwan 30076,
R.O.C.          |  | 27,898/34,609 6-inch wafer
production     |  | 6-inch wafer production     |  | Leased (expires in December 2026)            |  | Owned                         
|                                                                                            |  |                                           |  |                            
|Fab 8A, 3, 5 Li-Hsin 2nd Rd.,
Hsinchu Science Park, Hsinchu, Taiwan 30078,
R.O.C.           |  | 43,468/83,699 8-inch wafer
production     |  | 8-inch wafer production     |  | Leased (expires in March 2014)               |  | Owned                         
|                                                                                            |  |                                           |  |                            
|Fab 8C, 6 Li-Hsin 3rd Rd.,
Hsinchu Science Park, Hsinchu, Taiwan 30078,
R.O.C.              |  | 24,678/71,427 8-inch wafer
production     |  | 8-inch wafer production     |  | Leased (expires in March 2016)               |  | Owned                         
|                                                                                            |  |                                           |  |                            
|Fab 8D, 8 Li-Hsin 3rd Rd.,
Hsinchu Science Park, Hsinchu, Taiwan 30078,
R.O.C.              |  | 8,036/29,181 8-inch wafer
production      |  | 8-inch wafer production     |  | Leased (expires in March 2016)               |  | Owned                         
|                                                                                            |  |                                           |  |                            
|Fab 8E, 17 Li-Hsin Rd.,
Hsinchu Science Park, Hsinchu, Taiwan 30078,
R.O.C.                 |  | 35,000/76,315 8-inch wafer
production     |  | 8-inch wafer production     |  | Leased (expires in February 2016)            |  | Owned                         
|                                                                                            |  |                                           |  |                            
|Fab 8F, 3 Li-Hsin 6th Rd.,
Hsinchu Science Park, Hsinchu, Taiwan 30078,
R.O.C.              |  | 24,180/65,736 8-inch wafer
production     |  | 8-inch wafer production     |  | Leased (expires in February 2018)            |  | Owned                         
|                                                                                            |  |                                           |  |                            
|Fab 8S, 16 Creation 1st Rd.,
Hsinchu Science Park, Hsinchu, Taiwan 30077,
R.O.C.            |  | 20,404/65,614 8-inch wafer
production     |  | 8-inch wafer production     |  | Leased (expires in December 2023)            |  | Owned                         
|                                                                                            |  |                                           |  |                            
|Fab 12A, 18, 20 Nan-Ke 2nd Rd.,
Tainan Science Park, Sinshih, Tainan, Taiwan
74147, R.O.C.  |  | 113,661/350,597 12-inch wafer
production  |  | 12-inch wafer production    |  | Leased (expires in November 2030)            |  | Owned                         
|                                                                                            |  |                                           |  |                            
|Fab 12i, 3 Pasir Ris Drive 12
Singapore 519528                                              |  | 85,737/142,169 12-inch wafer
production   |  | 12-inch wafer production    |  | Leased (expires in March 2031)               |  | Owned                         
|                                                                                            |  |                                           |  |                            
|UMCJ, 1580, Yamamoto,
Tateyama-City, Chiba, Japan                                           |  | 387,551/60,923 8-inch wafer
production    |  | 8-inch wafer production     |  | 83% owned, 17% leased (expires in June 2049) |  | 96% Owned, 4% Leased          
|                                                                                            |  |                                           |  |                            
|United Tower, 3 Li-Hsin 2nd Rd.,
Hsinchu Science Park, Hsinchu, Taiwan 30078,
R.O.C.        |  | 8,818/85,224 Administration
office        |  | Administration office       |  | Leased (expires in March 2014)               |  | Owned                         
|                                                                                            |  |                                           |  |                            
|Neihu Rd. office, 8F,68.Sec.
1,Neihu Rd., Taipei Taiwan 11493,
R.O.C.                       |  | 626/4,817 Administration
office           |  | Administration office       |  | Owned                                        |  | Owned                         
|                                                                                            |  |                                           |  |                            
|Testing Building, 1, Chin-Shan, St. 7, Hsinchu, Taiwan 30080, R.O.C.                        |  | 10,762/41,318 Leased to
several companies |  | Leased to several companies |  | Owned                                        |  | Owned                         
|                                                                                            |  |                                           |  |                            
|R&D Building, 18 Nan-Ke 2nd Rd., Tainan Science Park, Sinshih, Tainan, Taiwan 74147, R.O.C. |  | 42,000/47,501 Research and
development    |  | Research and development    |  | Leased (expires in December 2023)            |  | Owned                         
|                                                                                            |  |                                           |  |                            
|Nexpower, No.2, Houke S.Rd., Houli District, Taichung, Taiwan 42152, R.O.C.                 |  | 94,016/78,212 Sun power
production        |  | Sun power production        |  | Leased (expires in December 2026)            |  | Owned                         
|                                                                                            |  |                                           |  |                            
|Topcell, No. 1560, Sec. 1 Zhongshan Rd., Guanyin Township,Taoyuan, Taiwan 32852, R.O.C.     |  | 16,873/35,643 6-inch cell
production      |  | 6-inch cell production      |  | Leased (expires in March 2018)               |  | Leased (expires in March 2018)



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##### Table of Contents

Process Technology

Process technology is a set of specifications and parameters that we implement for manufacturing the critical dimensions of the patterned features of the circuitry of semiconductors. Our process
technologies are currently among the most advanced in the foundry industry. These advanced technologies have enabled us to provide flexible production schedules to meet our customers particular needs.

The continued enhancement of our process technologies has enabled us to manufacture semiconductor devices with smaller geometries,
allowing us to produce more dice on a given wafer. We pioneered the production of semiconductor products with 0.25 and 0.18 micron process technology in 1997 and 1999, respectively, and used copper interconnect metallurgic to allow better
reliability and higher conductibility than traditional aluminum interconnects. We began volume production using 0.13-micron process technology in 2002. Our extensive experience in the 0.13-micron process technology has helped smooth our transition
to 90- nanometer pilot production. Our 90-nanometer process marks further advance in our technology achievements, incorporating up to nine copper metal layers, triple gate oxide and other advanced features and using chrome-less phase-shift masks.
This technology has been in volume production since the second quarter of 2004 after passing several product certifications. In 2005, our research and development teams continued to work closely with the manufacturing staff to finalize our
90-nanometer technology portfolio. These collaborative efforts, performed in our best-in-class 300mm facilities, contributed to the improvement of high density 6T-SRAM yield to the maturity level of more than 90%. Our accomplishments led to multiple
design awards followed by first silicon success, including a PC graphic IC and the worlds first 90-nanometer Wireless Local Area Network (WLAN) RF chip featuring a unique and specially developed inductor scheme. In addition, we were able to
develop, within 6 months, several customized 90-nanometer processes tailored to our customers device specifications, and demonstrated product success by delivering record high yield for the first product lots. Our first fully-functional
65-nanometer wireless digital baseband customer IC was produced in July of 2005, after only a year since this research and development project began at this facility.

Since the third quarter of 2006, we have begun the mass production of a next-generation 65-nanometer FPGA product, which features a 65% logic capacity increase over previous generation of FPGAs with
triple gate oxide and 11 copper metal layers. Our 65- nanometer development team is not only independently developing our technologies in-house but is also bringing up customized process technologies to match customer specific needs. Furthermore,
our 45/40-nanometer process technologies, which are jointly developed by us and our strategic partners have been in production since the first half of 2009, significantly increasing the competitive advantages of our customers by providing better
device performance in a smaller die size.



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##### Table of Contents

The table below sets forth our actual process technology range, categorized by line widths,
or the minimum physical dimensions of the transistor gate of integrated circuits in production by each fab, in 2011, and the estimated annual full capacity of each fab, actual total annual output and capacity utilization rates in 2009, 2010 and
2011:



|                             |  |                          |  |                                       |  |                                                               |       |   |      |  |       |      |  |  |       |  
|---------------------------- |  | ------------------------ |  | ------------------------------------- |  | ------------------------------------------------------------- | ----- | - | ---- |  | ----- | ---- |  |  | ----- | -
|                             |  |                          |  | Year ended December 31, 2011
Range of |  | Year Ended December 31,                                       |      
|                             |  | Year of                  |  | Process)                              |  | 2009                                                          |       |   | 2010 |  |       | 2011 | 
|                             |  | Commencementof Operation |  | Technologies
(in microns)             |  | (in thousands of 8-inch waferequivalents, except percentages) |      
|Fab                          |  |                          |  |                                       |  |                                                               |       |   |      |  |       |      |  |  |       |  
|Fab 6A                       |  | 1989                     |  | 0.5                                   |  |                                                               | 328   |   |      |  | 332   |      |  |  | 303   |  
|Fab 8A                       |  | 1995                     |  | 0.5 to 0.25                           |  |                                                               | 816   |   |      |  | 816   |      |  |  | 813   |  
|Fab 8C                       |  | 1998                     |  | 0.35 to 0.13                          |  |                                                               | 402   |   |      |  | 366   |      |  |  | 359   |  
|Fab 8D                       |  | 2000                     |  | 0.13 to 0.09                          |  |                                                               | 270   |   |      |  | 314   |      |  |  | 364   |  
|Fab 8E                       |  | 1998                     |  | 0.5 to 0.18                           |  |                                                               | 408   |   |      |  | 410   |      |  |  | 469   |  
|Fab 8F                       |  | 2000                     |  | 0.18 to 0.13                          |  |                                                               | 381   |   |      |  | 387   |      |  |  | 388   |  
|Fab 8S                       |  | 2000                     |  | 0.18 to 0.13                          |  |                                                               | 300   |   |      |  | 303   |      |  |  | 307   |  
|Fab 12A                      |  | 2002                     |  | 0.18 to 0.040                         |  |                                                               | 888   |   |      |  | 842   |      |  |  | 1,128 |  
|Fab 12i                      |  | 2004                     |  | 0.13 to 0.065                         |  |                                                               | 815   |   |      |  | 1,022 |      |  |  | 1,192 |  
|UMCJ                         |  | 1996                     |  | 0.35 to 0.15                          |  |                                                               | 240   |   |      |  | 240   |      |  |  | 240   |  
|Total estimated capacity     |  |                         |  |                                      |  |                                                               | 4,848 |   |      |  | 5,031 |      |  |  | 5,563 |  
|Total output (actual)        |  |                         |  |                                      |  |                                                               | 3,362 |   |      |  | 4,713 |      |  |  | 4,370 |  
|Average capacity utilization |  |                         |  |                                      |  |                                                               | 69.4  | % |      |  | 93.7  | %    |  |  | 78.6  | %

The table below sets forth a breakdown of number and percentage of wafer output by process technologies
in 2009, 2010 and 2011.



|                        |  |                                                                |       |  |      |  |       |      |  |  |       |  |  |  |       |   |  |  |       |  |  |  |       |  
|----------------------- |  | -------------------------------------------------------------- | ----- |  | ---- |  | ----- | ---- |  |  | ----- |  |  |  | ----- | - |  |  | ----- |  |  |  | ----- | -
|                        |  | Year Ended December 31,                                        |      
|                        |  | 2009                                                           |       |  | 2010 |  |       | 2011 | 
|                        |  | (in thousands of 8-inch wafer equivalents, except percentages) |      
|Technology              |  |                                                                |       |  |      |  |       |      |  |  |       |  |  |  |       |   |  |  |       |  |  |  |       |  
|40 nanometers and under |  |                                                                | 10    |  |      |  | 0.3   | %    |  |  | 65    |  |  |  | 1.3   | % |  |  | 159   |  |  |  | 3.6   | %
|65 nanometers           |  |                                                                | 260   |  |      |  | 7.7   |      |  |  | 696   |  |  |  | 14.8  |   |  |  | 980   |  |  |  | 22.4  |  
|90 nanometers           |  |                                                                | 605   |  |      |  | 18.0  |      |  |  | 584   |  |  |  | 12.4  |   |  |  | 333   |  |  |  | 7.6   |  
|0.13 micron             |  |                                                                | 602   |  |      |  | 17.9  |      |  |  | 997   |  |  |  | 21.2  |   |  |  | 1,049 |  |  |  | 24.0  |  
|0.15 micron             |  |                                                                | 269   |  |      |  | 8.0   |      |  |  | 367   |  |  |  | 7.8   |   |  |  | 134   |  |  |  | 3.1   |  
|0.18 micron             |  |                                                                | 587   |  |      |  | 17.4  |      |  |  | 611   |  |  |  | 13.0  |   |  |  | 510   |  |  |  | 11.7  |  
|0.25 micron             |  |                                                                | 76    |  |      |  | 2.3   |      |  |  | 144   |  |  |  | 3.0   |   |  |  | 165   |  |  |  | 3.8   |  
|0.35 micron             |  |                                                                | 655   |  |      |  | 19.5  |      |  |  | 766   |  |  |  | 16.3  |   |  |  | 621   |  |  |  | 14.2  |  
|0.50 micron or higher   |  |                                                                | 298   |  |      |  | 8.9   |      |  |  | 483   |  |  |  | 10.2  |   |  |  | 419   |  |  |  | 9.6   |  
|                        |  |                                                                |       |  |      |  |       |      |  |  |       |  |  |  |       |   |  |  |       |  |  |  |       |  
|Total                   |  |                                                                | 3,362 |  |      |  | 100.0 | %    |  |  | 4,713 |  |  |  | 100.0 | % |  |  | 4,370 |  |  |  | 100.0 | %
|                        |  |                                                                |       |  |      |  |       |      |  |  |       |  |  |  |       |   |  |  |       |  |  |  |       |  

Capacity and Utilization

The fabs in Taiwan that we own directly are named Fab 6A, Fab 8A, Fab 8C, Fab 8D, Fab 8E, Fab 8F and Fab 8S, all of which are located in the Hsinchu Science Park in Taiwan, and Fab 12A, which is located
in the Tainan Science Park in Taiwan. The fab in Singapore is named Fab 12i. The fab in Japan is named UMCJ.

Our average
capacity utilization rate was 69.4% in 2009, 93.7% in 2010, and 78.6% in 2011.

Equipment

Considering the performance and productivity of our manufacturing capability highly rely on the quality of our capital equipment, we
generally purchase equipment that cannot only meet the demand of our existing process technology, but also has the capability to be upgraded to match our future needs. The principal equipment we use to manufacture semiconductor devices are
scanners/steppers, cleaners and track equipment, inspection equipment, etchers, furnaces, wet stations, strippers, implanters, sputters, CVD equipment, probers, testers and so on. We own all of the production equipment except for a few demonstration
tools.



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Our policy is to purchase high-quality equipment that demonstrates stable performance from
vendors with dominate market share to ensure our continued competitiveness in the semiconductor field.

Some of the equipment
is available from a limited number of qualified vendors and/or is manufactured in relatively limited quantities, and some equipment has only recently been developed. We believe that our relationships with equipment suppliers are strong enough that
we can leverage our position as a major purchaser to purchase equipment on better terms, including shorter lead time, than the terms received by several other foundries.

Although we face the challenge of procuring the right equipment in sufficient quantity necessary for ramp-up or expansion of our fabrication facilities under constraint of short lead times, we have not in
the past experienced any material problems in procuring the latest generation equipment on a timely basis even in periods of unpredictably high market demand. We manage the risks in the procurement process through timely internal communications
among different divisions, efficient market information collection, early reservation of appropriate delivery slots and constant communications with our suppliers as well as by utilizing our good relationships with the vendors.

Raw Materials

Our
manufacturing processes use many raw materials, primarily silicon wafers, chemicals, gases and various types of precious sputtering targets. These raw materials are generally available from several suppliers. Our policy with respect to raw material
purchases, similar to that for equipment purchases, is to select only a small number of qualified vendors who have demonstrated quality and reliability on delivery time of the raw materials. We may have any long-term supply contracts with our
vendors if necessary.

Our general inventory policy is to maintain sufficient stock of each principal raw material for
production and rolling forecasts of near-term requirements received from customers. In addition, we have agreements with several key material suppliers under which they hold similar levels of inventory in their warehouses for our use. However, we
are not under any obligation to purchase raw material inventory that is held by our vendors for our benefit until we actually order it. We typically work with our vendors to plan our raw material requirements on a quarterly basis, with indicative
pricing generally set on a quarterly basis. The actual purchase price is generally determined based on the prevailing market conditions. In the past, prices of our principal raw materials have not been volatile to a significant degree. Although we
have not experienced any shortage of raw materials that had a material effect on our operations, and supplies of raw materials we use currently are adequate, shortages could occur in various critical materials due to interruption of supply or an
increase in industry demand.

The most important raw material used in our production processes is silicon wafer, which is the
basic raw material from which integrated circuits are made. The principal makers for our wafers are Shin-Etsu, Siltronic AG, MEMC Corporation and Sumco Group. We have in the past obtained and believe that we will continue to be able to obtain a
sufficient supply of silicon wafers. We believe that we have close working relationships with our wafer suppliers. Based on such long-term relationships, we believe that these major suppliers will use their best efforts to accommodate our demand.

We use a large amount of water in our manufacturing process. We obtain water supplies from government-owned entities and
recycle approximately 85% of the water that we use during the manufacturing process. We also use substantial amounts of dual loop electricity supplied by Taiwan Power Company in the manufacturing process. We maintain back-up generators that are
capable of providing adequate amounts of electricity to maintain the required air pressure in our clean rooms in case of power interruptions. We believe our back-up devices are adequate in preventing business interruptions caused by power outages
and emergency situations.

Quality Management

We believe that our advanced process technologies and reputation for high quality and reliable services and products have been important factors in attracting and retaining leading international and
domestic semiconductor companies as customers.



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We structure our quality management system in accordance with the latest international
quality standards and our customers strict quality and reliability requirements. Our quality management system incorporates comprehensive quality control programs into the entire business flow of foundry operation including, among others, new
process development management, production release control, incoming raw material inspection, statistical process control and methodology development, process change management, technical documentation control, product final inspection, metrology
tool calibration and measurement system analysis, quality audit program, nonconformity management, customer complaint disposition, eight-discipline problem solving and customer satisfaction monitoring.

We set a high quality goal to ensure consistent high yielding and reliable product performance. Our quality program is continually
enhanced through top-down annual Business Policy Management and bottom-up Total Quality Management activities. In addition, our efforts to observe best practices among fabs in the foundry industry have also contributed to the improvement of our
overall quality management system.

Many of our customers perform physical production site qualification process in the early
development phase and routine quality conformance audits in the volume production phase. These audits include both quality system review and physical fabrication area inspection for verification of conformity with the international quality standard
and customers quality requirement. Our quality management system and quality control programs have been qualified and routinely audited by numerous customers who are recognized as world-class semiconductor companies with best-in-class quality
standards.

Our Quality Assurance Division and Reliability Technology and Assurance Division collaborate to provide quality
and reliability performance to customers. With our wafer processing quality and reliability conformance monitor program, we monitor the product quality and reliability at various stages of the entire manufacturing process before shipment to
customers.

All our fabs are certified in compliance with ISO/TS 16949 and QC080000 IECQ HSPM standards. ISO/TS 16949 sets the
criteria for developing a fundamental quality management system emphasizing on customer satisfaction in quality management, continual improvement, defect prevention and variation and waste reduction. QC080000 IECQ HSPM sets the criteria for
developing a process management system for hazardous substances and focuses on developing environmentally friendly manufacturing processes. We are committed to continuously improve our quality management system and to deliver high quality product to
our customers.

Services and Products

We primarily engage in wafer fabrication for foundry customers. To optimize fabrication services for our customers, we work closely with them as they finalize circuit design and contract for the
preparation of masks to be used in the manufacturing process. We also offer our customers turnkey services by providing subcontracted assembly and test services. We believe that this ability to deliver a variety of foundry services in addition to
wafer fabrication enables us to accommodate the needs of a full array of integrated device manufacturers, system companies and fabless design customers with different in-house capabilities.

Wafer manufacturing requires many distinct and intricate steps. Each step in the manufacturing process must be completed with precision
in order for finished semiconductor devices to work as intended. The processes require taking raw wafers and turning them into finished semiconductor devices generally through five steps: circuit design, mask tooling, wafer fabrication, assembly and
test. The services we offer to our customers in each of these five steps are described below.

Circuit Design.
At this initial design stage, our engineers generally work with our customers to ensure that their designs can be successfully and cost-effectively manufactured in our facilities. We have assisted an increasing number of our customers in the design
process by providing them with access to our partners electronic design analysis tools, intellectual property and design services as well as by providing them with custom embedded memory macro-cells. In our Silicon Shuttle program, we offer
customers and intellectual property providers early access to actual silicon samples with their desired intellectual property and content in order to enable early and rapid use of our advanced technologies. The Silicon Shuttle program is a
multi-chip test wafer program that allows silicon verification of intellectual property and design elements. In the Silicon Shuttle program, several different vendors



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can test their intellectual property using a single mask set, greatly reducing the cost of silicon verification for us and the participating vendors. The high cost of masks for advanced processes
makes this program attractive to intellectual property vendors. ARM Limited, Faraday Technology Corp., or Faraday Technology, MIPS Technologies International, Virage Logic Corporation (acquired by Synopsys) and Synopsys Inc. have utilized our
Silicon Shuttle program. In our Alliance Program, we coordinate with leading suppliers of intellectual property, design and ASIC services to ensure their offerings are available to our customers in an integrated, easy to use manner which matches
customers need to our technologies. With a view to lowering customer design barriers, we expanded our design support functions from conventional design support to adding intellectual property development to complement third-party intellectual
properties and to provide customers with the widest range of silicon-verified choices. Our offerings range from design libraries to basic analog mixed-mode intellectual properties which, together, have helped shorten our customers design cycle
time.

Mask Tooling. Our engineers generally assist our customers to design and/or obtain masks that are
optimized for our advanced process technologies and equipment. Actual mask production is usually provided by independent third parties specializing in mask tooling.

Wafer Fabrication. As described above, our manufacturing service provides all aspects of the wafer fabrication process by utilizing a full range of advanced process technologies. During the
wafer fabrication process, we perform procedures in which a photosensitive material is deposited on the wafer and exposed to light through the mask to form transistors and other circuit elements comprising a semiconductor. The unwanted material is
then etched away, leaving only the desired circuit pattern on the wafer. As part of our wafer fabrication services, we also offer wafer probing services, which test, or probe, individual die on the processed wafers and identify dice that fail to
meet required standards. We prefer to conduct wafer probing internally to obtain speedier and more accurate data on manufacturing yield rates.

Assembly and Testing. We offer our customers turnkey services by providing the option to purchase finished semiconductor products that have been assembled and tested. We outsource assembly
and test services to leading assembly and test service providers, including Siliconware Precision Industries Co., Ltd., or Siliconware, and Advanced Semiconductor Engineering Inc. in Taiwan. After final testing, the semiconductors are shipped to our
customers designated locations.

Customers and Markets

Our primary customers, in terms of our sales revenues, include premier integrated device manufacturers, such as Texas Instruments, Infineon and STMicroelectronics, and leading fabless design companies,
such as Xilinx, Broadcom, MediaTek, Realtek and Novatek. Although we are not dependent on any single customer, a significant portion of our net operating revenues have been generated from sales to a few customers. Our top ten customers accounted for
approximately 60.3% of our net operating revenues in 2011. Set forth below is a geographic breakdown of our operating revenues in 2009, 2010 and 2011 by the location of our customers.



|                          |  |                         |       |   |      |  |       |      |  |  |       |  
|------------------------- |  | ----------------------- | ----- | - | ---- |  | ----- | ---- |  |  | ----- | -
|                          |  | Year Ended December 31, |      
|Region                    |  | 2009                    |       |   | 2010 |  |       | 2011 | 
|Taiwan                    |  |                         | 35.8  | % |      |  | 33.6  | %    |  |  | 33.1  | %
|Singapore                 |  |                         | 24.2  |   |      |  | 28.8  |      |  |  | 24.8  |  
|China (include Hong kong) |  |                         | 2.6   |   |      |  | 3.4   |      |  |  | 4.2   |  
|Japan                     |  |                         | 2.6   |   |      |  | 2.1   |      |  |  | 1.9   |  
|USA                       |  |                         | 21.7  |   |      |  | 16.9  |      |  |  | 17.9  |  
|Others                    |  |                         | 13.1  |   |      |  | 15.2  |      |  |  | 18.1  |  
|                          |  |                         |       |   |      |  |       |      |  |  |       |  
|Total                     |  |                         | 100.0 | % |      |  | 100.0 | %    |  |  | 100.0 | %
|                          |  |                         |       |   |      |  |       |      |  |  |       |  

We believe our success in attracting these end customers is a direct result of our commitment to high
quality service and our intense focus on customer needs and performance. Because we are an independent semiconductor foundry, most of our operating revenue is generated by our sales of wafers. For 2011, net wafer sales represents 91.0% of our net
operating revenue, and excludes revenue from testing, mask and other services. The following table presents the percentages of our net wafer sales by types of customers during the last three years.



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|                                |  |                        |       |   |      |  |       |      |  |  |       |  
|------------------------------- |  | ---------------------- | ----- | - | ---- |  | ----- | ---- |  |  | ----- | -
|                                |  | Year EndedDecember 31, |      
|Customer Type                   |  | 2009                   |       |   | 2010 |  |       | 2011 | 
|Fabless design companies        |  |                        | 79.2  | % |      |  | 78.1  | %    |  |  | 75.8  | %
|Integrated device manufacturers |  |                        | 20.8  |   |      |  | 21.9  |      |  |  | 24.2  |  
|                                |  |                        |       |   |      |  |       |      |  |  |       |  
|Total                           |  |                        | 100.0 | % |      |  | 100.0 | %    |  |  | 100.0 | %
|                                |  |                        |       |   |      |  |       |      |  |  |       |  

We focus on providing a high level of customer service in order to attract customers and maintain their
ongoing loyalty. Our culture emphasizes responsiveness to customer needs with a focus on flexibility, speed and accuracy throughout our manufacturing and delivery processes. Our customer-oriented approach is especially evident in two types of
services: customer design development services and manufacturing services. We believe that our large production capacity and advanced process technology enable us to provide better customer service than many other foundries through shorter
turn-around time, greater manufacturing flexibility and higher manufacturing yields.

We work closely with our customers
throughout the design development and prototyping processes. Our design support team closely interacts with customers and intellectual property vendors to facilitate the design process and to identify their specific requirements for intellectual
property offerings. We are responsive to our customers requirements in terms of overall turn-around time and production time-to-market by, for example, helping our customers streamline their IP offering processes and delivering prototypes in a
timely and easy-to-use fashion. We also maintain flexibility and efficiency in our technical capability and respond quickly to our customers design changes.

For IP offerings, we work with several leading IP vendors from digital, memory and analog fields in the semiconductor industry, such as Faraday Technology Corp., Synopsys Inc., ARM Limited, Silicon Image
Inc. Sidense Corp., and Kilopass Technology, to deliver quality IP blocks that have been silicon validated using our advanced processes. Our alliance programs with major electronic design automation vendors, such as Cadence, Magma, Mentor and
Synopsys Inc., provide our customers with digital/analog reference design procedures and easy-to-use design solutions. By continuously enhancing our IP offerings, reference design procedures and design services through collaboration with major
vendors, we aim to provide complete, accurate and user-friendly design solutions to our customers.

As a design moves into
manufacturing production, we continue to provide ongoing customer support through all phases of the manufacturing process. The local account manager works with our customer service representative to ensure the quality of our services, drawing upon
our marketing and customer engineering support teams as required.

We offer an online service, MyUMC, which gives
our customers easy access to our foundry services by providing a total online supply chain solution. MyUMC offers 24-hour access to detailed account information such as manufacturing, engineering and design support documents through each
customers own customized start page. The features that are available to customers through MyUMC include (i) viewing the status of orders from the start of production to the final shipping stages; (ii) designing layouts to shorten
customers tape out time; (iii) collecting customer engineering requests; (iv) gathering and downloading documents for design purposes and (v) and accessing online in real-time the same manufacturing data used by our fab
engineers. In addition, we have a system-to-system connecting services to provide direct data exchange between our system and our customers systems. These services, which include our UMC Design View Room Cloud Service, facilitate
our design collaborations with our customers to help reduce the cost of chip designs and reduce the time to market. In order to continue to improve our information security management, our Information Technology Division received the certification
of ISO/IEC 27001:2005 in March 2008.

We price our products on a per die or per wafer basis, taking into account the
complexity of the technology, the prevailing market conditions, the order size, the cycle time, the strength and history of our relationship with the customer and our capacity utilization. Our main sales office is located in Taiwan, which is in
charge of our sales activities in Asia. United Microelectronics (Europe) BV, our wholly-owned subsidiary based in Amsterdam, assists our sales to customers in Europe. Our sales in North America are made through UMC Group (USA), our subsidiary
located in Sunnyvale, California.



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We typically designate a portion of our wafer manufacturing capacity to some of our
customers primarily under two types of agreements: reciprocal commitment agreements and deposit agreements. Under a reciprocal commitment agreement, the customer agrees to pay for, and we agree to supply, a specified capacity at a specified time in
the future. Under a deposit agreement, the customer makes in advance a cash deposit for an option on a specified capacity at our fabs for a stated period of time. Option deposits are credited to wafer purchase prices as shipments are made. If this
customer does not use the specified capacity, it will forfeit the deposit but, in certain circumstances and with our permission, the customer may arrange for a substitute customer to utilize such capacity. In some cases, we also make available
capacity to customers under other types of agreements, such as capacity commitment arrangements with technology partners.

We
advertise in trade journals, organize technology seminars, hold a variety of regional and international sales conferences and attend a number of industry trade fairs to promote our products and services. We also publish a corporate newsletter for
our customers.

Competition

The worldwide semiconductor foundry industry is highly competitive, particularly during periods of overcapacity and inventory correction. We compete internationally and domestically with dedicated foundry
service providers as well as with integrated device manufacturers and final product manufacturers which have in-house manufacturing capacity or foundry operations. Some of our competitors have substantially greater production, financial, research
and development and marketing resources than we have. As a result, these companies may be able to compete more aggressively over a longer period of time than we can. In addition, several new dedicated foundries have commenced operations and compete
directly with us. Any significant increase in competition may erode our profit margins and weaken our earnings.

We believe
that our primary competitors in the foundry services market are Taiwan Semiconductor Manufacturing Company Limited, Semiconductor Manufacturing International (Shanghai) Corporation and Globalfoundries Inc., as well as the foundry operation services
of some integrated device manufacturers such as IBM, Samsung, Intel and Toshiba. Other competitors such as DongbuAnam Semiconductor, Grace Semiconductor Manufacturing Corp., X-FAB Semiconductors Foundries AG and Silterra Malaysia Sdn. Bhd. have
initiated efforts to develop substantial new foundry capacity, although much of such capacity involves less cost-effective production than the 12-inch fabs for which we possess technical know-how. New entrants in the foundry business are likely to
initiate a trend of competitive pricing and create potential overcapacity in legacy technology. The principal elements of competition in the semiconductor foundry industry include technical competence, production speed and cycle time,
time-to-market, research and development quality, available capacity, manufacturing yields, customer service and price. We believe that we compete favorably with the new competitors on each of these elements, particularly our technical competence
and research and development capabilities.

Intellectual Property

Our success depends in part on our ability to obtain patents, licenses and other intellectual property rights covering our production
processes and activities. To that end, we have acquired certain patents and patent licenses and intend to continue to seek patents on our production processes. As of December 31, 2011, we held 3,791 U.S. patents and 6,200 patents issued outside
of the United States.

Our ability to compete also depends on our ability to operate without infringing on the proprietary
rights of others. The semiconductor industry is generally characterized by frequent claims and litigation regarding patent and other intellectual property rights. As is the case with many companies in the semiconductor industry, we have from time to
time received communications from third parties asserting patents that allegedly cover certain of our technologies and alleging infringement of certain intellectual property rights of others. We expect that we will receive similar communications in
the future. Irrespective of the validity or the successful assertion of such claims, we could incur significant costs and devote significant management resources to the defense of these claims, which could seriously harm our company. See Item
3. Key InformationD. Risk FactorsOur inability to obtain, preserve and defend intellectual property rights could harm our competitive position.



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In order to minimize our risks from claims based on our manufacture of semiconductor devices
or end-use products whose designs infringe on others intellectual property rights, we in general accept orders only from companies that we believe enjoy satisfactory reputation and for products that are not identified as risky for potential
infringement claims. Furthermore, we obtain indemnification rights from customers. We also generally obtain indemnification rights from equipment vendors to hold us harmless from any losses resulting from any suit or proceedings brought against our
company involving allegation of infringement of intellectual property rights on account of our use of the equipment supplied by them.

We have entered into various patent cross-licenses with major technology companies, including a number of leading international semiconductor companies, such as IBM, Renesas (and formerly Hitachi),
Freescale (and formerly Motorola) and LSI. Our cross licenses may have different terms and expiry dates. Depending upon our competitive position and strategy, we may or may not renew our cross licenses and further, we may enter into different and/or
additional technology and/or intellectual property licenses in the future.

Research and Development

We spent NT$8,044 million, NT$8,740 million, and NT$9,395 million (US$310 million) in 2009, 2010, and 2011, respectively, on research and
development, which represented 8.8%, 6.9%, and 8.0%, respectively, of our net operating revenues for these periods. Our research and development efforts are mainly focused on delivering SoC foundry solutions that consist of the worlds leading
process technologies, customer support services and manufacturing techniques. These resources provide our foundry customers with improved opportunities to develop SoC products that supply the global market. Our commitment to research and development
can be illustrated by our 2011 research and development expenditures, which reached approximately 8.0% of net operating revenues. In June 2007, we completed the construction of a research and development center for nanometer technologies in the
Tainan Science Park. The research and development center allows for seamless application of advanced process technology in the research and development phase to the manufacturing phase.

As of March 31, 2012, we employed 988 professionals in our research and development activities. In addition, other management and
operational personnel are also involved in research and development activities but are not separately identified as research and development professionals.

Our Investments

Depending on the market conditions, we intend to gradually
reduce our investments through exchangeable bond offerings and other measures available to our company.

In December 2009, We
issued two tranches of zero coupon exchangeable bonds due 2014. The two exchangeable bond offerings consist of $127.2 million bonds exchangeable into common shares of Unimicron Technology Corporation, or Unimicron, and $80 million bonds exchangeable
into common shares of Novatek Microelectronics Corp., Ltd., or Novatek. As of December 31, 2011, no bonds had been exchanged into common shares of Unimicron and Novatek, respectively.

In 2009, we sold 2 million common shares of MediaTek for NT$809 million and did not have any common shares of MediaTek. In addition, we
sold 12 million common shares of Unimicron Tech Corp. for NT$462 million.

In 2010, we sold 96 million common shares of Mega
Financial Holding Company for NT$1,903 million.

In 2011, we sold 1 million, 1 million, 6 million, 5 million and 7 million
common shares of Maxlinear, Inc., Alpha & Omega Semiconductor Ltd., Coretronic Corp., Epistar Corp., and Davicom Semiconductor , Inc. for NT$330 million (US$11 million), NT$305 million (US$10 million), NT$292 million (US$10 million), NT$277
million (US$9 million), and NT$205 million (US$7 million), respectively.

Environmental, Safety and Health Matters

UMC implemented extensive ESH management systems since 1996. These systems enable our operations to identify applicable ESH regulations,
assist in evaluating compliance status and timely establish loss preventive and control measures. The systems we implemented in all our fabs have been certified as meeting the ISO 14001 and OHSAS 18001 standards. ISO 14001 consists of a set of
standards that provide guidance to the management of organizations to achieve an effective environmental management system. Procedures are established at manufacturing locations to ensure that all accidental spills and discharges are properly
addressed. OHSAS 18001 is a recognizable occupational health and safety management system standard, which may be applied to assess and certify our management systems. Our goal in implementing ISO 14001 and OHSAS 18001 systems is to continually
improve our ESH management, comply with ESH regulations and to be a sustainable green foundry. UMCs major ESH policies include:

Environmental Protection Aspects:



| |  |  | To be an environmentally friendly enterprise characterized by continual improvement with a goal of pollution-free production;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------



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| |  |  | To incorporate our environmental management system into the general organizational management system;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | To take initiatives to reduce waste production and prevent pollution by introducing and developing environmentally friendly technology for design,
production and operation;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | To conserve energy and recycle resources in order to be a model of environmental protection for the international community;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | To fulfill corporate social responsibilities by playing an active role in public and community affairs to improve and protect the environment;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | To educate employees about environmentally sound ethics and practices.
| | - |  | ----------------------------------------------------------------------

Safety and Health Aspects :



| |  |  | To achieve a goal of zero accidents and comply with all applicable safety and regulatory requirements to ensure safety is the top priority for
UMCs sustainable development.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | To reinforce best safety and health management practice to reach international ESH and risk management standards.
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | To adopt risk control advanced ESH management and rescue technologies to enhance companys standards.
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | To provide safe work environment and operation through preventive management and audit.
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | To eliminate hazard factors and prevent incidents through each and every ownership of responsibilities in safety and health.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | To encourage all employees to actively participate in safety and health training and promotional activities.
| | - |  | ------------------------------------------------------------------------------------------------------------

As a member of the global community and a semiconductor industry leader, we have implemented measures to deal with environmental problems
and mitigate climate change. We have introduced green concepts in our operations, including green commitment, management, procurement, production, products, recycling, office, education and marketing.

In order to conquer the green barrier formed by the RoHS (the Restriction of the Use of Certain Hazardous Substances in Electrical and
Electronic Equipment) Directive, we established a cross-division HSPM (Hazardous Substances Process Management) committee to manage all development and implementation of related work. We completed the final system audit for QC 080000 ICEQ HSPM
qualification, a certification for having a hazardous substance process management system that meets the RoHS Directive, on June 9, 2006 and became the first semiconductor manufacturer worldwide to achieve HSPM certification for all fabs. In
2009, we completed the report on the carbon footprint verification for integrated circuit wafers produced at our facilities, the first such report in the foundry industry. In 2010, UMC completed water footprint verification for our 200 mm and 300 mm
wafers. These verifications provide scientific and reliable statistics on the carbon and water information of products manufactured in our fabs as well as self-reviews of environmental impact.

With respect to safety and health management, we realized that lowering the risks in equipment and processes can reduce accidents, but
cannot guarantee the safety of all employees. In order to achieve the goal of zero-accident, we intend to promote the concept of safety is my responsibility. We have educated the employees with the concepts of be aware
of your own safety well as the safety of others and safety is everyones responsibility, and my personal accountability.



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Furthermore, we have implemented the FMEA method to foster employees capabilities in
risk analysis. Therefore, we established a channel for communication to encourage and ensure the employees to fully express their opinions for professional response and assistance. By doing so, we hope to establish a working attitude of Safety
and health first to further improve the quality of our working environment, and eventually to become a good example of global safety and hygiene management.

The following list sets forth some of the important awards that we received in environmental protection, safety and health.



| |  |  | Selected as a member of Dow Jones Sustainability Indexes for 4 years since 2008
| | - |  | -------------------------------------------------------------------------------



| |  |  | Awarded National Sustainable Development Award, by National Council for Sustainable Development in 2011
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | Awarded Industrial Sustainable Excellence Award, by Industrial Development Bureau, Ministry of Economic Affairs in 2011
| | - |  | -------------------------------------------------------------------------------------------------------------------------



| |  |  | Awarded Excellence Disclosure in CSR Report Award, by Taiwan Stock Exchange Corporation in 2011
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | Awarded Taiwan Corporate Sustainability Report Award by Taiwan Institute for Sustainable Energy. (2008-2011)
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | Awarded Enterprises Environmental Award of the Republic of China by the Environmental Protection Administration of Executive Yuan, R.O.C.
(totally 12 times since 2001)
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Awarded Excellent Performance in Waste Management and Resource Reduction, Recycle and Reuse by the Environmental Protection Administration
of Executive Yuan, R.O.C.(2011)
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Awarded Workplace Safety & Health Performance Awards- Silver Award by Ministry of Manpower. (2011)
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | Awarded Excellent Industrial Safety and Health Executive Organization of Hsinchu Science Park by The Science Park Administration.
(2011)
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Awarded Excellent Achievements in 2011 National Occupational Safety and Health Week by Council of Labor affairs.
(2011)
| | - |  | -------------------------------------------------------------------------------------------------------------------------

Climate Change

We hope to contribute to energy saving and carbon reduction through breakthroughs in green technology development and applications and establish our company as a leader in the green technology industry by
injecting fresh enthusiasm for sustainable development.

We announced the climate change policy and carbon
emission reduction plans on April 22, 2010. The new plans include a reduction of 33% for normalized perfluorinated compounds, or PFC, emissions and 3% for electricity usage by 2012 compared with the base year 2009. It is estimated that once the
plan is completed, relative CO2emissions will be reduced by
another 170,000 tons each year, which is expected to bring the total relative CO2emission reduction achieved through our carbon reduction measures to 43%, or approximately 1.1 million tons per year. Relative PFC emissions are expected to be reduced by as much as 75% with the new
plan when combined with existing efforts. Our climate change policies during this post-Kyoto Protocol period includes: (i) achieving carbon neutral status via carbon management, (ii) becoming a comprehensive low-carbon solution provider,
and (iii) leveraging corporate resources to cultivate a low-carbon economy.



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We are the leader in the foundry industry to complete the replacement of
C2F6with C3F8of lower global warming potential in 2007. We estimate this replacement program helped reduce CO2emissions by 132,000 metric tons in 2011. Furthermore, our introduction of C4F8in 2008 further decreased the emission of CO2in our production process reducing CO2emissions by an estimated 250,000 metric tons in 2011.

We also support timely disclosure of carbon information and ensuring data quality. Since 2006, we have participated in the Carbon
Disclosure Project formed by global institutional investors and disclosed our annual greenhouse gas emission volume, reduction goals and results. Moreover, we engage third-party verifiers to ensure the quality of the data. We completed verification
on greenhouse gas emission and reduction records from 2000 to 2010 for all of our fabs in Taiwan. We plan to complete the 2011 GHG emissions data verification within this year.

In addition, our environmental efforts include the establishment of our New Business Development Center which will promote a low carbon
economy by investing across the entire supply chain of the green technology industry, including renewable energy, solar energy, and new generation LED. The New Business Development Center will focus its primary investments on the LED and solar
energy industries and such companies as LED lighting company Power Light Co. and photovoltaic engineering design company EverRich Energy Corporation.

Litigation

Hejian, a semiconductor manufacturer in Suzhou, China, was set
up in December 2001. Soon after the establishment of Hejian, various rumors circulated that Hejian was set up by us. We immediately denied these rumors: we did not provide any capital nor did we transfer any technology to Hejian. Our company was
found by the R.O.C. MOEA to be in violation of the Act Governing Relations Between Peoples of the Taiwan Area and the Mainland Area and fined in the amount of NT$5 million for our alleged investment in Hejian. Our appeal to the R.O.C. MOEA in
relation to such fines was denied in late 2006. We filed an administrative lawsuit in December 2006 with the Taipei Administrative High Court to challenge the R.O.C. MOEA fine. In July 2007, the Taipei Administrative High Court revoked the R.O.C.
MOEAs decision and ruled in our favor. In August 2007, the R.O.C. MOEA filed an appeal with the Supreme Administrative Court. On December 10, 2009, the Supreme Administrative Court reversed the decision of, and remanded the case to, the
Taipei High Administrative Court for a new trial on our administrative lawsuit. On July 21, 2010, the Taipei High Court ruled against us and we appealed to the Supreme Administrative Court on August 23, 2010. The Supreme Administrative
Court rejected our appeal on December 19, 2011 and ruled against us. Since we already paid the fine on January 29, 2007, this case has been closed.

In February 2006, Taiwan Power Company, or TPC, filed a civil litigation case in Taiwan Hsinchu District Court against us and other Taiwan companies, claiming that (1) we and the other defendants
collectively should pay electrical fees of NT$13.3 million with accrued interest to TPC, and (2) we pay electrical line fees of NT$21.2 million to TPC. On March 11, 2009, the Hsinchu District Court denied TPCs claim and ruled in our
favor. TPC filed an appeal with the Taiwan High Court on April 9, 2009. On July 13, 2010, the Taiwan High Court ruled against us and we filed an appeal to the Supreme Court on August 13, 2010. On December 30, 2010, the Supreme
Court found our appeal to be legitimate, dismissed the Taiwan High Courts judgment against us and remanded the case back to the Taiwan High Court for retrial. The Taiwan High Court ruled against TPC on July 5, 2011, and TPC filed an
appeal with the Supreme Court. On October 12, 2011 the Supreme Court denied TPCs appeal and ruled in our favor. This case has been closed in our favor.

Risk Management

Risk and safety matters are administered by our
Groups Risk Management and Environmental Safety Health Division, or the GRM & ESH, established in 1998. We are pursuing the goal of a highly protected risk status in the semiconductor industry through the implementation of strict
engineering safety procedures, regular enforcement of safety codes and standards, and compliance of detailed industry safety guidelines.



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Our hazards risk management slogans are set forth below:



| |  |  | Uniqueness in risk management
| | - |  | -----------------------------



| |  |  | Maturity in property loss control
| | - |  | ---------------------------------



| |  |  | Continuous improvement in BCP
| | - |  | -----------------------------

We have also adopted the Triple Star Ranking System of Chartis Insurance, a global leader in risk management and insurance, since 1999. All fabs have been ranked as top-class following Chartiss risk
evaluation and risk improvement recommendations. The ranking system focuses on 20 items, including ten Physical Protection Elements and ten Human Elements. Our latest 12-inch lines, Fab 12A P1/2, 12A P3/4 and 12i, obtained triple-stars in all 20
elements in the very first Triple Star Audit.

We have also implemented proactive efforts in earthquake risk prevention. We
believe our efforts contributed to our quick and exemplary recovery from two major earthquakes in Taiwan on September 21, 1999 and March 4, 2010, respectively. Our Hsinchu fabs and Fab 12A in Tainan sustained only minor impact to their
operations from the earthquake without interruption to the power system or water service. Normal operations resumed shortly after the incidents.

Our continuous efforts in risk improvement and mitigation programs were recognized by the clean room risk identification and mitigation Gold Medal we received in the National Quality Control
Circle competition held by the R.O.C. MOEA in 2005. In addition, we were awarded Outstanding Performance Award in Risk Management in 2006 by Chartis Insurance as a result of our outstanding risk management program.

Insurance

We maintain
industrial all risk insurance for our buildings, facilities, equipment and inventories as well as third party properties. The insurance for fabs and their equipment covers losses from physical damage and business interruption up to their respective
policy limits except for policy exclusions. We purchase directors and officers liability insurance for our board directors and executive officers, covering the liabilities incurred in relation to his/her/its operation of business and legally
responsible for. We also maintain public liability insurance for losses to third parties arising from our business operations. We believe that our insurance arrangement is adequate to cover all major types of losses relevant to the semiconductor
industry practice. However, significant damage to any of our production facilities, whether as a result of fire or other causes, could seriously harm our business.



|C. | Organizational Structure
|-- | ------------------------

The following list shows our corporate structure as of December 31, 2011:



|                                      |  |                               |  |                                               |        |  
|------------------------------------- |  | ----------------------------- |  | --------------------------------------------- | ------ | -
|Company                               |  | Jurisdiction of
Incorporation |  | Percentage ofOwnership as ofDecember 31, 2011 |       
|UMC Group (USA)                       |  | California, U.S.A.            |  |                                               | 100.00 | %
|United Microelectronics (Europe) B.V. |  | The Netherlands               |  |                                               | 100.00 | %
|UMC Capital Corp.                     |  | Cayman Islands                |  |                                               | 100.00 | %
|TLC Capital Co., Ltd.                 |  | Taiwan, R.O.C.                |  |                                               | 100.00 | %
|UMC New Business Investment Corp.     |  | Taiwan, R.O.C.                |  |                                               | 100.00 | %
|Green Earth Limited                   |  | Samoa                         |  |                                               | 100.00 | %
|Fortune Venture Capital Corp.         |  | Taiwan, R.O.C.                |  |                                               | 100.00 | %
|UMC Japan                             |  | Japan                         |  |                                               | 100.00 | %
|UMC Investment (Samoa) Limited        |  | Samoa                         |  |                                               | 100.00 | %



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|                                                                          |  |                        |  |  |        |  
|------------------------------------------------------------------------- |  | ---------------------- |  |  | ------ | -
|Unitruth Investment Corp.                                                 |  | Taiwan, R.O.C.         |  |  | 100.00 | %
|UMC Capital (U.S.A)                                                       |  | California, U.S.A.     |  |  | 100.00 | %
|ECP VITA Ltd.                                                             |  | British Virgin Islands |  |  | 100.00 | %
|Soaring Capital Corp.                                                     |  | Samoa                  |  |  | 100.00 | %
|Unitruth Advisor (Shanghai) Co., Ltd.                                     |  | China                  |  |  | 100.00 | %
|Tera Energy Development Co., Ltd.                                         |  | Taiwan, R.O.C.         |  |  | 100.00 | %
|Green Field (Samoa) Limited                                               |  | Samoa                  |  |  | 100.00 | %
|New Business Realty (Samoa) Limited                                       |  | Samoa                  |  |  | 100.00 | %
|Nexpower Technology Corp.                                                 |  | Taiwan, R.O.C.         |  |  | 57.33  | %
|Wavetek Microelectronics Corporation                                      |  | Taiwan, R.O.C.         |  |  | 72.16  | %
|United Lighting Opto-Electronic Inc.                                      |  | Taiwan, R.O.C.         |  |  | 55.25  | %
|United Lighting Opto-Electronic Investment (HK) Limited                   |  | China                  |  |  | 55.25  | %
|Power Light Investments Limited                                           |  | Samoa                  |  |  | 55.25  | %
|Bao Lin (Shandong) Guang Dian Ke Ji You Xian Gongsi                       |  | China                  |  |  | 55.25  | %
|Everrich Energy Corp.                                                     |  | Taiwan, R.O.C.         |  |  | 90.61  | %
|Everrich Energy Investment (HK) Limited                                   |  | China                  |  |  | 90.61  | %
|Everrich (Shandong) Energy Co. (formerly Yongsheng (Shandong) Energy Co.) |  | China                  |  |  | 90.61  | %
|Unistars Corp.                                                            |  | Taiwan, R.O.C.         |  |  | 72.83  | %
|Topcell Solar International Co. Ltd.                                      |  | Taiwan, R.O.C.         |  |  | 70.09  | %
|Smart Energy Enterprises Limited                                          |  | China                  |  |  | 90.61  | %
|Smart Energy ShanDong Corporation                                         |  | China                  |  |  | 90.61  | %
|Wavetek Microelectronics Investment (HK) Limited                          |  | China                  |  |  | 72.16  | %
|Newenergy Holding Limited                                                 |  | Samoa                  |  |  | 57.33  | %
|Futurepower Holding Limited                                               |  | Samoa                  |  |  | 57.33  | %
|Nexpower (Shandong) Energy Co., Ltd                                       |  | China                  |  |  | 57.33  | %
|NPT Holding Limited                                                       |  | Samoa                  |  |  | 57.33  | %
|NLL Holding Limited                                                       |  | Samoa                  |  |  | 57.33  | %



|Note : | On April 1, 2011, United Lighting Opto-Electronic Inc. merged with Power Light Tech Co., Ltd. After the merger, Power Light Tech Co., Ltd. was the surviving
company and was renamed to United Lighting Opto-Electronic Inc.
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|D. | Property, Plants and Equipment
|-- | ------------------------------

Please refer to B. Business OverviewManufacturing Facilities for a discussion of our property, plants and equipment.



|ITEM 4A. | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------

Not applicable.



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|ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS
|------- | --------------------------------------------

Unless stated otherwise, the discussion and analysis of our financial condition and results of operations in this section apply to our financial information as prepared in accordance with R.O.C. GAAP.
You should read the following discussion of our financial condition and results of operations together with the consolidated financial statements and the notes to such statements included in this annual report. This discussion may contain
forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set
forth under Item 3. Key InformationD. Risk Factors or in other parts of this annual report on Form 20-F. R.O.C. GAAP varies in certain significant respects from U.S. GAAP. These differences and their effects on our financial
statements are described in Note 35 to our audited consolidated financial statements included in this annual report.

For the convenience of readers, NT dollar amounts used in this section for, and as of, the year ended December 31, 2011 have been
translated into U.S. dollar amounts using US$1.00 = NT$30.27, the noon buying rate as certified for customs purposes by the Federal Reserve Bank of New York on December 30, 2011. The U.S. dollar translation appears in parentheses next to the
relevant NT dollar amount.

Overview

We are one of the worlds leading independent semiconductor foundries, providing comprehensive wafer fabrication services and technologies to our customers based on their designs. We manage our
business as two operating segments but measure our results of operations based on a single reportable segment because the other operating segment does not exceed the materiality threshold.

Cyclicality of the Semiconductor Industry

As the semiconductor industry is highly cyclical, revenues varied significantly over this period. It can take several years to plan and construct a fab and bring it to operations. Therefore, during
periods of favorable market conditions, semiconductor manufacturers often begin building new fabs or acquiring existing fabs in response to anticipated demand growth for semiconductors. In addition, after commencement of commercial operations, fabs
can increase production volumes rapidly. As a result, large amounts of semiconductor manufacturing capacity typically become available during the same time period. Absent a proportional growth in demand, this increase in supply often results in
semiconductor manufacturing overcapacity, which has led to a sharp decline in semiconductor prices and significant capacity under-utilization. Our average capacity utilization rate was 69.4% in 2009, 93.7% in 2010 and 78.6% in 2011. We believe that
our results in 2009, 2010 and 2011 reflect the ongoing uncertainty in the global economy, conservative corporate information technology spending and low visibility with respect to end market demand.

Pricing

We price our products on either a per die or a per wafer basis, taking into account the complexity of the technology, the prevailing
market conditions, the order size, the cycle time, the strength and history of our relationship with the customer and our capacity utilization. Because semiconductor wafer prices tend to fluctuate frequently, we in general review our pricing on a
quarterly basis. As a majority of our costs and expenses are fixed or semi-fixed, fluctuations in our products average selling prices historically have had a substantial impact on our margins. Our average selling price increased approximately
2.3% from 2010 to 2011, mainly due to a change in our product mix.

We believe that our current level of pricing is comparable
to that of other leading foundries in each respective geometry. We believe that our ability to provide a wide range of advanced foundry services and process technologies as well as large manufacturing capacity will enable us to compete effectively
with other leading foundries at a comparable price level.

Capacity Utilization Rates

Our operating results are characterized by relatively high fixed costs. In 2009, 2010 and 2011, approximately 67.2%, 61.5%, and 63.8%,
respectively, of our manufacturing costs consisted of depreciation, a portion of indirect material costs, amortization of license fees and indirect labor costs.



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If our utilization rates increase, our costs would be allocated over a larger number of
units, which generally leads to lower unit costs. As a result, our capacity utilization rates can significantly affect our margins. Our utilization rates have varied from period to period to reflect our production capacity and market demand. Our
average capacity utilization rate was 69.4% in 2009, 93.7% in 2010 and 78.6% in 2011. Utilization rates were primarily affected by global macroeconomic factors. Other factors affecting utilization rates are efficiency in production facilities,
product flow management, the complexity and mix of the wafers produced, overall industry conditions, the level of customer orders, mechanical failure, disruption of operations due to expansion of operations, relocation of equipment or disruption of
power supply and fire or natural disaster.

Our production capacity is determined by us based on the capacity ratings given by
manufacturers of the equipment used in the fab, adjusted for, among other factors, actual output during uninterrupted trial runs, expected down time due to set up for production runs and maintenance, expected product mix and research and
development. Because these factors include subjective elements, our measurement of capacity utilization rates may not be comparable to those of our competitors.

Change in Product Mix and Technology Migration

Because the price of wafers
processed with different technologies varies significantly, the mix of wafers that we produce is among the primary factors that affect our revenues and profitability. The value of a wafer is determined principally by the complexity and performance
of the processing technology used to produce the wafer, as well as by the yield and defect density. Production of devices with higher levels of functionality and performance, with better yields and lower defect density as well as with greater
system-level integration requires better manufacturing expertise and generally commands higher wafer prices. The increase in price generally has more than offset associated increases in production cost once an appropriate economy of scale is
reached.

Prices for wafers of a given level of technology generally decline over the processing technology life cycle. As a
result, we have continuously been migrating to increasingly sophisticated technologies to maintain the same level of profitability. We began our volume production with 90 nanometer and 65 nanometer technologies in 2004 and 2006, respectively. We
started 40-nanometer production in the first half of 2009. These types of technology migration require continuous capital and research and development investment. Because developing and acquiring advanced technologies involve substantial capital
investment, we expect to continue to spend a substantial amount of capital on upgrading our technologies and capabilities. We introduced our 28-nanometer technology to customers in 2011 to significantly increase the competitive advantages of our
customers by providing better device performance in a smaller die size.

Manufacturing Yields

Manufacturing yield per wafer is measured by the number of functional dice on that wafer over the maximum number of dice that can be
produced on that wafer. A small portion of our products is priced on a per die basis, and our high manufacturing yields have assisted us in achieving higher margins. In addition, with respect to products that are priced on a per wafer basis, we
believe that our ability to deliver high manufacturing yields generally has allowed us to either charge higher prices per wafer or attract higher order volumes, resulting in higher margins.

We continually upgrade our process technologies. At the beginning of each technological upgrade, the manufacturing yield utilizing the
new technology is generally lower, sometimes substantially lower, than the yield under the current technology. The yield is generally improved through the expertise and cooperation of our research and development personnel and process engineers, as
well as equipment and at times raw material suppliers. Our policy is to offer customers new process technologies as soon as the new technologies have passed our internal reliability tests.

Investments

Most of our investments were made to improve our market position and for strategy considerations, a significant portion of which are in foundry-related companies including fabless design customers, raw
material suppliers and intellectual property vendors. In addition, we also invest in non-foundry-related businesses, such as Cathay Financial Holding Co. Ltd. We have established the New Business Development Center to identify and make strategic
investments in high growth industries such as solar, LED and semiconductor.



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In recent years many developed and developing countries have listed energy saving and carbon
reduction as primary administrative policies to tackle the challenge of potential energy shortages in future. Technologies for renewable energy and energy saving are expected to become a focus in future technology development and the growth of green
energy related industries is predictable. On August 24, 2009, our Board of Directors approved the establishment of our New Business Development Center and its 100% owned subsidiary, UMC New Business Investment Corporation. We established the
New Business Development Center to capitalize on high growth and high profit in potential industries such as solar, light-emitting diode, LED, and semiconductor through timely strategic investment. Although our revenues from the solar and LED
section have been adversely affected by short-term market conditions, we believe that the long-term potential of solar and LED sectors still appears promising. As we believe that these two sectors have great potential for growth, we have invested an
additional NT$3 billion to our UMC New Business Investment Corporation in 2011 that will primarily be allocated to research and development and capital expenditures for the solar and LED sectors. As of December 31, 2011, the paid-in capital of
the UMC New Business Investment Corporation is NT$4.5 billion. As key proficiencies mature and resource integration is complete, the new energy business is expected to become one of our core businesses. We expect these measures will position us well
for future growth.

We have from time to time disposed of investments for financial, strategic or other purposes in recent
years. See Item 4. Information on the CompanyB. Business OverviewOur Investments for a description of our investments.

Treasury Share Programs

We have from time to time announced plans, none of which was binding on us, to buy back up to a fixed amount of our shares on the Taiwan
Stock Exchange at the price range set forth in the plans. In 2009, 2010, and 2011, we purchased an aggregate of 300 million, 300 million, and nil, respectively, of our shares under these plans. From December 17, 2008 to
February 16, 2009, we purchased 300 million of our shares at an average price of NT$7.98 per share to transfer to employees. From February 3, 2010 to April 2, 2010, we purchased 300 million of our shares at an average price
of NT$16.15 per share to transfer to employees. Of the repurchased shares, 97 million, 78 million and 64 million shares were purchased by our employees in December 2007, December 2009, and December 2010, respectively;
556 million shares in aggregate were canceled in 2008.

Critical Accounting Policies

General

Our discussion
and analysis of our financial condition and results of operations are based upon our consolidated financial statements included in the annual report, which have been prepared in accordance with R.O.C. GAAP. R.O.C. GAAP varies in certain respects
from U.S. GAAP. These differences and their effects on our financial statements are described in Note 35 to our audited consolidated financial statements included elsewhere in this annual report. The preparation of our consolidated financial
statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis and
base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies involve significant judgments and estimates used in the preparation of our consolidated financial statements.



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Revenue Recognition

We recognize revenue when persuasive evidence of an arrangement exists, the product or service has been delivered, the sellers price to the buyer is fixed or determinable and collectability is
reasonably assured. Most of our sales transactions have shipping terms of Free Carrier, or FCA, by which title and the risk of loss or damage for the shipment are transferred to the customer upon delivery of the product to a carrier approved by the
customer.

Allowance for sales returns and discounts are estimated based on the information of customer complaints, historical
experiences, management judgment and any other known factors that might significantly affect collectability. Such allowances are recorded in the same period in which sales are made. Shipping and handling costs are included in sales expenses.

Allowance for Doubtful Accounts

Prior to December 31, 2010, recognition of an allowance for doubtful accounts was based on historical experience in analyzing the aging and determining the collectability of notes, accounts and other
receivables as of the balance sheet date. Effective January 1, 2011, we first assess as of balance sheet date whether objective evidence of impairment exists for notes, accounts and other receivables that are individually significant. If there
is objective evidence that an impairment loss has occurred, the amount of impairment loss is assessed individually. For notes, accounts and other receivables other than those mentioned above, we group those assets with similar credit risk
characteristics and collectively assess them for impairment. If, in a subsequent period, the amount of the impairment loss decreases, and the decrease can be related objectively to an event occurring after the impairment was recognized, the
previously recognized impairment loss is reversed and recognized through profit or loss. The reversal shall not result in a carrying amount of notes, accounts and other receivables that exceeds what the amortized cost would have been had the
impairment not been recognized at the date the impairment is reversed. Considerable judgment is required in assessing the ultimate realization of these receivables including the current credit worthiness and the past collection history of each
customer. A deterioration of economic conditions either in the R.O.C. or in other major overseas markets may contribute to the deterioration of financial conditions of our customers, resulting in an impairment of their ability to make payments.

Inventory

Inventories are accounted for on a perpetual basis. Raw materials are recorded at actual purchase costs, while the work in process and
finished goods are recorded at standard costs and subsequently adjusted to costs using the weighted-average method at the end of each month. Allocation of fixed production overheads to the costs of conversion is based on the normal capacity of the
production facilities. Inventories are valued at the lower of cost and net realizable value item by item. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated
costs necessary to make the sale.

Income Taxes

Most of our existing tax benefits arise from investment tax credits, and others from net operating loss carry-forward and temporary differences. We recognize these tax benefits as deferred tax assets.
Income tax expense or benefit is recognized when there is a net change in deferred tax assets and liabilities. A valuation allowance is recorded to reduce our deferred tax assets to the extent that we believe it is more likely than not that the tax
benefits will not be realized. The assessment of the valuation allowance involves subjective assumptions and estimates as it principally depends on the estimation of future taxable income. If future taxable income is lower than expected due to
future market conditions or other reasons or in the event we determine that we will not be able to realize all or part of our net deferred tax assets in the future, an adjustment to our deferred tax assets valuation allowance may be required with
the adjusting amount charged to income in this period. Likewise, should future taxable income be higher than expected due to future market conditions or other reasons or in the event we determine that we would be able to realize our deferred tax
assets in the future in excess of our net recorded amount, an adjustment to our deferred tax assets valuation allowance would increase income in this period.



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Long-lived Assets Impairment

We review the long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of the long-lived assets might not be recoverable. Such review may include
assessing whether there is a significant decrease in market values of long-lived assets or significant deterioration of market conditions to indicate the carrying value of such assets may not be recovered through future cash flows, any change in the
use of long-lived assets to negatively affect their fair values, and any obsolescence issues that would lead to a lower fair value determination. If there is an indication that an asset might be impaired, we proceed with a further impairment test,
which is performed for asset groups related to the lowest level of identifiable independent cash flows. We compare the carrying amount with the recoverable amount derived from discounted cash flow analysis to determine whether the asset is impaired
and recognize impairment loss to the extent that its carrying amount exceeds its recoverable amount. If there is evidence that impairment losses recognized previously no longer exists, or has diminished, and the recoverable amount of the long-lived
assets increases because of an increase in the assets estimated service potential, the amount of loss may be reversed to the extent that the resulting carrying value should not exceed the carrying value had no impairment loss been recognized
in prior years.

Due to our asset usage model and the interchangeable nature of our semiconductor manufacturing capacity, we
must make subjective judgments and estimates in determining the independent cash flows that can be related to specific asset groups, including the service potential of long-lived assets through its estimated useful life, cashflow-generating
capacity, physical output capacity, potential fluctuation of economic cycle in the semiconductor industry and our operating situation.

Goodwill Impairment

Goodwill is subject to impairment tests on an annual basis, or more frequently whenever events occur or circumstances change indicating
that goodwill might be impaired. The assessment on impairment of goodwill is subject to significant judgment. Such judgment includes identifying the cash generating unit, or CGU, making assumptions for discounted cash flow analysis to derive the
fair value of the CGU and properly assigning relevant assets, liabilities and goodwill to the CGU. Ultimately, we compare the fair value of goodwill to its carrying value and determine the impairment loss, if any. If the relevant assumptions and
estimates change in the future, they will impact our goodwill impairment test.

Pension

Under the defined benefit pension plan of the Labor Standards Law, we have significant pension benefit costs and liabilities that are
developed from actuarial valuations. Inherent in these valuations are key assumptions including discount rates and expected return on plan assets. We consider current market conditions, including changes in interest rates, in selecting these
assumptions. In addition to changes resulting from fluctuations in our related headcount, changes in the related pension costs or liabilities may also occur in the future due to changes in assumptions. Under the defined contribution pension plan of
the R.O.C. Labor Pension Act, we are required to make monthly contributions to employees individual pension accounts and recognize expenses in the periods in which the contributions become due.

Net pension costs of the defined benefit plan are recorded based on an independent actuarial valuation. Pension cost components such as
service cost, interest cost, expected return on plan assets, the amortization of net obligation at transition, pension gain or loss, and prior service cost, are all taken into consideration. We recognize expenses from the defined contribution
pension plan in the period in which the contribution becomes due.

Investments in Debt and Equity Securities

In accordance with R.O.C. GAAP, equity securities over which we exercise no significant influence or control and with readily determinable
fair values and debt securities are to be classified as financial assets at fair value through profit or loss, or FVTPL, available-for-sale or held-to-maturity securities. Debt securities that we have the intent and ability to hold to maturity are
classified as held-to-maturity securities and reported at their amortized cost. Debt and equity securities that are bought and traded for short-term profit are classified as FVTPL and reported at fair value, with unrealized gains and losses included
in earnings. Debt and equity securities not classified as either



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held-to-maturity or FVTPL are classified as available-for-sale securities and reported at fair value, with unrealized gains and losses reported in other comprehensive income under
stockholders equity. Unrealized losses that are deemed to be other than temporary are charged to earnings. For individual securities classified as either available-for-sale or held-to-maturity, we consider, among other factors, information
concerning significant adverse changes in market conditions in which the investee operates and operating issues specific to the investee in determining whether a decline in value is temporary. In general, we consider a decline in market value below
cost for a continuous period of six months to be other than temporary unless there is persuasive evidence to the contrary. If the decline in fair value is judged to be other than temporary, the cost basis of the individual security is written down
to fair value with a charge against earnings.

Derivative Instruments

The embedded derivative features contained in exchangeable bonds are bifurcated and separately accounted for if the economic
characteristics and risks of the embedded derivative instruments are not clearly and closely related to those of the host contracts. Those bifurcated embedded derivatives are fair valued at the end of each reporting period by using the option
pricing model with the changes in fair value included in earnings. The valuation model uses the market-based observable inputs including share price, volatility, credit spread and swap rates.

We also hold certain freestanding derivative instruments such as interest rate swap and forward contracts, which are fair valued at each
reporting period end. The fair values of these instruments are determined using market established valuation techniques, which involve certain key inputs such as the expected interest forward rate, expected volatility in interest rates, spot
exchange rate and swap point. Any change in such key inputs could materially impact the determination of fair value of these derivative instruments.

Employee Stock Options

Under R.O.C. GAAP, for stock options granted before
January 1, 2008, we apply the intrinsic value method to recognize the difference between the market price of the stock at grant date and the exercise price of the employee stock option as compensation expense. For stock options granted on or
after January 1, 2008, we recognize compensation cost using the Black-Scholes option- pricing model in accordance with R.O.C. SFAS No. 39 Accounting for Share-Based Payment, or R.O.C. SFAS 39. The Black-Scholes option-pricing
model requires the use of input assumptions, including expected volatility, expected life, expected dividend rate and expected risk-free rate of return. We applied the historical realized volatility, which calculates volatility based on the
historical stock price volatility over the time period equal to the expected term of the employee stock option, in estimating expected volatility because our shares have been publicly traded for a long time. We determined the expected term based on
historical stock option exercise data and we used the historical pattern of dividend yield for estimating the expected dividend of the underlying employee stock options. For entities based in jurisdictions outside the United States, the risk-free
interest rate is the implied yield of zero-coupon government bonds currently available in the market in which the shares are primarily traded. Hence, we use the average yield of Taiwan Government Bond with the remaining term similar to the expected
option term as the risk-free interest rate. We adjust employee stock option expenses on an annual basis for changes in expected forfeitures based on the examination of latest employee stock option forfeiture activity. The effect of adjusting the
forfeiture rate used for expense amortization is recognized in the corresponding period in which the expected forfeiture rate is changed.



|A. | Operating Results
|-- | -----------------

Net Operating
Revenues

We generate our net operating revenues primarily from fabricating semiconductor devices. We also derive a
small portion of our net operating revenues from wafer probe services that we perform internally as well as mask tooling services and assembly and test services that we subcontract out.



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Cost of Goods Sold

Our costs of goods sold consist principally of:



| |  |  | overhead, including depreciation and maintenance of production equipment, indirect labor costs, indirect material costs, supplies, utilities and
royalties;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | wafer costs;
| | - |  | ------------



| |  |  | direct labor costs; and
| | - |  | -----------------------



| |  |  | service charges paid to subcontractors for mask tooling, assembly and test services.
| | - |  | ------------------------------------------------------------------------------------

Our total depreciation expenses were NT$33,530 million, NT$29,951 million and NT$31,915 million (US$1,054 million) in 2009, 2010 and
2011, respectively.

Operating Expenses

Our operating expenses consist of the following:



| |  |  | Sales and marketing expenses. Sales and marketing expenses consist primarily of intellectual property development expenses, salaries and related
personnel expenses, wafer sample expenses and related marketing expenses. Wafer samples are actual silicon samples of our customers early design ideas made with our most advanced processes and provided to those customers.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | General and administrative expenses. General and administrative expenses consist primarily of salaries for our administrative, finance and human
resource personnel, fees for professional services, and cost of computer and communication systems to support our operations.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Research and development expenses. Research and development expenses consist primarily of research testing related expenses, salaries and related
personnel expenses and depreciation on the equipment used for our research and development.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Non-operating Income and
Expenses

Our non-operating income principally consists of:



| |  |  | interest income, which has been primarily derived from time deposits;
| | - |  | ---------------------------------------------------------------------



| |  |  | investment income accounted for under the equity method, which has been primarily derived from the recognition of investee companies net income
based on the percentage of their ownership we hold;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | gain on disposal of investments, which has been primarily derived from our disposal of long-term investments accounted for under the equity method,
available-for-sale financial assets and financial assets measured at cost;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | dividend income, which has been primarily derived from the financial instruments of financial assets at fair value through profit or loss,
available-for-sale financial assets and financial assets measured at cost;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | gain on valuation of financial assets and liabilities, which have been primarily derived from disposal of and changes in the values of financial assets
and liabilities classified as FVTPL according to R.O.C. SFAS No. 34 Financial Instruments: Recognition and Measurement, or R.O.C. SFAS 34; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | other income, which has been primarily derived from our branchs grant income received from the government in Singapore and donation income from
our equity investee.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Our non-operating expenses principally consist of:



| |  |  | loss on valuation of financial assets and liabilities, which have been primarily derived from disposal of and changes in the values of financial assets
and liabilities classified as FVTPL according to R.O.C. SFAS 34;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | investment loss accounted for under the equity method, which has been primarily derived from the recognition of investee companies net loss based
on the percentage of their ownership we hold; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | impairment loss, which have been primarily derived from the loss recognized in long-term investments and long-lived assets.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------

Taxation

Based on our status as a company engaged in the semiconductor business in Taiwan, we have been granted exemptions from income taxes in Taiwan with respect to income attributable to capital increases for
the purpose of purchasing equipment related to the semiconductor business for a period of four or five years following each such capital increase. This tax exemption resulted in tax savings of approximately NT$766 million, NT$990 million, and NT$292
million (US$10 million) in 2009, 2010 and 2011, respectively. Our tax rate was 17 % in 2011, the same rate applicable to companies outside the Hsinchu Science Park, and the statutory tax rate has been changed from 25% to 17% effective
January 1, 2010.

We also benefit from other tax incentives generally available to technology companies in Taiwan,
including tax credits applicable against corporate income tax that range from 30% to 50% of the amount of certain research and development and employee training expenses and 5% to 20% of the amount of investment in certain qualified equipment and
technology. These tax incentives resulted in tax savings of approximately nil, NT$947 million and NT$301 million (US$10 million) in 2009, 2010 and 2011, respectively.

After taking into account the tax exemptions and tax incentives discussed above, we recorded NT$651 million, NT$1,606 million and NT$913 million (US$30 million) of tax expense in 2009, 2010 and 2011,
respectively. Our effective income tax rate in 2011 was 9.74%.

In 1997, the R.O.C. Income Tax Law was amended to integrate
corporate income tax and stockholder dividend tax to eliminate the double taxation effect for resident stockholders of Taiwan companies. Under the amendment, all retained earnings generated from January 1, 1998 and not distributed to
stockholders as dividends in the following year will be assessed a 10% retained earnings tax.

See Item 10. Additional
InformationE. R.O.C. Tax ConsiderationsDividends. As a result, if we do not distribute all of our annual retained earnings generated beginning January 1, 1998 as either cash and/or stock dividends in the following year, these
earnings will be subject to the 10% retained earnings tax. In addition, the R.O.C. government enacted the R.O.C. Income Basic Tax Act, also known as the Minimum Income Tax Statute, or the Statute, which became effective on
January 1, 2006 and imposes an alternative minimum tax, or AMT. The AMT imposed under the Statute is a supplemental tax which is payable if the income tax payable pursuant to the R.O.C. Income Tax Act is below the minimum amount prescribed
under the Statute. In accordance with the Statute, a company will be subject to a 10% AMT if its annual taxable income under the Statute exceeds NT$2 million.

Comparisons of Results of Operations

The following table sets forth
some of our results of operations data as a percentage of our net operating revenues for the periods indicated.



|                       |  |                         |       |   |      |  |       |      |  |  |       |  
|---------------------- |  | ----------------------- | ----- | - | ---- |  | ----- | ---- |  |  | ----- | -
|                       |  | Year Ended December 31, |      
|                       |  | 2009                    |       |   | 2010 |  |       | 2011 | 
|Net operating revenues |  |                         | 100.0 | % |      |  | 100.0 | %    |  |  | 100.0 | %
|Cost of goods sold     |  |                         | (83.1 | ) |      |  | (70.8 | )    |  |  | (81.8 | )
|                       |  |                         |       |   |      |  |       |      |  |  |       |  
|Gross profit           |  |                         | 16.9  |   |      |  | 29.2  |      |  |  | 18.2  |  



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|                                                |  |                         |      |   |      |  |      |      |  |  |      |  
|----------------------------------------------- |  | ----------------------- | ---- | - | ---- |  | ---- | ---- |  |  | ---- | -
|                                                |  | Year Ended December 31, |     
|                                                |  | 2009                    |      |   | 2010 |  |      | 2011 | 
|Operating expenses:                             |  |                         |      |   |      |  |      |      |  |  |      |  
|Sales and marketing                             |  |                         | (3.1 | ) |      |  | (2.0 | )    |  |  | (2.9 | )
|General and administrative                      |  |                         | (3.0 | ) |      |  | (2.9 | )    |  |  | (2.9 | )
|Research and development                        |  |                         | (8.8 | ) |      |  | (6.9 | )    |  |  | (8.0 | )
|                                                |  |                         |      |   |      |  |      |      |  |  |      |  
|Operating income                                |  |                         | 2.0  |   |      |  | 17.4 |      |  |  | 4.4  |  
|Net non-operating income (loss)                 |  |                         | (0.2 | ) |      |  | 2.7  |      |  |  | 3.6  |  
|                                                |  |                         |      |   |      |  |      |      |  |  |      |  
|Income before income tax and minority interests |  |                         | 1.8  |   |      |  | 20.1 |      |  |  | 8.0  |  
|Income tax expense                              |  |                         | (0.7 | ) |      |  | (1.3 | )    |  |  | (0.7 | )
|Extraordinary gain                              |  |                         | 0.7  |   |      |  | 0.1  |      |  |  |     |  
|                                                |  |                         |      |   |      |  |      |      |  |  |      |  
|Net income                                      |  |                         | 1.8  |   |      |  | 18.9 |      |  |  | 7.3  |  
|                                                |  |                         |      |   |      |  |      |      |  |  |      |  
|Attributable to:                                |  |                         |      |   |      |  |      |      |  |  |      |  
|the Company                                     |  |                         | 4.2  |   |      |  | 18.9 |      |  |  | 9.1  |  
|minority interests                              |  |                         | (2.4 | ) |      |  | (0.0 | )    |  |  | (1.8 | )

Year Ended December 31, 2011 Compared to Year Ended December 31, 2010

Net operating revenues. Net operating revenues decreased by 7.7% from NT$126,442 million in 2010 to NT$116,703 million
(US$3,855 million) in 2011 primarily due to a decrease in volume of products shipped.

Cost of goods sold. Cost
of goods sold increased by 6.6% from NT$89,518 million in 2010 to NT$95,417 million (US$3,152 million) in 2011 primarily due to the decrease of the utilization rate from 93.7% in 2010 to 78.6% in 2011 as a result of decreased customer demand.

Gross profit and gross margin. Gross margin decreased from 29.2% in 2010 to 18.2% in 2011 primarily due to the
lower utilization rate in 2011.

Operating income and operating margin. Operating income decreased from
NT$22,020 million in 2010 to NT$5,180 million (US$171 million) in 2011. Our operating margin decreased from 17.4% in 2010 to 4.4% in 2011. The decrease in operating margin is largely due to a decrease in gross margin. Operating expenses increased by
8.1% from NT$14,904 million in 2010 to NT$16,106 million (US$532 million) in 2011.

Sales and marketing expenses.Our sales and marketing expenses increased by 31.3% from NT$2,566 million in 2010 to NT$3,369 million (US$111 million) in 2011. The increase in sales and marketing expenses was mainly due to an increase in sample expenses and bad debt
expenses. Our sales and marketing expenses as a percentage of our net operating revenues increased slightly from 2.0% in 2010 to 2.9% in 2011.

General and administrative expenses. Our general and administrative expenses decreased by 7.1% from NT$3,598 million in 2010 to NT$3,342 million (US$111 million) in 2011 primarily as a
result of a decrease in personnel expenses. Our general and administrative expenses as a percentage of our net operating revenues was equal to 2.9% in 2010 and 2011, respectively.

Research and development expenses.Our research and development expenses increased by 7.5% from NT$8,740 million in 2010 to
NT$9,395 million (US$310 million) in 2011. The increase in research and development expenses resulted primarily from an increase in research and development wafer expenses and mask expenses. Our research and development expenses as a percentage of
our net operating revenues increased from 6.9% in 2010 to 8.0% in 2011.

Net non-operating income. Net
non-operating income increased by 24.9% from income of NT$3,364 million in 2010 to NT$4,200 million (US$139 million) in 2011, mainly due to an increase in gain on valuation of financial liabilities from loss of NT$(665) million in 2010 to gain of
NT$1,341 million (US$44 million) in 2011, an increase in other income from NT$1,019 million in 2010 to NT$2,055 million (US$68 million) in 2011 and an increase in impairment loss from NT$114 million in 2010 to NT$2,246 million (US$74 million) in
2011.

Net income attributable to the Company. Due to the factors described above, we incurred a net income of
NT$23,899 million in 2010, compared with a net income of NT$10,610 million (US$351 million) in 2011.



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Year Ended December 31, 2010 Compared to Year Ended December 31, 2009

Net operating revenues. Net operating revenues increased by 38.4% from NT$91,390 million in 2009
to NT$126,442 million (US$4,339 million) in 2010, largely attributable to the global economic recovery steadily.

Cost
of goods sold. Cost of goods sold increased by 17.8% from NT$75,975 million in 2009 to NT$89,518 million (US$3,072 million) in 2010. Our cost of goods sold increased at a slower pace compared to the increase in our revenues as a result of
our continued efforts to reduce costs, which included measures such as negotiating with suppliers for more favorable prices and streamlining the workforce. In addition, the increase in our utilization rate also lowered our cost per unit
manufactured.

Gross profit and gross margin. Gross margin increased from 16.9% in 2009 to 29.2% in 2010,
primarily due to the recovery of global economic and our improved operating efficiencies as a result of cost reduction.

Operating income and operating margin. Operating income increased substantially from NT$1,847 million in 2009 to NT$22,020
million in 2010. Our operating margin increased from 2.0% in 2009 to 17.4% in 2010. The increase in operating margin is largely due to an increase in gross margin. Operating expenses increased by 9.9% from NT$13,568 million in 2009 to NT$14,904
million in 2010.

Sales and marketing expenses. Our sales and marketing expenses decreased by 8.4% from NT$2,800
million in 2009 to NT$2,566 million in 2010. The decrease in sales and marketing expenses was mainly due to a decrease in IP royalty expenses. Our sales and marketing expenses as a percentage of our net operating revenues decreased slightly from
3.1% in 2009 to 2.0% in 2010.

General and administrative expenses. Our general and administrative expenses
increased by 32.1% from NT$2,724 million in 2009 to NT3,598 million in 2010 primarily as a result of an increase in personnel expenses. Our general and administrative expenses as a percentage of our net operating revenues decreased slightly from
3.0% in 2009 to 2.9% in 2010.

Research and development expenses.Our research and development expenses
increased by 8.7% from NT$8,044 million in 2009 to NT$8,740 million in 2010. The increase in research and development expenses resulted primarily from an increase in personnel expenses. Our research and development expenses as a percentage of our
net operating revenues decreased from 8.8% in 2009 to 6.9% in 2010.

Net non-operating loss. Net non-operating
income (loss) increased by 2,027.9% from loss of NT$(174) million in 2009 to income of NT$3,364 million in 2010, mainly due to a decrease in impairment loss from NT$4,007 million to NT$114 million, a decrease in gain on valuation of financial assets
from NT$513 million to nil and an 42.8% increase in dividend income from NT$941 million to NT$1,344 million.

Net income
attributable to the Company. Due to the factors described above, we incurred a net income of NT$3,874 million in 2009, compared with a net income of NT$23,899 million in 2010.



|B. | Liquidity and Capital Resources
|-- | -------------------------------

The foundry business is highly capital intensive. Our development over the past three years has required significant investments. Additional expansion for the future generally will continue to require
significant cash for acquisition of plant and equipment to support increased capacities, particularly for the production of 12-inch wafers, although our expansion program will be adjusted from time to time to reflect market conditions. In addition,
the semiconductor industry has historically experienced rapid changes in technology. To maintain competitiveness at the same capacity, we are required to make adequate investments in plant and equipment. In addition to our need for liquidity to
support the large fixed costs of capacity expansion and the upgrading of our existing plants and equipment for new technologies, as we ramp up production of new plant capacity, we require significant working capital to support purchases of raw
materials for our production and to cover variable operating costs such as salaries until production yields provide sufficiently positive margins for a fabrication facility to produce operating cash flows.



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We have financed our capital expenditure requirements in recent years with cash flows from
operations as well as from

bank borrowings, the issuance of bonds and equity-linked securities denominated in NT dollars and U.S. dollars. We
incurred capital expenditures of NT$17,618 million, NT$61,323 million, and NT$53,326 million (US$1,762 million) in 2009, 2010 and 2011, respectively, requiring a significant amount of funding from financing activities. Once a fab is in operation at
acceptable capacity and yield rates, it can provide significant cash flows. Cash flows significantly exceed operating income, reflecting the significant non-cash depreciation expense. We generated cash flows from operations of NT$32,422 million,
NT$53,495 million and NT$41,654 million (US$1,376 million) in 2009, 2010 and 2011, respectively.

On May 24, 2011, we
issued US$500 million aggregate principal amount of currency linked zero coupon convertible bonds due 2016. Each bond, at the option of the holder, will be convertible into our ADS. The proceeds of this offering will be used for purchasing machinery
and equipment. As of December 31, 2011, no bonds had been converted into our ADS, and we have repurchased and cancelled US$64 million principal amount of these bonds in the open market transactions.

As of December 31, 2011, we had NT$49,070 million (US$1,621 million) of cash and cash equivalents and NT$696 million (US$23 million)
of FVTPL, current. Cash equivalents included reverse repurchase agreements with banks in Taiwan for commercial paper, government bonds, or other highly secure assets for short-term liquidity management. These agreements bore interest rates ranging
from 0.14% to 0.17%, 0.25% to 0.41% and 0.45% to 0.62% in 2009, 2010 and 2011, respectively. The terms of these agreements were typically less than two weeks. As of December 31, 2009, 2010, and 2011, we held reverse repurchase agreements in the
amount of NT$8,777 million, NT$3,757 million and NT$3,532 million (US$117 million) million, respectively.

We believe that our
working capital, cash flow from operations and unused lines of credit are sufficient for our present requirements.

At our
2010 annual general meeting, our stockholders authorized the Board to raise capital from private placement, through issuing instruments such as common shares, depositary receipts (including but not limited to ADS), or Euro/Domestic convertible bonds
(including secured or unsecured corporate bonds), based on market conditions and our needs. The amount of shares issued or convertible is proposed to be no more than 10% of our total shares issued (i.e., no more than 1,298,791,231 shares). According
to Item 6, Article 43-6 of the R.O.C. Security and Exchange Act, any private placement of our shares must be conducted separately within one year after approval at the annual general meeting of stockholders. The approval to conduct a private
placement of our shares will expire on June 14, 2011. Considering changes in regulations and market conditions, the Board has resolved to terminate any plans for a private placement of our shares.

Operating Activities

Our operating activities generated cash of NT$41,654 million (US$1,376 million) in 2011. Cash generated from our operating activities for 2011 significantly exceeded net income due to the add-back of
non-cash items, such as depreciation and amortization in the amount of NT$32,371 million (US$1,069 million). Cash generated by operating activities decreased from NT$53,495 million in 2010 to NT$41,654 million (US$1,376 million) in 2011, primarily
due to a decrease in cash collected from our customers.

Investment Activities

Net cash used in our investment activities was NT$55,120 million (US$1,821 million) in 2011. In 2011, we used cash of NT$53,326 million
(US$1,762 million) to purchase equipment primarily used at our fabs. This was offset by the net cash provided by acquisition and disposal of available-for-sale financial assets of NT$3,005 million (US$99 million).

Financing Activities

Net cash provided by our financing activities was NT$9,923 million (US$328 million) in 2011. We drew down bank loans of NT$13,156 million (US$435 million), issued convertible bonds of NT$14,423 million
(US$476 million), paid cash dividends of NT$14,016 million (US$463 million) and repaid long-term loans of NT$3,457 million (US$114 million).



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We had NT$9,412 million (US$311 million) outstanding short-term loans as of
December 31, 2011. We had total availability under existing short-term lines of credit of NT$19,609 million (US$648 million) as of December 31, 2011.

We had bonds payable of NT$17,405 million (US$575 million) in the aggregate as of December 31, 2011.

As of December 31, 2011, our outstanding long-term debts primarily consisted of NT$613 million unsecured and NT$3,237 million secured long-term bank loans due in 2013, NT$600 million secured
long-term bank loans due in 2014, NT$1,000 million unsecured and NT$1,670 million secured long-term bank loans due in 2015, and NT$2,000 million unsecured and NT$2,581 million secured long-term bank loans due in 2016. The interest rates of our
long-term bank loans range from 1.14% to 2.30%.

As of December 31, 2011, the current portion of bonds due within one
year was NT$5,420 million (US$179 million), and the current portion of long-term bank loans due within one year was NT$2,582 million (US$85 million).

Capital Expenditures

We have entered into several construction contracts
for the expansion of our factory space. As of December 31, 2011, these construction contracts amounted to NT$4,255 million (US$ 141 million) with an unaccrued portion of the contracts of NT$1,067 million (US$35 million).

In 2011, we spent approximately NT$53,326 million (US$1,762 million) primarily to purchase equipment for research and development and
production purposes.

We continue to maintain high levels of capital expenditures as we believe there are promising
opportunities for 28 - nanometer and 40 - nanometer technologies. We continue to devote most of our capital expenditure to improvement of advanced technology within 12-inch fabs. We will focus on our addressable markets (i.e., 40 & 28 -
nanometer) and continue to build up our production capacity. We believe our 28 - nanometer technology progress will propel our advanced process growth, strengthen our future competitiveness, and enhance our portfolio of comprehensive foundry
solutions available to our customers.

We believe that our existing cash and cash equivalents and short-term investments will
be sufficient to meet our working capital and capital expenditure requirements at least through the end of 2012. We also expect to fund a portion of our capital requirements in 2012 through the cash provided by operating activities. Due to rapid
changes in technology in the semiconductor industry, however, we have frequent demand for investment in new manufacturing technologies. We cannot assure you that we will be able to raise additional capital, should that become necessary, on terms
acceptable to us, or at all. If financing is not available on terms acceptable to us, management intends to reduce expenditures so as to delay the need for additional financing. To the extent that we do not generate sufficient cash flows from our
operations to meet our cash requirements, we may rely on external borrowings and securities offerings to finance our working capital needs or our future expansion plans. The sale of additional equity or equity-linked securities may result in
additional dilution to our stockholders. Our ability to meet our working capital needs from cash flow from operations will be affected by the demand for our products and change in our product mix, which in turn may be adversely affected by several
factors. Many of these factors are beyond our control, such as economic downturns and declines in the average selling prices of our products. The average selling prices of our products have been subjected to downward pressure in the past and are
reasonably likely to be subject to further downward pressure in the future. We have not historically relied, and we do not plan to rely in the foreseeable future, on off-balance sheet financing arrangements to finance our operations or expansion.

Transactions with Related Parties

Our transactions with related parties have been conducted on arms-length terms. See Item 7. Major Stockholders and Related Party TransactionsB. Related Party Transactions and Note
26 to our audited consolidated financial statements included in this annual report.



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Inflation/Deflation

We do not believe that inflation in the R.O.C. has had a material impact on our results of operations.

U.S. GAAP Reconciliation

Our consolidated financial statements are
prepared in accordance with R.O.C. GAAP, which differs in certain significant respects from U.S. GAAP. Such differences include methods for measuring the amounts shown in the financial statements and additional disclosures required by U.S. GAAP Note
35 to our audited financial statements, included in this annual report, provides a discussion and quantification of the differences between R.O.C. GAAP and U.S. GAAP as they related to us. We provide a summary of material differences included
therein below.

The following table sets forth a comparison of our net income and stockholders equity in accordance with
R.O.C. GAAP and U.S. GAAP for the periods indicated.



|                                          |  |                         |         |   |      |  |         |      |  |  |         |   |  |  |       |  
|----------------------------------------- |  | ----------------------- | ------- | - | ---- |  | ------- | ---- |  |  | ------- | - |  |  | ----- | -
|                                          |  | Year Ended December 31, |        
|                                          |  | 2009                    |         |   | 2010 |  |         | 2011 | 
|                                          |  | NT$                     |         |   | NT$  |  |         | NT$  |  |  | US$     |  
|                                          |  | (in millions)           |        
|Consolidated net income                   |  |                         |         |   |      |  |         |      |  |  |         |   |  |  |       |  
|Consolidated net income, R.O.C. GAAP      |  |                         | 1,671   |   |      |  | 23,846  |      |  |  | 8,467   |   |  |  | 280   |  
|U.S. GAAP adjustments                     |  |                         |         |   |      |  |         |      |  |  |         |   |  |  |       |  
|Compensation                              |  |                         | (804    | ) |      |  | (397    | )    |  |  | (106    | ) |  |  | (4    | )
|Equity investees                          |  |                         | (35     | ) |      |  | (42     | )    |  |  | (11     | ) |  |  |      |  
|Investments in debt and equity securities |  |                         | (830    | ) |      |  | (234    | )    |  |  | (210    | ) |  |  | (7    | )
|Convertible bond liabilities              |  |                         |         |   |      |  |         |      |  |  | 21      |   |  |  | 1     |  
|Goodwill and Business Combinations        |  |                         |        |   |      |  | 452     |      |  |  | (1,308  | ) |  |  | (44   | )
|Treasury stock and related disposal       |  |                         |        |   |      |  | (81     | )    |  |  | (179    | ) |  |  | (6    | )
|Inventory                                 |  |                         | 362     |   |      |  |        |      |  |  |        |   |  |  |      |  
|Tax effect of U.S. GAAP adjustments       |  |                         |        |   |      |  |        |      |  |  | (69     | ) |  |  | (2    | )
|                                          |  |                         |         |   |      |  |         |      |  |  |         |   |  |  |       |  
|Consolidated net income, U.S. GAAP        |  |                         | 364     |   |      |  | 23,544  |      |  |  | 6,605   |   |  |  | 218   |  
|                                          |  |                         |         |   |      |  |         |      |  |  |         |   |  |  |       |  
|Stockholders equity                      |  |                         |         |   |      |  |         |      |  |  |         |   |  |  |       |  
|Stockholders equity, R.O.C. GAAP         |  |                         | 214,096 |   |      |  | 225,136 |      |  |  | 212,125 |   |  |  | 7,008 |  
|Compensation                              |  |                         | 65      |   |      |  | 32      |      |  |  | 4       |   |  |  |      |  
|Equity investees                          |  |                         | (150    | ) |      |  | (142    | )    |  |  | (261    | ) |  |  | (9    | )
|Investments in debt and equity securities |  |                         | 1,717   |   |      |  | 1,765   |      |  |  | 1,669   |   |  |  | 55    |  
|Convertible bond liabilities              |  |                         |        |   |      |  |        |      |  |  | (522    | ) |  |  | (17   | )
|Goodwill and Business Combinations        |  |                         | (8      | ) |      |  | 1,301   |      |  |  | (8      | ) |  |  |      |  
|Treasury stock and related disposal       |  |                         | (2,769  | ) |      |  | (2,624  | )    |  |  | (2,044  | ) |  |  | (68   | )
|Pension                                   |  |                         | 289     |   |      |  | (345    | )    |  |  | (254    | ) |  |  | (8    | )
|Tax effect of U.S. GAAP adjustments       |  |                         |        |   |      |  |        |      |  |  | (69     | ) |  |  | (2    | )
|                                          |  |                         |         |   |      |  |         |      |  |  |         |   |  |  |       |  
|Stockholders equity, U.S. GAAP           |  |                         | 213,240 |   |      |  | 225,123 |      |  |  | 210,640 |   |  |  | 6,959 |  
|                                          |  |                         |         |   |      |  |         |      |  |  |         |   |  |  |       |  

The differences between R.O.C. GAAP and U.S. GAAP that have a material effect on our net income and
stockholders equity under R.O.C. GAAP were described as follows:

Compensation Expenses

Pursuant to our articles of incorporation, we are required, under certain circumstances, to distribute a certain percentage of
unappropriated earnings as employee bonus and remuneration to directors. Please refer to Item 10. Additional InformationB. Memorandum and Articles of AssociationDividends and Distributions. Remuneration to directors is
settled in cash. Our Articles of Incorporation specifies that employee bonus can be settled in cash or shares or a combination of both. Under both R.O.C. and U.S. GAAP, employee bonus is charged to compensation expense and accrued based on
managements estimate. The employee bonus is initially accrued as at the year-end based on managements estimate according to our Article of Association with adjustment in the subsequent year after stockholders approval. Compensation
expense relating to stock bonus is determined based on the fair market value of our common stock on the grant date. According to the R.O.C. ARDF



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Interpretation 96-052, Accounting for Employee Bonus and Remunerations to Directors and Supervisors, compensation expense relating to stock bonus is determined based on the fair value
of our common stock at the date before the stockholders meeting. Under U.S. GAAP, compensation expense relating to stock bonus is measured at the fair market value on the date of stock distribution.

Under R.O.C. GAAP, we apply the intrinsic value method to recognize compensation cost for employee stock options granted before
January 1, 2008. For stock options granted on or after January 1, 2008, we adopted R.O.C. SFAS 39 to recognize compensation cost using the fair value method, which is consistent with U.S. GAAP. We amortized share-based compensation expense
over the vesting period based on the grant-date fair value. The fair value of liability awards is re-measured at each reporting date with fair value changes charged to compensation expenses accordingly. Compensation expense is recognized on a
graded-vesting basis over the requisite service period of the options.

Investments in Debt and Equity Securities

Under R.O.C. GAAP, investment in restricted stock, for which sale is restricted by governmental or contractual requirement is accounted
for as an available-for-sale security, or a cost method investment and its fair value should be adjusted for the effect of restriction. Under U.S. GAAP, however, if the restricted investment does not meet the definition of an equity security with
readily determinable fair value, it is accounted for as a cost method investment. Before 2011, our restricted investments were classified as cost method investments both under R.O.C. GAAP and U.S. GAAP. In 2011, these restricted investments are
reclassified as available-for-sale securities under U.S. GAAP as the period of restriction terminates within one year from the reporting date.

When we lose our significant influence on an investment accounted for under the equity method and reclassify it as an available-for-sale security, the proportionate share of an investees equity
adjustments for other comprehensive income should remain as a part of the carrying amount of the investment under R.O.C. GAAP and the dividends received from the available-for-sale security which were declared from pre-acquisition profits are
deducted from the cost of the security. However, under U.S. GAAP, all of the investees equity adjustments for other comprehensive income should be offset against the carrying amount of the investment at the time significant influence is lost,
and the dividends received from the available-for-sale security are accounted for as dividend income.

Our ownership interest
in a subsidiary or equity investee may change, for example, (1) when an equity investee or a subsidiary issues additional shares and we subscribe for these shares at a percentage higher or lower than its current ownership percentage in the
equity investees or subsidiaries, (2)when the employees of our subsidiaries or equity investees exercise their stock options, or (3)when the convertible bondholders of our subsidiaries or equity investees exercise their conversion rights. Under
R.O.C. GAAP, the change in tour proportionate share in the net assets of our equity investees or subsidiaries resulting from the issuance of additional shares of the investees stock, at the rate not proportionate to our existing equity
ownership in such investees, is recorded to the additional paid-in capital and long-term investments account for an equity method investee, or noncontrolling interest for a subsidiary. Under U.S. GAAP, pursuant to ASC 810-10-45, Noncontrolling
Interests in a Subsidiary, a change in our ownership interest in a subsidiary that does not result in a change of control shall be accounted for as equity transactions. Nevertheless, a dilution of ownership interest in an equity-method investee
is recognized as a gain or loss, while an increase of ownership interest is accounted for as additional acquisition interest in an equity method investee, with the difference between the total cost of the additional investment and the proportionate
share of the fair value of net assets treated as equity method goodwill.

In December 2009 and June 2010, we acquired
additional ownership interests in one of our subsidiaries. Under R.O.C. GAAP, the acquisition was accounted for using the purchase method of accounting. However, under U.S. GAAP, the acquisition was accounted for as an equity transaction. Under U.S.
GAAP the difference between the fair value of the consideration paid and the book value of the noncontrolling interests is adjusted against stockholders equity.



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In June 2010, a non-affiliated company invested for newly issued shares of one of our
consolidated entities, which reduced our ownership interest from 100% to 50%. Due to this transaction, we jointly controlled the entity and accounted for the entity as a

joint venture. Under R.O.C. GAAP, the reduction of equity interest is adjusted against additional paid-in capital. However, under U.S. GAAP, we accounted for the transaction as a deconsolidation of a
subsidiary and remeasured the remaining holding interests by recognizing a loss in net income attributable to us.

Under
R.O.C. GAAP, when an investor company holds 20% or more of an investee companys outstanding voting securities but without the controlling power, unless it is evidenced that the investor company does not have significant influence over the
investee company, the investors investment in the investee companys equity securities, including preferred shares, shall be accounted for using the equity method. When an investor company invests in preferred stock of an investee
company, equity method accounting is necessary if the investor has the ability to exercise its significant influence over the investee. Therefore, when determining the excess of cost of investment over underlying equity in net assets of the
investee, and recognizing subsequent pick up of equity method gains or losses, we take these preferred shareholdings into consideration. In addition, excess of investment cost over the underlying net assets will be treated as equity-method goodwill
as a component of the carrying value of the equity-method investment. If, however, there is excess of underlying net assets over the investment cost, the investees non-current assets, as components of the equity-method investment balance, will
be subject to pro rata reduction with the remaining unallocated bargain purchase recognized immediately as an extraordinary gain.

Under U.S. GAAP, however, equity-method accounting generally applies only to investments in common stock and in-substance common stock that give the investor the ability to exercise significant influence
over operating and financial policies of an investee. U.S. GAAP may also require the Companys other forms of investments, including preferred equities, to pick up losses when the investment in common stock and in-substance common stock is
reduced to zero. Pursuant to ASC 323-10-15-13, in-substance common stock is an investment in an entity that has risk and reward characteristics that are substantially similar to that entitys common stock. An investor must consider all of the
characteristics of the securities: subordination, risk: and rewards of ownership and obligation to transfer value, when determining whether an investment in an entity is substantially similar to an investment in an entitys common stock.

In December 2011, after considering all the above mentioned characteristics, we conclude that our investment in an
investees preferred shares is not in-substance common stock. Therefore, under U.S. GAAP the investment of preferred shares was reclassified from long-term investment accounted for under the equity method to financial assets measured at cost.
We also reversed the effects of the pro rata reduction for the bargain purchase recognized, and recognized an equity-method goodwill as a component of the equity-method investment balance for our investment in common stocks.



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Convertible Bond Liabilities

We issued convertible bonds in May 2011. Under R.O.C. GAAP, the bonds contain both a liability component and an equity component. The conversion right is classified in stockholders equity at its
fair value at issuance. Under U.S. GAAP, the conversion right was determined to be a contract indexed to our own stock and, if it existed on a freestanding basis, would be classified in stockholders equity, meeting the scope exception
described in ASC 815-10-15-74. As such, the conversion right is not considered to be a derivative instrument that is required to be bifurcated from the host contract.

In addition, under R.O.C. GAAP, the issuance costs are allocated proportionally to the equity and liability components. The amount allocated to the equity components is accounted for as a reduction of
equity as well as the amount allocated to the liability component is accounted for as a bond discount. The issuance costs allocated to the liability component are amortized over the contractual life of the bonds using the effective interest rate
method. Under U.S. GAAP, however, the entire issuance costs are reported as deferred charges and amortized over the contractual life of the bonds using the effective interest rate method.

Based on the above differences, we reclassified the equity component under R.O.C. GAAP to bonds payable under U.S. GAAP, and reclassified
the issuance costs which are allocated to the liability and equity component under R.O.C. GAAP to deferred charges under U.S. GAAP. We also adjusted the differences resulting from the subsequent amortization of the bond discount and deferred charges
as well as the subsequent redemption of the bonds.

Goodwill and Business Combinations

In accordance with R.O.C. GAAP, goodwill is measured separately on each acquisition, and it excludes goodwill in non-controlling interest.
In a step acquisition, the acquirer does not re-measure its previously held equity interest in the acquiree, therefore, the acquisition does not result in gains or losses from re-measurements. Goodwill is not amortized and is subject to annual
impairment tests or whenever events and circumstances change indicating goodwill may be impaired. The assessment of impairment includes identifying the goodwill-allocated cash generating unit (CGU), determining the recoverable amount of CGU by using
a discounted cash flow analysis, and ultimately comparing the recoverable amount with the carrying amount of CGU including goodwill. If the CGUs carrying amount is greater than its recoverable amount, an impairment loss is recognized. The
impairment of goodwill cannot be reversed. When the fair value of identifiable net assets acquired exceeds the cost, the difference should be assigned to non-current assets acquired (except for financial assets not under equity method, assets to be
disposed, deferred tax assets, prepaid pension or other retirement benefits cost) proportionate to their respective fair values. If these assets are all reduced to zero value, the remaining excess should be recognized as extraordinary gain.

Under U.S. GAAP, in a business combination achieved in stages, the acquirer shall re-measure its previously held equity
interest in the acquiree at its acquisition-date fair value and recognize the resulting gain or loss. The acquirer shall recognize goodwill, or gain on bargain purchase, as of the acquisition date measured as the excess of (a) the aggregate of:
(i) the consideration transferred, (ii) the fair value of any non-controlling interest in the acquiree, plus (iii) the fair value of any previously held equity interest in the acquiree; over (b) the fair value of identifiable
assets acquired and the liabilities assumed on the acquisition date. Goodwill is not amortized and is subject to an annual impairment test or more frequently when events and circumstances indicate a possible impairment may exist. The first step of
the impairment test is to compare the fair value of the reporting unit with its carrying value, including goodwill. If the carrying value of the reporting unit exceeds its fair value, the second step of the impairment test compares the implied fair
value of the reporting unit goodwill with its carrying value. If the carrying amount of goodwill exceeds its fair value, and impairment loss is recognized on the consolidated statements of income equal to the excess. Impairment of goodwill cannot be
subsequently reversed. Any bargain purchase gain is immediately recognized in earnings.

On November 30, 2010, we
acquired additional stocks issued by one of our equity investee, which increased our ownership interest from 45.79% to 57.67%. Prior to the acquisition date, we accounted for its 45.79% interest as an equity-method investment. As a result of the
acquisition, we obtained control of the acquiree and the results of the acquirees operations have been included in the consolidated financial statements since that date.



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Under R.O.C. GAAP, a change in our proportionate share in the net assets of an equity
investee resulting from our acquisition of additional stock issued by the equity investee at a rate not proportionate to our existing equity ownership is charged to the additional paid-in capital and long-term investments accounts. However, under
U.S. GAAP, the acquisition of a controlling interest in acquiree is regarded as a business combination. Under U.S. GAAP, the sum of the fair value of the consideration transferred, non-controlling interests and equity interest previously held by us
exceeding the fair value of identifiable net assets is recorded as goodwill.

In September 2011, as a result of lower than
expected operating profits and cash flows due to the sharp deterioration in market condition since November 2010, the acquiree determined some of its long lived assets were impaired pursuant to ASC350. The impairment loss also served as an indicator
that goodwill might also be impaired. Accordingly, we conducted a two-step process to identify and measure the amount of impairment loss, if any. As the carrying amount of the subsidiary exceeded its fair value which was estimated by using the
expected present value of future cash flows, its goodwill was considered to be impaired. To calculate the implied fair value of goodwill, we allocated the fair value to each asset and liability account as described in Note 35(6) of our audited
financial statements . The excess of the reporting units fair value over the total amounts allocated to each asset (except goodwill) and liability account would be the implied fair value of goodwill. As the carrying amount exceeded the implied
fair value of the subsidiarys goodwill, we recognized a goodwill impairment loss of NT$1,499 million (US$50 million) in 2011 under U.S. GAAP. While the impairment assessment resulted in a full write down of goodwill under both R.O.C. GAAP and
U.S. GAAP, the amount of the charge was different due to the difference in carrying values of goodwill under each GAAP.

Treasury stock and
related disposal

Some of our subsidiaries and equity method investees also hold our shares as investments. Under R.O.C.
GAAP, reciprocal shareholdings held by subsidiaries, but not equity investees, are recorded as treasury stocks on our books. Under U.S. GAAP, however, reciprocal shareholdings, whether being held by subsidiaries or equity investees, are recorded as
treasury stocks on our books. Accordingly, we recognized treasury stocks for reciprocal shareholdings held by equity-method investees and eliminated the related unrealized gain (loss) or investment gain (loss) as they are accounted for as treasury
stock under U.S. GAAP.

Pension

Under R.O.C. GAAP, a minimum pension liability should be measured as the excess of accumulated benefit obligation over the fair value of the plan assets and allowed the unrecognized items, including prior
service costs and credits, gains or losses, and transition obligations or assets to be reported in disclosure shown as a plans funded status. Under U.S. GAAP, ASC 715-30, Defined Benefit Plans-Pension, requires an employer to recognize
an asset for a plans overfunded status or a liability for a plans underfunded status with an offsetting adjustment to accumulated other comprehensive income.

Inventory

Under U.S. GAAP, the allocation of fixed production overhead to
inventory is based on the normal capacity of the production facilities. Unallocated overheads are recognized as an expense in the period in which they are incurred. Other items such as abnormal freight, handling costs and amounts of wasted materials
are treated as current period charges rather than as a portion of the inventory cost pursuant to ASC 330, Inventory. R.O.C. GAAP does not provide definite guidance for such abnormal items and the use of normal capacity was not mandatory
before the adoption of R.O.C. SFAS No. 10, Accounting for Inventory, or R.O.C. SFAS 10, on January 1, 2009.

Under R.O.C. GAAP, the write down of inventory for the lower of cost or net realizable value may be reversed in subsequent periods if market conditions improve. Under U.S. GAAP, the write down to lower of
cost or market creates a new cost basis that subsequently cannot be marked up. Upon the sale of the related inventory, the difference between these two GAAPs is resolved.



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Tax Effect of U.S. GAAP Adjustments

According to ASC 740-10, Income Tax, our uncertain tax positions are accounted for based on a two-step process. The first step is to
evaluate the tax position for recognition by determining if it is more likely than not that the position will be sustained based on the technical merits. The second step requires us to estimate and measure the tax benefit as the largest amount that
is more than 50% likely to be realized upon ultimate settlement. Although ASC 740-10 provides further clarification of the accounting for uncertainty in income taxes recognized in the financial statements, significant management judgment must be
made and used in connection with the recognition threshold and measurement attribute. Determination of our uncertain tax positions involves the legal and factual interpretation with respect to the application of relevant tax laws and regulations,
along with our assessment of other factors including changes in facts or circumstances, changes in tax law, and/or effectively settled issues under audit. As mentioned above, the application of tax laws and regulations is inherently subject to legal
and factual interpretation, judgment and uncertainty. In addition, tax laws and regulations themselves are subject to change as a result of changes in fiscal policy, changes in legislation, the evolution of regulations and court rulings. Therefore,
the final settlement of these uncertain tax positions might be materially different from our estimates, which could result in the need to record additional tax liabilities or potentially reverse previously recorded tax liabilities. Unlike ASC
740-10, R.O.C. SFAS 22 contained no guidance on uniform criteria for an enterprise to recognize and measure potential tax benefits associated with uncertain tax positions.

Under R.O.C. GAAP, the 10% tax on undistributed earnings is recorded as an expense at the time shareholders resolve that its earnings shall be retained. Under U.S. GAAP, 10% income tax impact is provided
in the period the income is earned, assuming that no earnings are distributed.

Recent Accounting Pronouncements

In May 2011, the FASB issued ASU 2011-4 Fair Value Measurement (Topic 820) Amendments to Achieve Common Fair Value Measurement and
Disclosure Requirements in U.S. GAAP and IFRSs. This ASU is not expected to have material impact on U.S. GAAP as the amendment represents the converged guidance of the FASB and the IASB on fair value measurement, and results in greater comparability
of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRSs. The amendments in this Update are required to be applied prospectively, and are effective for interim and annual periods
beginning after December 15, 2011, with earlier application not permitted. As the ASU does not require additional fair value measurements and is not intended to establish valuation standards or affect valuation practices outside of financial
reporting, we do not expect this amendment to have a material impact on our consolidated financial statements.

In June 2011,
the FASB issued ASU 2011-5 Comprehensive Income (Topic 220) Presentation of Comprehensive Income. The amendment changes how other comprehensive income (OCI) is presented including the presentation requirements for reclassification adjustments
of items out of accumulated other comprehensive income which is superseded by ASU 2011-12. Instead of being included in the statement of owners equity, the items classified as OCI will be moved to the page in the financial statements that
includes the income statement. This ASU does not change what would be classified as OCI but addresses how to present OCI either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both options,
the entity will be required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. The
amendments in this Update should be applied retrospectively, and are effective for fiscal years and interim periods beginning after December 15, 2011. We are currently evaluating the potential impact, if any, that the adoption of ASU 2011-5
will have on our consolidated financial statements.

In September 2011, the FASB issued ASU 2011-8
IntangiblesGoodwill and Other (Topic 350) Testing Goodwill for Impairment. The standard is intended to reduce the cost and complexity of the annual goodwill impairment test with the option of performing a qualitative
assessment to determine whether further impairment testing is necessary. If entities determine, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, the two-step
impairment test would be required. The ASU does not change how goodwill is calculated or assigned to reporting units, nor does it revise the requirement to test goodwill annually for impairment. The amendments are effective for annual and interim
goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and



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interim goodwill impairment tests performed as of a date before September 15, 2011, if an entitys financial statements for the most recent annual or interim period have not yet been
issued or, for nonpublic entities, have not yet been made available for issuance. This standard is not expected to have a material impact on our consolidated financial statements in the near future.

In December 2011, the FASB issued ASU 2011-11 Balance Sheet (Topic 210) Disclosures about Offsetting Assets and Liabilities. The
new requirement is about disclosure of the nature of an entitys rights of setoff and related arrangements associated with its financial instruments and derivative instruments. The Update are designed to make financial statements that are
prepared under U.S. GAAP more comparable to those prepared under IFRSs. The ASU is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods, with retrospective application
required. This standard is not expected to have a material impact on our future consolidated financial statements.



|C. | Research, Development, Patents and Licenses, Etc.
|-- | -------------------------------------------------

The semiconductor industry is characterized by rapid changes in technology, frequently resulting in obsolescence of process technologies and products. As a result, effective research and development is
essential to our success. We invested approximately NT$8,044 million, NT$8,740 million and NT$9,395 million (US$310 million) in 2009, 2010 and 2011, respectively, in research and development, which represented 8.8%, 6.9% and 8.0%, respectively, of
net operating revenues for such years. We believe that our continuous spending on research and development will help us maintain our position as a technological leader in the foundry industry. As of March 31, 2012, we employed 988 professionals
in our research and development division.

Our current research and development activities seek to upgrade and integrate
manufacturing technologies and processes, as well as to develop 28 nanometer technology, including HK/MG (high-K/metal gate), and advanced device technologies, including FinFET, 3D device and FD-SOI (fully depleted Silicon on Insulator). Although we
emphasize firm-wide participation in the research and development process, we maintain central research and development teams primarily responsible for developing cost-effective technologies that can serve the manufacturing needs of our customers.
Monetary incentives are provided to our employees if projects result in successful patents. We believe we have a strong foundation in research and development and intend to continue our efforts on technology developments. Our top management believes
in the value of continued support of research and development efforts and intends to continue our foundry leadership position by providing customers with comprehensive technology and SoC solutions in the industry.



|D. | Trend Information
|-- | -----------------

Please
refer to Item 5. Operating and Financial Review and ProspectsOverview for a discussion of the most significant recent trends in our production, sales, costs and selling prices. In addition, please refer to discussions included in
this Item for a discussion of known trends, uncertainties, demands, commitments and events that we believe are reasonably likely to have a material effect on our net operating revenues, income from continuing operations, profitability, liquidity or
capital resources, or that would cause reported financial information not necessarily to be indicative of future operating results or financial condition.



|E. | Off-balance Sheet Arrangements
|-- | ------------------------------

We do not generally provide letters of credit to, or guarantees for, or engage in any repurchase financing transactions with any entity other than our consolidated subsidiaries. We have, from time to
time, entered into foreign currency forward contracts to hedge our existing assets and liabilities denominated in foreign currencies and identifiable foreign currency purchase commitments. We do not engage in any speculative activities using
derivative instruments. See Item 11. Quantitative and Qualitative Disclosure about Market Risk.



|F. | Tabular Disclosure of Contractual Obligations
|-- | ---------------------------------------------

The following table sets forth our contractual obligations and commitments with definitive payment terms on a consolidated basis which will require significant cash outlays in the future as of
December 31, 2011.



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|                                   |  |                                  |        |  |                  |  |       |           |  |  |           |  |  |                |        |  |  |  |       | 
|---------------------------------- |  | -------------------------------- | ------ |  | ---------------- |  | ----- | --------- |  |  | --------- |  |  | -------------- | ------ |  |  |  | ----- | 
|                                   |  | Payments Due by Period           |       
|                                   |  | Total                            |        |  | Less than 
1Year |  |       | 1-3 Years |  |  | 4-5 Years |  |  | After 
5-Years |       
|                                   |  | (consolidated) (in NT$ millions) |       
|Long-term debt(1)                  |  |                                  |        |  |                  |  |       |           |  |  |           |  |  |                |        |  |  |  |       | 
|Unsecured bonds                    |  |                                  | 18,546 |  |                  |  |      |           |  |  | 6,125     |  |  |                | 12,421 |  |  |  |      | 
|Long-term loans                    |  |                                  | 11,701 |  |                  |  | 2,582 |           |  |  | 5,469     |  |  |                | 3,650  |  |  |  |      | 
|Operating lease obligations(2)     |  |                                  | 3,055  |  |                  |  | 393   |           |  |  | 659       |  |  |                | 588    |  |  |  | 1,415 | 
|Purchase obligations(3)            |  |                                  | 411    |  |                  |  | 107   |           |  |  | 304       |  |  |                |       |  |  |  |      | 
|Other long-term obligations(4)     |  |                                  | 2,813  |  |                  |  | 2,462 |           |  |  | 265       |  |  |                |       |  |  |  | 86    | 
|                                   |  |                                  |        |  |                  |  |       |           |  |  |           |  |  |                |        |  |  |  |       | 
|Total contractual cash obligations |  |                                  | 36,526 |  |                  |  | 5,544 |           |  |  | 12,822    |  |  |                | 16,659 |  |  |  | 1,501 | 
|                                   |  |                                  |        |  |                  |  |       |           |  |  |           |  |  |                |        |  |  |  |       | 



|(1) | Assuming the exchangeable bonds and convertible bonds are paid off upon maturity.
|--- | ---------------------------------------------------------------------------------

|(2) | Represents our obligations to make lease payments to use machineries, equipments and land on which our fabs are located, primarily in the Hsinchu Science Park and the
Tainan Science Park in Taiwan, Pasir Ris Wafer Fab Park in Singapore and UMCJ.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Represents commitments for purchase of raw materials. These commitments are not recorded on our balance sheet as of December 31, 2011.
|--- | --------------------------------------------------------------------------------------------------------------------------------------

|(4) | Represents intellectual properties and royalties payable under our technology license agreements. The amounts of payments due under these agreements are determined
based on fixed contract amounts.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
|------- | ------------------------------------------



|A. | Directors and Senior Management
|-- | -------------------------------

The following table sets forth the name, age, position, tenure and biography of each of our directors and executives as of March 31, 2012. There is no family relationship among any of these persons.

In the stockholders meeting held on June 10, 2009, our stockholders elected nine new directors, Stan Hung,
Wen-Yang Chen, Ting-Yu Lin, Po-Wen Yen, Shih-Wei Sun, Paul S.C. Hsu, Chung-Laung Liu, Chun-Yen Chang and Cheng-Li Huang. The newly elected directors took their offices on June 10, 2009. The business address of our directors and executive
officers is the same as our registered address.



|                   |  |     |  |                                                                                           |  |              
|------------------ |  | --- |  | ----------------------------------------------------------------------------------------- |  | -------------
|Name               |  | Age |  | Position                                                                                  |  | Years with Us
|Stan Hung          |  | 51  |  | Chairman and Director                                                                     |  | 20           
|Shih-Wei Sun       |  | 54  |  | Director (Representative of Silicon Integrated Systems Corp.) and Chief Executive Officer |  | 17           
|Wen-Yang Chen      |  | 59  |  | Director (Representative of Hsun Chieh Investment Co.) and Chief Operating Officer        |  | 32           
|Po-Wen Yen         |  | 55  |  | Director (Representative of Hsun Chieh Investment Co.) and Senior Vice President          |  | 25           
|Ting-Yu Lin        |  | 51  |  | Director                                                                                  |  | 6            
|Paul S.C. Hsu(1)   |  | 76  |  | Independent Director                                                                      |  | 8            
|Chung-Laung Liu(1) |  | 78  |  | Independent Director                                                                      |  | 6            
|Chun-Yen Chang(1)  |  | 75  |  | Independent Director                                                                      |  | 6            
|Cheng-Li Huang(1)  |  | 63  |  | Independent Director                                                                      |  | 3            
|Chitung Liu        |  | 46  |  | Chief Financial Officer                                                                   |  | 11           



|(1) | Member of the Audit Committee.
|--- | ------------------------------

Stan Hung is a director and the Chairman of our company. Mr. Hung was our CFO & Senior Vice President from 2000 to
2007. He was also the Chairman of Epitech Technology Corporation in 2007 and ITE Technology Corporation for a portion of 2008, respectively. Prior to joining United Microelectronics Corporation in 1991, Mr. Hung was a financial manager at
Optoelectronics Corporation. He is also the Chairman of Fortune Venture Capital Corporation, TLC Capital Co., Nexpower Technology Corporation, UMC New Business Investment Corporation, Crystalwise Technology Inc., and a Director of Epistar
Corporation. Mr. Hung received a bachelors degree in accounting from Tam Kang University in 1982.



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Shih-Wei Sun is a director and the Chief Executive Officer of our company.
Dr. Sun is a representative of Silicon Integrated Systems Corp. Dr. Sun joined us in 1995 and has been responsible for the operation of our Fabs 6A, 8A, 8D and 12A, along with Central Research & Development. Prior to joining us,
Dr. Sun worked for Motorola in the Advanced Products Research and Development Laboratory for ten years. Dr. Sun is also a director of Fortune Venture Capital Corporation, TLC Capital Co., Nexpower Technology Corporation, UMC New Business
Investment Corporation. Dr. Sun holds a Ph.D. degree in electronics materials from Northwestern University in 1986.

Wen-Yang Chen is a director of our company and currently serves as our Chief Operating Officer responsible for fab operations.
Mr. Chen is a representative of Hsun Chieh Investment Co. Prior to us, Mr. Chen worked for companies including Digital Equipment Corporation and Vishay. Mr. Chen joined us in 1980 and is responsible for the operation of our 6A, 8A,
8E, 8D and 8F Fabs, specializing in development and integration of semiconductor processes and factory management. Mr. Chen is also a director of Fortune Venture Capital Corporation, TLC Capital Co., and UMC New Business Investment Corporation.
Mr. Chen received Award of the Excellent Engineers from Chinese Institute of Engineers in 1994 and Manager Excellence Award in 2002.

Po-Wen Yen is a director of our company and currently serves as our senior vice president responsible for 12-inch operations. Mr. Yen is a representative of Hsun Chieh Investment Co.
Mr. Yen joined us in 1986 and was responsible for the operation of Fabs 8A and 8C. He also served as the vice president for UMC-SG, our 300mm operation in Singapore. He is also a director of Fortune Venture Capital Corporation, TLC Capital Co.,
and UMC New Business Investment Corporation. In 2003, Mr. Yen received the National Manager Excellence Award from Chinese Professional Management Association. Mr. Yen earned a bachelors degree in Chemical Engineering from National
Tsing Hua University and his masters degree in chemical engineering from National Taiwan University.

Ting-Yu Lin
is a director of our company. Mr. Lin is also the chairman of Sunrox International Inc. Mr. Lin received a masters degree in international finance from Meiji University in 1993.

Paul S.C. Hsu is an independent director of our company. Professor Hsu is a Chair Professor & University Professor of
Yuan-Ze University, Taiwan, and the Chairman of Social Ethics Association. Professor Hsu is an independent director of Faraday Technology Corporation and Gintech Energy Corporation and a supervisor of Far Eastern International Bank. Professor Hsu
received a Ph.D. degree in business administration from The University of Michigan in 1974.

Chung-Laung Liu is an
independent director of our company. Professor Liu is the William M.W. Mong Honorary Chair Professor of National Tsing Hua University, Taiwan. Professor Liu is also the Chairman of Dramexchange Corporation, a supervisor of MediaTek Incorporation, an
independent director of Mototech Inc., and Powerchip semiconductor Corp., as well as a director of Macronix International Co., Ltd. Professor Liu received a doctorate degree in science from Massachusetts Institute of Technology in 1962.

Chun-Yen Chang is an independent director of our company. Professor Chang is an academician of Academia Sinica and a chair
professor and president of National Chiao Tung University, Taiwan. Professor Chang is also an independent director of Himax Technologies, Inc. and BizLink Holding Inc. Professor Chang received a Ph.D. degree in electrical engineering from National
Chiao Tung University in 1970.

Cheng-Li Huang is an independent director of our company. Dr. Huang was a
professor of Tamkang University and served as its Comptroller. He was also the chief executive of Tamkang Accounting Education Foundation and the publisher of Journal of Contemporary Accounting. Professor Huang is also a supervisor of Win
Semiconductors Corp. Professor Huang received a Ph.D. degree in accounting from University of Warwick in 1999.

Chitung
Liu is the Chief Financial Officer of our company. Prior to joining our company in 2001, Mr. Liu was a managing director of UBS. Mr. Liu is also a director of Novatek Microelectronics Corp., Unimicron Corporation, UMC New Business
Investment Corporation as well as a supervisor of TLC Capital Co., Ltd. and Nexpower Technology Corp., Mr. Liu received an executive MBA degree from National Taiwan University in 2009.



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|B. | Compensation
|-- | ------------

The
aggregate compensation paid and benefits in kind granted to our directors in 2011 were approximately NT$12 million (US$0.41 million).The remuneration was out of our 2011 earnings distribution plan, and the distribution percentage for directors is
0.1%. See Item 10. Additional InformationB. Memorandum and Articles of AssociationDividends and Distributions. Some of the remuneration was paid to the legal entities which some of our directors represent. The aggregate
compensation paid and benefits in kind granted to our executive officers in 2011 were approximately NT$161 million (US$5.32 million), which include NT$69 million as bonus. Certain of our directors who also served as executive officers held stock
options to purchase 12.6 million shares as of March 31, 2012.



|C. | Board Practices
|-- | ---------------

All of
our directors were elected in June 2009 for a term of three years. Neither we nor any of our subsidiaries has entered into a contract with any of our directors by which our directors are expected to receive benefits upon termination of their
employment.

Our board of directors established an audit committee in March 2005. In the annual ordinary stockholders
meeting held on June 13, 2008, we amended our articles of incorporation to introduce the mechanism of an R.O.C. Audit Committee. See Item 10. Additional Information  B. Memorandum and Articles of Association  Directors.
After the re-election of directors in the stockholders meeting on June 10, 2009, our board of directors appointed Paul S.C. Hsu, Chung-Laung Liu, Chun-Yen Chang and Cheng-Li Huang to be the members of the audit committee. Each audit
committee member is an independent director who is financially literate with accounting or related financial management expertise. The audit committee meets as often as it deems necessary to carry out its responsibilities. Pursuant to an audit
committee charter, the audit committee has responsibility for, among other things, overseeing the qualifications, independence and performance of our internal audit function and independent auditors, and overseeing the accounting policies and
financial reporting and disclosure practices of our company. The audit committee also has the authority to engage special legal, accounting or other consultants it deems necessary in the performance of its duties.

Remuneration Committee

The R.O.C. Securities and Exchange Act, as amended on November 24, 2010, further introduced the mechanism of a Remuneration
Committee, which requires all the publicly listed companies in the R.O.C., including our company, to adopt a remuneration committee. On March 18, 2011, R.O.C. FSC promulgated the Regulations Governing the Establishment and Exercise of
Powers by Compensation Committees of Public Companies, according to which, listing companies of our size shall set up the compensation committee no later than September 30, 2011 and the remuneration committee shall be composed of no less than
three members commissioned by the board of directors. In addition, for the company with independent directors, such as us, at least one of committee members shall be the independent director of such company. We established a remuneration committee
in accordance with Article 14-6 of the R.O.C. Securities and Exchange Act on April 27, 2011. The members of the remuneration committee are independent directors Chun-Yen Chang, Chung-Laung Liu, Paul S.C. Hsu, and Cheng-Li Huang, with Chun-Yen
Chang serving as convener and chairperson. We amended our articles of incorporation to introduce the mechanism of our remuneration committee in the annual ordinary stockholders meeting held on June 15, 2011.

In November 2003, the Securities and Exchange Commission approved changes to the NYSEs listing standards related to the corporate
governance practices of listed companies. Under these rules, listed foreign private issuers, like us, must disclose any significant ways in which their corporate governance practices differ from those followed by NYSE-listed U.S. domestic companies
under the NYSEs listing standards. A copy of the significant differences between our corporate governance practices and NYSE corporate governance rules applicable to U.S. companies is available on our website
http://www.umc.com/english/investors/Corp_gov_difference.asp.



|D. | Employees
|-- | ---------

As of
March 31, 2012, we had 13,326 employees, which included 7,523 engineers, 5,348 technicians and 455 administrative staffs performing administrative functions in Taiwan and our Singapore branch. We have in the past implemented, and may in the
future evaluate the need to implement, labor redundancy plans based on the work performance of our employees.



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|                     |  |                    |        |  |      |  |        |      |  |  |        | 
|-------------------- |  | ------------------ | ------ |  | ---- |  | ------ | ---- |  |  | ------ | 
|                     |  | As of December 31, |       
|Employees            |  | 2009               |        |  | 2010 |  |        | 2011 | 
|Engineers            |  |                    | 6,579  |  |      |  | 7,365  |      |  |  | 7,581  | 
|Technicians          |  |                    | 5,290  |  |      |  | 5,835  |      |  |  | 5,456  | 
|Administrative Staff |  |                    | 465    |  |      |  | 471    |      |  |  | 462    | 
|                     |  |                    |        |  |      |  |        |      |  |  |        | 
|Total                |  |                    | 12,334 |  |      |  | 13,671 |      |  |  | 13,499 | 
|                     |  |                    |        |  |      |  |        |      |  |  |        | 

Employee salaries are reviewed annually. Salaries are adjusted based on industry standards, inflation and
individual performance. As an incentive, additional bonuses in cash may be paid at the discretion of management based on the performance of individuals. In addition, except under certain circumstances, R.O.C. law requires us to reserve from 10% to
15% of any offerings of our new shares for employees subscription.

Our employees participate in our profit distribution
pursuant to our articles of incorporation. Employees are entitled to receive additional bonuses based on a certain percentage of our allocable surplus income. On March 14, 2012, the board of directors proposed an employee bonus in cash in the
amount of NT$1,618 million (US$53 million) in relation to retained earnings in 2011.

In April 2009, we were fined NT$18,000
by the Science Park Administration for violating the Labor Standard Act in connection with having female employees work (i) between 10:00 p.m. and 6:00 a.m. and (ii) shifted hours beyond the regular eight working hours per day without
holding a proper labor-management conference in advance and failing to pay them overtime wages. Despite that the night shift schedule of our female employees and shifted working hours beyond the regular eight working hours per day had been approved
by the Science Park Administration and included in our employment contracts, we failed to hold a labor-management meeting to approve such in accordance with the amended Labor Standard Act and the administrative ruling of the Council of Labor
Affairs. In May 2009, we were also fined NT$12,000 by the Southern Taiwan Science Park Administration for similar violations. We did not object to such fines and have held labor-management meetings for all of our fabs to approve the night shift
schedule of our female employees and shifted working hours beyond the regular eight working hours per day in accordance with relevant labor regulations.

Our employees are not covered by any collective bargaining agreements. We believe we have a good relationship with our employees.



|E. | Share Ownership
|-- | ---------------

As of
March 31, 2012, each of our directors and executive officers held shares and/or ADSs of United Microelectronics, either directly for their own account or indirectly as the representative of another legal entity on our board of directors, except
for Chung-Laung Liu, Paul S.C. Hsu, Chun-Yen Chang and Cheng-Li Huang, our independent directors. As of March 31, 2012, none of our directors or executive officers held, for their own account, 0.1% or more of our outstanding shares. As of
April 14, 2012, our most recent record date, Hsun Chieh Investment Co. held approximately 441 million of our shares, representing approximately 3.4% of our issued shares.

We have an Employee Stock Options Plan, pursuant to which options may be granted to our full-time regular employees, including those of
our domestic and overseas subsidiaries. The exercise price for the options would be the closing price of our common shares on the Taiwan Stock Exchange on the day the options are granted, while the expiration date for such options is 6 years from
the date of its issuance. In September 2004, December 2005, October 2007 and May 2009, we obtained approvals from relevant R.O.C. authorities for the grant of up to 150 million, 350 million, 500 million and 500 million
stock options, respectively, to acquire our common shares under our Employee Stock Options Plan. In April 2005, August 2005, September 2005, January 2006, May 2006, August 2006, December 2007 and June 2009, we granted
23 million, 54 million, 52 million, 39 million, 42 million, 28 million, 500 million and 300 million stock options, respectively, to our employees, with an exercise price of 22.37, 29.47, 26.89, 23.17, 25.19,
24.09, 18.03 and 10.40, respectively. The 23 million stock options with exercise price of 22.37 that we granted in April 2005, the 54 million stock options with exercise price of 29.47 that we granted in August 2005, the 52 million
stock options with exercise price of 26.89 that we granted in September 2005, and the 39 million stock options with exercise price of 23.17 that we granted in January 2006, expired on April 28, 2011, August 15,
2011, September 28, 2011 and January 3, 2012, respectively.



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According to our Employee Stock Options Plan, an option holder may exercise an increasing
portion of his or her options starting two years after the grant of the options. According to the vesting schedule, 50%, 75% and 100% of such option holders options shall vest two, three and four years after the grant of the options,
respectively. Upon a voluntary termination or termination in accordance with the R.O.C. Labor Law, the option holder shall exercise his or her vested options within 30 days, subject to exceptions provided therein, and after the termination otherwise
such options shall terminate. If termination was due to death, the heirs of such option holder have one year starting from the date of the death to exercise his or her vested options. If termination was due to retirement or occupational casualty,
the option holder or his or her heirs may exercise all his or her options within a certain period as provided. The options are generally not transferable or pledgeable by the option holders. The total number of shares issuable upon exercise of
option held by our directors and executive officers as of March 31, 2012 was 21.2 million. The units granted to each of our directors and executive officers as a percentage of our total shares as of March 31, 2012 were less than 1%.



|ITEM 7. | MAJOR STOCKHOLDERS AND RELATED PARTY TRANSACTIONS
|------- | -------------------------------------------------



|A. | Major Stockholders
|-- | ------------------

The
following table sets forth information known to us with respect to the beneficial ownership of our shares as of (i) April 14, 2012, our most recent record date and (ii) as of certain record dates in each of the preceding three years,
for (1) the stockholders known by us to beneficially own more than 2% of our shares and (2) all directors and executive officers as a group. Beneficial ownership is determined in accordance with Securities and Exchange Commission rules.



|                                                         |  |                                      |  |                                      |  |                                      |  |                                 
|-------------------------------------------------------- |  | ------------------------------------ |  | ------------------------------------ |  | ------------------------------------ |  | --------------------------------
|                                                         |  | As of April 12,2010                  |  | As of April 17,2011                  |  | As of
April 14,2012                 
|Name of Beneficial Owner                                 |  | Percentageof sharesbeneficiallyowned |  | Percentageof sharesbeneficiallyowned |  | Percentageof sharesbeneficiallyowned |  | Numberof sharesbeneficiallyowned
|Hsun Chieh Investment Co., Ltd.(1)                       |  | 3.4%                                 |  | 3.4%                                 |  | 3.4%                                 |  | 441,371,000                     
|Silicon Integrated Systems Corp.                         |  | 2.4%                                 |  | 2.4%                                 |  | 2.4%                                 |  | 315,380,424                     
|Directors, supervisors and executive officers as a group |  | 6.2%                                 |  | 6.22%                                |  | 6.26%                                |  | 809,808,031                     



|(1) | 36.5% owned by United Microelectronics Corp. as of March 31, 2012.
|--- | ------------------------------------------------------------------

None of our major stockholders have different voting rights from those of our other stockholders. To the best of our knowledge, we are not directly or indirectly controlled by another corporation, by any
foreign government or by any other natural or legal person severally or jointly.

For information regarding our shares held or
beneficially owned by persons in the United States, see Item 9. The Offer and ListingA. Offer and Listing DetailsMarket Price Information for Our American Depositary Shares in this annual report.



|B. | Related Party Transactions
|-- | --------------------------

From time to time we have engaged in a variety of transactions with our affiliates. We generally conduct transactions with our affiliates
on an arms-length basis. The sales and purchase prices with related parties are determined through negotiation, generally based on market price.

The following table shows our aggregate ownership interest, on a consolidated basis, in major related fabless design companies that we enter into transactions from time to time as of December 31,
2011.



|                                 |  |             |       | 
|-------------------------------- |  | ----------- | ----- | 
|Name                             |  | Ownership % |      
|AMIC Technology (Taiwan), Inc.   |  |             | 18.77 | 
|Silicon Integrated Systems Corp. |  |             | 18.38 | 



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We provide foundry services to these fabless design companies on arms-length prices
and terms. We derived NT$1,141 million, NT$791 million and NT$237 million (US$8 million) of our net operating revenues in 2009, 2010 and 2011, from the provision of our foundry services to these fabless design companies.



|C. | Interests of Experts and Counsel
|-- | --------------------------------

Not applicable.



|ITEM 8. | FINANCIAL INFORMATION
|------- | ---------------------



|A. | Consolidated Statements and Other Financial Information
|-- | -------------------------------------------------------

Please refer to Item 18 for a list of all financial statements filed as part of this annual report on Form 20-F.

Except as described in Item 4. Information on the CompanyB. Business OverviewLitigation, we are not currently involved in material litigation or other proceedings that may have, or
have had in the recent past, significant effects on our financial position or profitability.

As for our policy on dividend
distributions, see Item 10. Additional InformationB. Memorandum and Articles of AssociationDividends and Distributions. On June 10, 2009, our stockholders approved not to distribute any stock or cash dividends for 2009.
On June 15, 2010, our stockholders approved a cash dividend of NT$0.5 per share for an aggregate of NT$6,233,001,658. On June 15, 2011, our stockholders approved a cash dividend of NT$1.12 per share for an aggregate of NT$14,033,575,265.
On July 8, 2011, the Board of Directors resolved to adjust cash dividend ratio of NTD$1.11164840 per share, because the outstanding common shares had increased accordingly as a result of the exercise of employee stock options. On March 14,
2012, the board of directors proposed dividends of NT$ 6,316,434,833 (approximately NT$0.5 per share).

The following table
sets forth the cash dividends per share and stock dividends per share as a percentage of shares outstanding paid during each of the years indicated in respect of shares outstanding at the end of each such year, except as otherwise noted.



|     |  |                        |             |  |                         |  |            |                                               |  |  |                                       |  |  |  |                | 
|---- |  | ---------------------- | ----------- |  | ----------------------- |  | ---------- | --------------------------------------------- |  |  | ------------------------------------- |  |  |  | -------------- | 
|     |  | Cash Dividendper Share |             |  | Stock Dividendper
Share |  |            | Total Number ofShares Issued
asStock Dividend |  |  | Number ofOutstandingSharesat Year End | 
|     |  | NT$                    |             |  | NT$                     |  |            |                                               |  |  |                                       | 
|1997 |  |                        |            |  |                         |  | 3.0        |                                               |  |  | 868,629,276                           |  |  |  | 4,117,758,265  | 
|1998 |  |                        |            |  |                         |  | 2.9        |                                               |  |  | 1,199,052,940                         |  |  |  | 5,480,221,725  | 
|1999 |  |                        |            |  |                         |  | 1.5        |                                               |  |  | 834,140,790                           |  |  |  | 6,638,054,462  | 
|2000 |  |                        |            |  |                         |  | 2.0        |                                               |  |  | 1,809,853,716                         |  |  |  | 11,439,016,900 | 
|2001 |  |                        |            |  |                         |  | 1.5        |                                               |  |  | 1,715,104,035                         |  |  |  | 13,169,235,416 | 
|2002 |  |                        |            |  |                         |  | 1.5        |                                               |  |  | 1,968,018,212                         |  |  |  | 15,238,578,646 | 
|2003 |  |                        |            |  |                         |  | 0.4        |                                               |  |  | 607,925,145                           |  |  |  | 15,941,901,463 | 
|2004 |  |                        |            |  |                         |  | 0.8        |                                               |  |  | 1,288,558,185                         |  |  |  | 17,550,800,859 | 
|2005 |  |                        | 0.1029      |  |                         |  | 1.029      |                                               |  |  | 1,758,736,435                         |  |  |  | 18,856,632,324 | 
|2006 |  |                        | 0.409141420 |  |                         |  | 0.10228530 |                                               |  |  | 179,031,672                           |  |  |  | 19,131,192,690 | 
|2007 |  |                        | 0.7         |  |                         |  |           |                                               |  |  |                                      |  |  |  | 13,214,494,883 | 
|2008 |  |                        | 0.75        |  |                         |  | 0.45       |                                               |  |  | 562,958,816                           |  |  |  | 12,987,771,315 | 
|2009 |  |                        |            |  |                         |  |           |                                               |  |  |                                      |  |  |  | 12,987,771,315 | 
|2010 |  |                        | 0.5         |  |                         |  |           |                                               |  |  |                                      |  |  |  | 12,987,912,315 | 
|2011 |  |                        | 1.11164840  |  |                         |  |           |                                               |  |  |                                      |  |  |  | 13,084,341,565 | 



|(1) | We declare stock dividends in a NT dollar amount per share, but we pay the stock dividends to our stockholders in the form of shares. The amount of shares distributed
to each stockholder is calculated by multiplying the dividend declared by the number of shares held by the given stockholder, divided by the par value of NT$10 per share. Fractional shares are not issued but are paid in cash.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|B. | Significant Changes
|-- | -------------------

For
the significant subsequent events following the close of the last financial year up to the date of this annual report on Form 20-F, please refer to Note 30 to the consolidated financial statements.

Our consolidated net operating revenues for the three months ended March 31, 2012 was NT$26,269 million (US$868 million). Our
consolidated net operating revenues for the three months ended March 31, 2012 are not indicative of the results that may be expected for any subsequent period.



|ITEM 9. | THE OFFER AND LISTING
|------- | ---------------------



|A. | Offer and Listing Details
|-- | -------------------------

Market Price Information for Our Shares

Our shares have been listed on the
Taiwan Stock Exchange since July 1985. There is no public market outside Taiwan for our shares. The table below shows, for the periods indicated, the high and low closing prices and the average daily volume of trading activity on the Taiwan Stock
Exchange for our shares. The closing price for our shares on the Taiwan Stock Exchange on April 23, 2012 was NT$15.05 per share.



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|                                  |  |                             |       |  |                             |  |       |                         |  |  |           | 
|--------------------------------- |  | --------------------------- | ----- |  | --------------------------- |  | ----- | ----------------------- |  |  | --------- | 
|                                  |  | Closing Price Per 
Share(1) |       |  | Average 
DailyTradingVolume | 
|                                  |  | High                        |       |  | Low                         |  |      
|                                  |  | NT$                         |       |  | NT$                         |  |       | (in thousands ofshares) | 
|2007                              |  |                             | 23.45 |  |                             |  | 17.15 |                         |  |  | 53,166.86 | 
|2008                              |  |                             | 20.30 |  |                             |  | 6.80  |                         |  |  | 37,521.00 | 
|2009                              |  |                             | 17.20 |  |                             |  | 7.10  |                         |  |  | 85,869.55 | 
|2010                              |  |                             | 18.6  |  |                             |  | 12.95 |                         |  |  | 53,660.37 | 
|First Quarter                     |  |                             | 18.6  |  |                             |  | 15.45 |                         |  |  | 61,199.41 | 
|Second Quarter                    |  |                             | 17.2  |  |                             |  | 13.8  |                         |  |  | 44,109.17 | 
|Third Quarter                     |  |                             | 14.85 |  |                             |  | 12.95 |                         |  |  | 41,111.93 | 
|Fourth Quarter                    |  |                             | 16.7  |  |                             |  | 13.3  |                         |  |  | 68,624.75 | 
|2011                              |  |                             | 18.10 |  |                             |  | 10.45 |                         |  |  | 44,048.44 | 
|First Quarter                     |  |                             | 18.10 |  |                             |  | 14.10 |                         |  |  | 70,662.07 | 
|Second Quarter                    |  |                             | 15.6  |  |                             |  | 13.95 |                         |  |  | 37,160.89 | 
|Third Quarter                     |  |                             | 14.45 |  |                             |  | 10.45 |                         |  |  | 43,958.27 | 
|Fourth Quarter                    |  |                             | 13.35 |  |                             |  | 11.3  |                         |  |  | 27,100.94 | 
|October                           |  |                             | 13.35 |  |                             |  | 11.3  |                         |  |  | 31,067.16 | 
|November                          |  |                             | 13.15 |  |                             |  | 11.9  |                         |  |  | 27,371.33 | 
|December                          |  |                             | 13.25 |  |                             |  | 11.75 |                         |  |  | 22,936.91 | 
|2012 (through April 23)           |  |                             | 15.65 |  |                             |  | 12.60 |                         |  |  | 40,492.66 | 
|First Quarter                     |  |                             | 15.65 |  |                             |  | 12.60 |                         |  |  | 43,434.55 | 
|January                           |  |                             | 15.50 |  |                             |  | 12.60 |                         |  |  | 54,420.27 | 
|February                          |  |                             | 15.55 |  |                             |  | 14.75 |                         |  |  | 46,483.12 | 
|March                             |  |                             | 15.65 |  |                             |  | 14.45 |                         |  |  | 33,619.02 | 
|Second Quarter (through April 23) |  |                             | 15.05 |  |                             |  | 13.85 |                         |  |  | 29,117.34 | 
|April (through April 23)          |  |                             | 15.05 |  |                             |  | 13.85 |                         |  |  | 29,117.34 | 



Source:
Taiwan Stock Exchange.



|(1) | Information has been adjusted to give effect to NT$12,461,529,283 and NT$2,324,119,405 issued as cash dividend and cash employee bonus, respectively, in August 2007;
562,958,816 Shares and 114,616,567 Shares issued as stock dividend and employee bonus, respectively, in August 2008.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Market
Price Information for Our American Depositary Shares

Our ADSs have been listed on the NYSE under the symbol
UMC since September 19, 2000. The outstanding ADSs are identified by the CUSIP number 910873 40 5. The table below shows, for the periods indicated, the high and low closing prices and the average daily volume of trading activity on the
NYSE for our ADSs. The closing price for our ADSs on the New York Stock Exchange on April 23, 2012 was US$2.53 per ADS. Each of our ADSs represents the right to receive five shares.



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|                                  |  |                        |      |  |                                 |  |      |  |  |  |           | 
|--------------------------------- |  | ---------------------- | ---- |  | ------------------------------- |  | ---- |  |  |  | --------- | 
|                                  |  | Closing Price Per 
ADS |      |  | Average 
ADSDailyTrading Volume | 
|                                  |  | High                   |      |  | Low                             |  |     
|                                  |  | US$                    |      |  | US$                             |  |      |  | 
|2007                              |  |                        | 4.48 |  |                                 |  | 2.93 |  |  |  | 6,542,543 | 
|2008                              |  |                        | 3.71 |  |                                 |  | 1.51 |  |  |  | 5,780,890 | 
|2009                              |  |                        | 3.88 |  |                                 |  | 1.65 |  |  |  | 5,106,249 | 
|2010                              |  |                        | 4.22 |  |                                 |  | 2.55 |  |  |  | 3,932,515 | 
|First Quarter                     |  |                        | 4.22 |  |                                 |  | 3.34 |  |  |  | 5,847,433 | 
|Second Quarter                    |  |                        | 3.89 |  |                                 |  | 2.87 |  |  |  | 4,407,877 | 
|Third Quarter                     |  |                        | 3.21 |  |                                 |  | 2.55 |  |  |  | 2,944,113 | 
|Fourth Quarter                    |  |                        | 3.28 |  |                                 |  | 2.6  |  |  |  | 2,627,825 | 
|2011                              |  |                        | 3.46 |  |                                 |  | 1.79 |  |  |  | 3,454,527 | 
|First Quarter                     |  |                        | 3.46 |  |                                 |  | 2.50 |  |  |  | 4,156,134 | 
|Second Quarter                    |  |                        | 2.84 |  |                                 |  | 2.46 |  |  |  | 3,632,388 | 
|Third Quarter                     |  |                        | 2.56 |  |                                 |  | 1.79 |  |  |  | 3,540,807 | 
|Fourth Quarter                    |  |                        | 2.35 |  |                                 |  | 1.85 |  |  |  | 2,498,545 | 
|October                           |  |                        | 2.35 |  |                                 |  | 1.85 |  |  |  | 3,125,037 | 
|November                          |  |                        | 2.29 |  |                                 |  | 1.99 |  |  |  | 2,381,187 | 
|December                          |  |                        | 2.24 |  |                                 |  | 1.95 |  |  |  | 1,989,412 | 
|2012 (through April 23)           |  |                        | 2.72 |  |                                 |  | 2.14 |  |  |  | 3,180,841 | 
|First Quarter                     |  |                        | 2.72 |  |                                 |  | 2.14 |  |  |  | 3,363,260 | 
|January                           |  |                        | 2.71 |  |                                 |  | 2.14 |  |  |  | 3,457,401 | 
|February                          |  |                        | 2.72 |  |                                 |  | 2.57 |  |  |  | 3,593,642 | 
|March                             |  |                        | 2.72 |  |                                 |  | 2.45 |  |  |  | 3,068,239 | 
|Second Quarter (through April 23) |  |                        | 2.53 |  |                                 |  | 2.43 |  |  |  | 2,426,844 | 
|April (through April 23)          |  |                        | 2.53 |  |                                 |  | 2.43 |  |  |  | 2,426,844 | 



Sources: Bloomberg

As of March
31, 2012, there were a total of 229,568,376 ADSs listed on the NYSE. With certain limited exceptions, holders of shares that are not R.O.C. persons are required to hold these shares through a brokerage or custodial account in the R.O.C. As of March
31, 2012, 1,147,841,880 ordinary shares were registered in the name of a nominee of JPMorgan Chase & Co., the depositary under the deposit agreement. JPMorgan Chase & Co. has advised us that, as of March 31, 2012, 229,356,205 ADSs
representing these 1,146,781,025 shares were held of record by Cede & Co., and 212,171 ADSs were held by U.S. registered stockholders. We have no further information as to shares held or beneficially owned by U.S. persons.



|B. | Plan of Distribution
|-- | --------------------

Not
applicable.



|C. | Markets
|-- | -------

The principal
trading markets for our shares are the Taiwan Stock Exchange and the New York Stock Exchange, on which our shares trade in the form of ADSs.



|D. | Selling Stockholders
|-- | --------------------

Not
applicable.



|E. | Dilution
|-- | --------

Not applicable.



|F. | Expenses of the Issue
|-- | ---------------------

Not applicable.



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|ITEM 10. | ADDITIONAL INFORMATION
|-------- | ----------------------



|A. | Share Capital
|-- | -------------

Not
applicable.



|B. | Memorandum and Articles of Association
|-- | --------------------------------------

The following statements summarize the material elements of our capital structure and the more important rights and privileges of stockholders conferred by R.O.C. law and our articles of incorporation.

Objects and Purpose

The scope of business of United Microelectronics as set forth in Article 2 of our articles of incorporation, includes (i) integrated circuits; (ii) semiconductor parts and components;
(iii) parts and components of microcomputers, microprocessors, peripheral support and system products; (iv) parts and components of semiconductor memory systems products; (v) semiconductor parts and components for digital transceiver
product and system products; (vi) semiconductor parts and components for telecom system and system products; (vii) testing and packaging of integrated circuits; (viii) mask production; (ix) research and development, design,
production, sales, promotion and after-sale services related to our business; and (x) export/import trade related to our business.

Directors

The R.O.C.
Company Act and our articles of incorporation provide that our board of directors is elected by stockholders and is responsible for the management of our business. As of March 31, 2012, our board of directors consisted of nine directors, out of
which four are independent directors. In the annual ordinary stockholders meeting held on June 11, 2007, we amended our articles of incorporation to abolish the managing director mechanism. In the annual ordinary stockholders
meeting held on June 13, 2008, we amended our articles of incorporation to introduce the mechanism of an R.O.C. Audit Committee. The Chairman presides at all meetings of our board of directors, and also has the authority to represent our
company. The term of office for our directors is three years, and our directors are elected by our stockholders by means of cumulative voting. The amendment to our articles of incorporation on June 11, 2007 also adopts a nomination system which
provides that holders of one percent or more of the total issued and outstanding shares of our company would be entitled to submit a roster of candidates to be considered for nomination to our companys board of directors at a
stockholders meeting involving the election of directors. Pursuant to the R.O.C. Company Act, a person may serve as our director in his or her personal capacity or as the representative of another legal entity. A legal entity that owns our
shares may be elected as a director, in which case a natural person must be designated to act as the legal entitys representative. A legal entity that is our stockholder may designate its representative to be elected as our director on its
behalf. In the event several representatives are designated by the same legal entity, any or all of them may be elected. A director who serves as the representative of a legal entity may be removed or replaced at any time at the discretion of such
legal entity, and the replacement director may serve the remainder of the term of office of the replaced director. The R.O.C. FSC granted an exemption from this restriction if the terms of such representatives began prior to January 1, 2007. As
of March 31, 2012, three of our nine directors are representatives of other legal entities, as shown in Item 6. Directors, Senior Management and Employees  A. Directors and Senior Management.

According to the Company Act, a director who has a personal interest in a matter to be discussed at the meeting of the board of
directors, the outcome of which may conflict with his interests, shall explain the essential contents of such personal interest in the meeting of the board of directors and then abstain from voting on such matter. Our articles of incorporation, as
amended on June 13, 2008, provide that the board of directors is authorized, by taking into account of the extent of his/her/its involvement of our operation activities and the value of his/her/its contribution, to determine the compensation
for each director at a comparable rate adopted by other companies of the same industry regardless of the profit received by our company. In addition, according to our articles of incorporation, we may distribute 0.1% of the balance of our earnings
after deduction of payment of all taxes and dues, deduction of any past losses and allocation of 10% of our net income as a legal reserve as remuneration to directors. Our articles of incorporation do not impose a mandatory retirement age limit for
our directors. Furthermore, our articles of incorporation do not impose a shareholding qualification for each director. According to our current internal Loan Procedures, as amended in our annual stockholders meeting held in June 15,
2010, we shall not extend any loan to our directors.



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In order to strengthen corporate governance of companies in Taiwan, effective from
January 1, 2007, the amended R.O.C. Securities and Exchange Act authorizes the R.O.C. FSC, after considering certain factors, including the scale, shareholding structure and business nature of a public company, to require that a public company,
such as our company, meet certain criteria, including having at least two independent directors but not less than one fifth of the total number of directors. The amended R.O.C. Securities and Exchange Act grants those public companies a grace period
until the expiry of the terms of the incumbent directors who took their office prior to January 1, 2007.

In addition,
pursuant to the amended R.O.C. Securities and Exchange Act, a public company is required to either establish an audit committee, or R.O.C. Audit Committee, or retain supervisors, provided that the R.O.C. FSC may, after considering the scale and
business nature of a public company and other necessary situation, require the company to establish an audit committee in place of its supervisors. Currently, the R.O.C. FSC has not promulgated such compulsory rules, and all public companies may, at
their discretion, retain either an R.O.C. Audit Committee or supervisors. We amended our articles of incorporation in the annual ordinary stockholders meeting held on June 13, 2008, introducing the mechanism of an R.O.C. Audit Committee.
According to our latest amended articles of incorporation, our R.O.C. Audit Committee is composed of all independent directors and performs the duties of supervisors provided under the R.O.C. Company Act. We held the election for all of the
directors and independent directors in the annual ordinary stockholders meeting held in June 2009. As a company is not allowed to maintain both supervisors and a R.O.C. Audit Committee, immediately upon the inauguration of the first term of
the R.O.C. Audit Committee, we no longer retain the supervisors.

According to our articles of incorporation, as amended on
June 13, 2008, we may purchase directors and officers liability insurance for our directors, covering the liabilities incurred in relation to his/her/its operation of business and legally responsible for.

Shares

As of
December 31, 2011, our authorized share capital was NT$260 billion, divided into 26 billion shares, of which 13,084,455,565 shares were issued and 13,084,455,565 shares were outstanding (including 114,000 shares of Capital collected in
advance). All shares presently issued are fully paid and in registered form, and existing stockholders are not subject to any capital calls. We had US$ 436 million convertible bonds outstanding as of March 31, 2012. As of March 31,
2012, we had neither warrant nor option on our shares, except for the options exercisable for 522.1 million common shares we granted to our employees under our Employee Stock Options Plan discussed below.

Employee Stock Option

According to our Employee Stock Options Plan, options may be granted to our full-time regular employees, including those of our domestic
and overseas subsidiaries. In October 2003, September 2004, December 2005, October 2007 and June 2009, we obtained approval by relevant R.O.C. authorities to grant up to 1 billion, 150 million, 150 million, 350 million,
500 million and 500 million stock options, respectively, to acquire our common shares under our Employee Stock Option Plan. According to the plan, an option holder may exercise an increasing portion of his or her options in time starting
two years after the grant of the options. According to the vesting schedule, 50%, 75% and 100% of such option holders options shall vest two, three and four years after the grant of the options, respectively.



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The table below shows the number of options granted and outstanding and the month in which
they were granted:



|                                                        |  |               |      |  |            |  |     |               |  |  |             |  |  |  |       | 
|------------------------------------------------------- |  | ------------- | ---- |  | ---------- |  | --- | ------------- |  |  | ----------- |  |  |  | ----- | 
|                                                        |  | April2005     |      |  | August2005 |  |     | September2005 |  |  | January2006 | 
|                                                        |  | (in millions) |     
|Number of Options Granted                               |  |               | 23   |  |            |  | 54  |               |  |  | 52          |  |  |  | 39    | 
|Number of Options Outstanding as of March 31, 2012      |  |               |     |  |            |  |    |               |  |  |            |  |  |  |      | 
|Shares available to option holders as of March 31, 2012 |  |               |     |  |            |  |    |               |  |  |            |  |  |  |      | 
|                                                        |  |               |      | 
|                                                        |  | May2006       |      |  | August2006 |  |     | December2007  |  |  | June2009    | 
|                                                        |  | (in millions) |     
|Number of Options Granted                               |  |               | 42   |  |            |  | 28  |               |  |  | 500         |  |  |  | 300   | 
|Number of Options Outstanding as of March 31, 2012      |  |               | 13.2 |  |            |  | 7.3 |               |  |  | 350.0       |  |  |  | 151.6 | 
|Shares available to option holders as of March 31, 2012 |  |               | 13.2 |  |            |  | 7.3 |               |  |  | 350.0       |  |  |  | 151.6 | 



|Note: | The employee stock options granted prior to August 7, 2007, the effective date of capital reduction, were adjusted in accordance with capital reduction rate. Each
option unit entitles an optionee to subscribe for about 0.7 share of the Companys common stock. The exercise price of the options was also adjusted according to the capital reduction rate. Each stock option unit granted after August 7,
2007 remains to be subscribed for one share of the Companys common stock.
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

New Shares and Preemptive Rights

New shares may only be issued with the prior approval of our board of directors. If our issuance of any new shares will
result in any change in our authorized share capital, we are required under R.O.C. law to amend our articles of incorporation and obtain approval of our stockholders in a stockholders meeting. We must also obtain the approval of, or submit a
registration with, the R.O.C. FSC and the Science Park Administration. According to the R.O.C. Company Act, when a company issues capital stock for cash, 10% to 15% of the issue must be offered to its employees. In addition, if a listed company
intends to offer new shares for cash, at least 10% of the issue must also be offered to the public. This percentage can be increased by a resolution passed at a stockholders meeting, which will reduce the number of new shares in which existing
stockholders may have preemptive rights. Unless the percentage of the shares offered to the public is increased by a resolution, existing stockholders of the company have a preemptive right to acquire the remaining 75% to 80% of the issue in
proportion to their existing shareholdings. According to the Corporate Merger and Acquisition Act of the R.O.C., as effective on February 8, 2002, and amended on May 5, 2004, if new shares issued by our company are solely for the purpose
of acquisition, share swap or spin-off, the above-mentioned restrictions, including the employee stock ownership plan, the preemptive rights of the existing stockholders and the publicity requirement of a listed company, to such issuance of new
shares may not be applied.

Stockholders

We only recognize persons registered in our register as our stockholders. We may set a record date and close our register of stockholders for specified periods to determine which stockholders are entitled
to various rights pertaining to our shares.

Transfer of Shares

Under the R.O.C. Company Act, a public company, such as our company, may issue individual share certificates, one master certificate or no
certificate at all, to evidence common shares. Our articles of incorporation, as amended on June 13, 2008, provide that we may deliver shares in book-entry form instead of by means of issuing physical share certificates. We have issued our
shares in uncertificated/scripless form since 2007. Therefore, the transfer of our shares is carried out on the book-entry system. The settlement of trading of our shares is normally carried out on the book-entry system maintained by the Taiwan
Depositary and Clearing Corporation. Transferees must have their names and addresses registered on our register in order to assert stockholders rights against us. Our stockholders are required to file their respective specimen seals with our
share registrar, Horizon Securities Co., Ltd.



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Stockholders Meetings

We are required to hold an annual ordinary stockholders meeting once every calendar year within six months from the end of each fiscal year. Our board of directors may convene an extraordinary
meeting whenever the directors deem necessary, and they must do so if requested in writing by stockholders holding no less than 3% of our paid-in share capital who have held these shares for more than a year. At least 15 days advance written
notice must be given of every extraordinary stockholders meeting and at least 30 days advance written notice must be given of every annual ordinary stockholders meeting. Unless otherwise required by law or by our articles of
incorporation, voting for an ordinary resolution requires an affirmative vote of a simple majority of those present. A distribution of cash dividends would be an example of an ordinary resolution. The R.O.C. Company Act also provides that in order
to approve certain major corporate actions, including any amendment of our articles of incorporation, dissolution, merger or spin-off, entering into, amendment, or termination of any contract for lease of the companys business in whole, or for
entrusted business, or for joint operation with others on regular basis, the transfer of all or an essential part of the business or assets, accept all of the business or assets of any other company which would have a significant impact in our
operations, removing directors or the distribution of dividend in stock form, a special resolution shall be adopted by the holders of the majority of our shares represented at a stockholders meeting at which holders of at least two-thirds of
our issued and outstanding shares are present. However, in the case of a public company, such as our company, such resolution may be adopted by the holders of at least two-thirds of the shares represented at a stockholders meeting at which
holders of at least a majority of our issued and outstanding shares are present. However, if we are the controlling company and hold no less than 90% of our subordinate companys outstanding shares, our merger with the subordinate company can
be approved by a board resolution adopted by majority consent at a meeting with two-thirds of our directors present without stockholders approval. In addition, according to the Corporate Merger and Acquisition Act of the R.O.C., if a company
intends to transfer all or an essential part of its business or assets to its wholly-owned subsidiary, subject to the qualifications set forth in the said act, such transaction only needs to be approved by majority board resolution rather than super
majority vote by the stockholders meeting as required by the R.O.C. Company Act.

Voting Rights

Each common share is generally entitled to one vote and no voting discount will be applied. However, treasury shares and our common shares
held by (i) an entity in which we own more than 50% of the voting shares or paid-in capital, or (ii) a third party in which we and an entity controlled by us jointly own, directly or indirectly, more than 50% of the voting shares or
paid-in capital are not entitled to any vote. Except as otherwise provided by law or our articles of incorporation, a resolution can be adopted by the holders of a simple majority of the total issued and outstanding shares represented at a
stockholders meeting. The quorum for a stockholders meeting to discuss the ordinary resolutions is a majority of the total issued and outstanding shares. Pursuant to R.O.C Company Act amended on December 28, 2011, the election of
directors by our stockholders shall be conducted by means of cumulative voting rather than other voting mechanisms adopted in our articles of incorporation. In all other matters, a stockholder must cast all his or her votes in the same manner when
voting on any of these matters.

Our stockholders may be represented at an ordinary or extraordinary stockholders
meeting by proxy if a valid proxy form is delivered to us five days before the commencement of the ordinary or extraordinary stockholders meeting, unless such proxy has been revoked no later than two days before the date of the
stockholders meeting. Voting rights attached to our shares exercised by our stockholders proxy are subject to the proxy regulation promulgated by the R.O.C. FSC.

Authorized by latest amendment of the R.O.C Company Act, the R.O.C. FSC has issued an administrative order in February 20, 2012 to require Taiwan Stock Exchange-listed companies, such as our company,
and GreTai Securities Market-listed companies in the R.O.C. with NT$10 billion or more of paid-in share capital and with 10,000 or more stockholders as of the first date of the close period applicable to the stockholders meeting to adopt an
e-voting system for stockholders meeting. The e-voting system provides a new platform for stockholders to exercise their voting rights online. As a company that meets the foregoing criteria, we are required to adopt the e-voting system in this
years stockholders meeting.



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Any stockholder who has a personal interest in a matter to be discussed at our
stockholders meeting, the outcome of which may impair our interests, shall not vote or exercise voting rights on behalf of another stockholder on such matter.

According to the R.O.C. Company Act newly amended on January 4, 2012, a stockholder of a public company who holds shares for others, such as a depositary, may choose to exercise his/her/its voting power
separately. On April 13, 2012, R.O.C. FSC promulgated the Regulations Governing the Split Voting of the Stockholders and Compliance Matters for Public Companies, the implementation rules of such split voting method, which stipulates that the
depository of the overseas depositary receipts may exercise its voting power separately in accordance with the instructions of the respective holders of the ADS. Notwithstanding the foregoing, before any amendment to the currently effective Deposit
Agreement is made, holders of our ADSs generally will not be able to exercise voting rights on the shares underlying their ADSs on an individual basis.

Dividends and Distributions

We are not allowed under R.O.C. law to pay
dividends on our treasury shares. We may distribute dividends on our issued and outstanding shares if we have earnings. Before distributing a dividend to stockholders, among other things, we must recover any past losses, pay all outstanding taxes
and set aside a legal reserve equivalent to 10% of our net income until our legal reserve equals our paid-in capital.

At an
annual ordinary stockholders meeting, our board of directors submits to the stockholders for their approval proposals for the distribution of dividends or the making of any other distribution to stockholders from our net income or reserves for
the preceding fiscal year. Dividends are paid to stockholders proportionately. Dividends may be distributed either in cash or in shares or a combination of cash and shares, as determined by the stockholders at such meeting.

Our articles of incorporation provide that we may distribute as remuneration to directors 0.1% of the balance of our earnings deducted
by:



| |  |  | payment of all taxes and dues;
| | - |  | ------------------------------



| |  |  | deduction of any past losses; and
| | - |  | ---------------------------------



| |  |  | allocation of 10% of our net income as a legal reserve.
| | - |  | -------------------------------------------------------

The amount of no less than 5% of the residual amount after the deductions illustrated above, plus, at discretion, any undistributed earnings from previous years, shall be distributed as bonus to
employees. Originally, the distribution of employee bonus were in the form of new shares; in the annual ordinary stockholders meeting held in June 2005, our stockholders approved an amendment of our articles of incorporation to enable the
distribution of employee bonus in the form of cash or in shares. Employees eligible for such distribution may include certain qualified employees from our subordinate companies and the qualification of such employees is to be determined by our board
of directors. The remaining amount may be distributed according to the distribution plan proposed by our board of directors based on our dividend policy, and submitted to the stockholders meeting for approval.

In the annual ordinary stockholders meeting held in June 2005, our stockholders approved a change of the percentage of stock
dividend issued to our stockholders, if any, to no more than 80% and cash dividend, if any, to no less than 20%.

In addition
to permitting dividends to be paid out of net income, we are permitted under the R.O.C. Company Act to make distributions to our stockholders of additional shares by capitalizing reserves, including the legal reserve and capital surplus of premiums
from issuing stock and earnings from gifts received, or make such distributions by cash, if we do not have losses. However, where legal reserve is distributed by capitalization or in cash, only the portion of legal reserve which exceeds 25 percent
of the paid-in capital may be distributed.

For information as to R.O.C. taxes on dividends and distributions, see
E. R.O.C. Tax Considerations in this Item.



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Acquisition of Our Shares by Us

An R.O.C. company may not acquire its own common shares, except under certain exceptions provided in the R.O.C. Company Act or the R.O.C.
Securities and Exchange Act. Under the amendments to the R.O.C. Company Act, which took effect on November 14, 2001, a company may purchase up to 5% of its issued common shares for transfer to employees in accordance with a resolution of its
board of directors, passed by a majority vote, at a meeting with at least two-thirds of the directors present.

Under Article
28-2, an amendment to the R.O.C. Securities and Exchange Act, which took effect on July 21, 2000, we may, by a board resolution adopted by majority consent at a meeting with two-thirds of our directors present, purchase up to 10% of our issued
shares on the Taiwan Stock Exchange or by a tender offer, in accordance with the procedures prescribed by the R.O.C. FSC, for the following purposes:



| |  |  | to transfer shares to our employees;
| | - |  | ------------------------------------



| |  |  | to transfer upon conversion of bonds with warrants, preferred shares with warrants, convertible bonds, convertible preferred shares or certificates of
warrants issued by us; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | if necessary, to maintain our credit and our stockholders equity; provided that the shares so purchased shall be canceled thereafter.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------

We have from time to time announced plans, none of which was binding on us, to buy back up to a fixed
amount of our shares on the Taiwan Stock Exchange at the price range set forth in the plans. In 2009 and 2010, we purchased an aggregate of 300 million and 300 million, respectively, of our shares under these plans. From December 17,
2008 to February 16, 2009, we purchased 300 million of our shares on the Taiwan Stock Exchange at an average price of $7.98 per share to transfer to our employees. From February 3, 2010 to April 2, 2010, we purchased
300 million of our shares on the Taiwan Stock Exchange at an average price of NT$16.15 per share to transfer to our employees. Of the repurchased shares, 137 million, 97 million, 78 million and 64 million shares were
purchased by our employees in November 2003, December 2007 , December 2009, and December 2010, respectively. On March 14, 2012, the board of directors approved the cancellation on treasury share of 157,934,400 shares which was bought from
December 17, 2008 to February 16, 2009 .

In addition, we may not spend more than the aggregate amount of the
retained earnings, the premium from issuing stock and the realized portion of the capital reserve to purchase our shares.

We
may not pledge or hypothecate any purchased shares. In addition, we may not exercise any stockholders rights attached to such shares. In the event that we purchase our shares on the Taiwan Stock Exchange, our affiliates, directors, managers
and their respective spouses and minor children and/or nominees are prohibited from selling any of our shares during the period in which we purchase our shares.

In addition to the share purchase restriction, the Company Act provides that our subsidiaries may not acquire our shares or the shares of our majority-owned subsidiaries if the majority of the outstanding
voting shares or paid-in capital of such subsidiary is directly or indirectly held by us.

Liquidation Rights

In a liquidation, you will be entitled to participate in any surplus assets after payment of all debts, liquidation expenses and taxes
proportionately.

Rights to Bring Stockholders Suits

Under the R.O.C. Company Act, a stockholder may bring suit against us in the following events:



| |  |  | within 30 days from the date on which a stockholders resolution is adopted, a stockholder may file a lawsuit to annul a stockholders
resolution if the procedure for convening a stockholders meeting or the method of resolution violates any law or regulation or our articles of incorporation. However, if the court is of the opinion that such violation is not material and does
not affect the result of the resolution, the court may reject the stockholders claim.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | if the substance of a resolution adopted at a stockholders meeting contradicts any applicable law or regulation or our articles of incorporation,
a stockholder may bring a suit to determine the validity of such resolution.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Stockholders may bring suit against our
directors under the following circumstances:



| |  |  | Stockholders who have continuously held 3% or more of our issued shares for a period of one year or longer may request in writing that the audit
committee institute an action against a director on our behalf. In case the audit committee fails to institute an action within 30 days after receiving such request, the stockholders may institute an action on our behalf. In the event stockholders
institute an action, a court may, upon the defendants motion, order such stockholders to furnish appropriate security.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Stockholders who hold more than 3% or more of our total issued shares may institute an action with a court to remove a director of ours who has
materially violated the applicable laws or our articles of incorporation or has materially damaged the interests of our company if a resolution for removal on such grounds has first been voted on and rejected by our stockholders and such suit is
filed within 30 days of such stockholders vote.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In the event that any director, manager or stockholder holding more than 10% of our shares or any respective spouses or minor children and/or nominees
of any of them sells shares within six months after acquisition of such shares, or repurchases the shares within six months after the sale, we may claim for recovery of any profits realized from the sale and purchase. If our board of directors or
audit committee fail to claim for recovery, any stockholder may set forth a 30-day period for our board of directors or audit committee to exercise the right. In the event our directors or audit committee fail to exercise the right during such
30-day period, such requesting stockholder shall have the right to claim such recovery on our behalf. Our directors shall be jointly and severally liable for damages suffered by us as a result of their failure to exercise the right of claim.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Other Rights of Stockholders

Under the R.O.C. Company Act and the Corporate Merger and Acquisition Act, dissenting stockholders are entitled to appraisal rights in the event of a spin-off or a merger and various other major corporate
actions. Dissenting stockholders may request us to redeem all their shares at a then fair market price to be determined by mutual agreement. If no agreement can be reached, the valuation will be determined by a court. Subject to applicable law,
dissenting stockholders may, among other things, exercise their appraisal rights by notifying us in writing before the related stockholders meeting and/or by raising and registering their dissent at the stockholders meeting and also
waive their voting rights.

One or more stockholders who have held 3% or more of the issued and outstanding shares one year or
longer may require our board of directors to call an extraordinary stockholders meeting by sending a written request to our board of directors.

Effective from June 24, 2005, the R.O.C. Company Law allows stockholder(s) holding 1% or more of the total issued shares of a company to, during the period of ten days or more prescribed by the
company, submit one proposal in writing containing no more than three hundred words (in terms of Chinese characters) for discussion at the annual ordinary stockholders meeting.

Financial Statements

For a period of at least 10 days before our annual
ordinary stockholders meeting, we must make available our annual financial statements at our principal offices in Hsinchu, Taiwan, and our share registrar in Taipei for our stockholders inspection.



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Transfer Restrictions

Our directors, managers and stockholders holding more than 10% of our shares are required to report any changes in their shareholding to us on a monthly basis. In addition, the number of shares that they
can sell or transfer on the Taiwan Stock Exchange on a daily basis is limited by R.O.C. law. Further, they may sell or transfer our shares on the Taiwan Stock Exchange only after reporting to the R.O.C. FSC at least three days before the transfer,
provided that such reporting is not required if the number of shares transferred does not exceed 10,000 in one business day.



|C. | Material Contracts
|-- | ------------------

Cross License
Agreement, dated as of January 1, 2006, between United Microelectronics Corporation and International Business Machine Corporation.

We entered into a five-year cross license agreement with IBM effective as of January 1, 2006, which provides for the cross license of certain semiconductor patents including process, topography and
design. Under this agreement, IBM had granted to us and our subsidiaries, nonexclusive and non-transferable licenses, without the right to grant sublicenses, for making our and our subsidiaries licensed products in R.O.C., Japan and Singapore
and selling, leasing, licensing, using and/or transferring our and our subsidiaries licensed products worldwide under IBMs patents filed prior to January 1, 2011; we granted IBM, royalty-free, worldwide and non-transferable
licenses, without the right to grant sublicenses, for the term of the cross license for making, selling, leasing, licensing, using and/or transferring IBMs licensed products under our patents filed prior to January 1, 2011. We also agreed
to pay IBM certain royalty fees under this agreement. This five-year cross license agreement with IBM terminated on December 31, 2010. We entered into a new life-of-the-patents cross license agreement with IBM that will be effective
until June 30, 2029, the expiration date of the last-to-expire of the licensed patents thereunder. Under this agreement, IBM has granted to us and our subsidiaries, nonexclusive and non-transferable licenses, without the right to grant
sublicenses, for making our and our subsidiaries licensed products in R.O.C., Japan, Singapore and PRC and selling, leasing, licensing, using and/or transferring our and our subsidiaries licensed products worldwide under IBMs
patents filed effectively prior to July 1, 2009; we granted IBM, royalty-free, worldwide and non-transferable licenses, without the right to grant sublicenses, for the term of the cross license for making, selling, leasing, licensing, using
and/or transferring IBMs licensed products under our patents filed effectively prior to July 1, 2009. We also agreed to pay IBM certain royalty fees under this agreement.

Settlement and Cross License Agreement, dated as of April 1, 2009, between United Microelectronics Corporation and LSI Corporation (and its subsidiary Agere)

We entered into a multi-year cross license agreement with LSI effective as of May 10, 2007 through December 31, 2012, which
provides for the cross license of certain semiconductor patents, including process and design patents. Under this agreement, LSI granted to us and our subsidiaries, nonexclusive and non-transferable licenses, without the right to grant sublicenses,
for making, selling, importing or otherwise disposing of our and our subsidiaries licensed products under LSIs patents filed prior to April 1, 2009. We granted LSI, royalty-free, worldwide and non-transferable licenses, without the
right to grant sublicenses, for making, selling, using or otherwise disposing of LSI licensed products under our patents filed prior to April 1, 2009. The parties further agreed not to assert patent claims against each other prior to
December 31, 2012. We also agreed to pay LSI certain royalty fees under this agreement.

Major Long-term Supply and Marketing
Agreements

We have entered into long-term distribution, sales, service and marketing agreements with the following
companies: UMC Group (USA), an agreement effective from January 1, 2010 through December 3, 2012; United Microelectronics (Europe) B.V., an agreement effective from January 1, 2008 through December 3, 2012; UMCJ, an agreement
effective as of January 1, 2008 through December 3, 2012. We also entered into a long-term supply agreement with Shin-Etsu Handotai Taiwan Co., Ltd., or Shin-Etsu Handotai, under which Shin-Etsu Handotai agrees to provide us with 150mm,
200mm and 300mm raw wafer materials for an indefinite period unless the agreement is otherwise terminated.



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Major Construction Agreements

We entered into various major construction agreements with companies such as, M+W Group, Organo Technology Co., Ltd., Shifuh Enterprise
Co., Ltd., Nova Technology Corp., Huengluei Process Industry Co., Ltd., and Wholetech System Hitech Limited for the expansion of our semiconductor facilities in the Tainan Science Park. These agreements are effective from April 22, 2011 to
December 31, 2012, and the total contractual amount exceeds NT$2.5 billion.

Major Long-term Loan Agreements

We entered into a long-term secured loan agreement effective from November 28, 2008 through November 28, 2018 with the Bank of
Taiwan. We pledged the equipment at our semiconductor facilities in Tainan Science Park as collateral in an amount up to NT$4.8 billion for the loan.



|D. | Exchange Controls
|-- | -----------------

Foreign Investment
and Exchange Controls in Taiwan

We have extracted from publicly available documents the information presented in this
section. Please note that citizens of the Peoples Republic of China and entities organized in the Peoples Republic of China are subject to special R.O.C. laws, rules and regulations, which are not discussed in this section.

General

Historically, foreign investments in the securities market of Taiwan were restricted. However, commencing in 1983, the Taiwan government
has from time to time enacted legislation and adopted regulations to make foreign investment in the Taiwan securities market possible. Initially, only overseas investment trust funds of authorized securities investment trust enterprises established
in Taiwan were permitted to invest in the Taiwan securities market. Since January 1, 1991, qualified foreign institutional investors are allowed to make investments in the Taiwan public securities market. Since March 1, 1996, non-resident
foreign institutional and individual investors, called general foreign investors, are permitted to make direct investments in the Taiwan public securities market. On September 30, 2003, the Executive Yuan amended the Regulations
Governing Investment in Securities by Overseas Chinese and Foreign Nationals, or the Investment Regulations, under which the Qualified Foreign Institutional Investors, or QFII, designations have been abolished and the restrictions on
foreign portfolio investors have been revised. According to the Investment Regulations, Foreign Institutional Investor, or FINI, means an entity which is incorporated under the laws of countries other than the R.O.C. or the branch of a
foreign entity which is established within the territory of the R.O.C., and Foreign Individual Investor, or FIDI, means an overseas Chinese or a foreign natural person. In addition, the Investment Regulations also lifted some
restrictions and simplified procedures of investment application.

On April 30, 2009, the R.O.C. FSC promulgated
regulations allowing QDIIs under PRC regulations and certain other PRC persons to invest in the securities of R.O.C. companies. However, prior approval from the Investment Commission of the R.O.C. Ministry of Economic Affairs is required for QDIIs
or certain other PRC persons to own 10% or more of the issued and outstanding shares of a listed R.O.C. company.

Foreign Ownership
Limitations

Foreign ownership of the issued share capital in a Taiwan Stock Exchange-listed company or a GreTai Securities
Market-listed company has been limited to 50% in the past. Since December 30, 2000, the 50% limit has been lifted. Foreign investors can now hold such investments without any foreign ownership percentage limitations, unless the law has imposed
restrictions otherwise.



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Foreign Investors

Each FINI who wishes to invest directly in the R.O.C. securities market is required to register with the Taiwan Stock Exchange and obtain an investment identification number if the FINI is a non-resident
and has no sub-investment accounts in the R.O.C. Except for some restrictions imposed by specific laws and regulations, the individual and aggregate foreign ownership of the issued share capital in a Taiwan Stock Exchange-listed company or a GreTai
Securities Market-listed company is not restricted. An R.O.C. custodian for a non-resident FINI or FIDI is required to submit to the CBC, and the Taiwan Stock Exchange a report of trading activities, inward and outward remittance of capital and
status of assets under custody and other matters every month. Foreign institutional investors are not subject to any ceiling for investment in the R.O.C. securities market.

Each FIDI who wishes to invest directly in the R.O.C. securities market is also required to register with the Taiwan Stock Exchange and obtain an investment identification number. The R.O.C. FSC has
lifted the limitation on the amount of investment in the R.O.C. securities market for a non-resident FIDI.

Foreign Investment Approval

Foreign investors (both institutional and individual) who wish to make direct investments in the shares of R.O.C.
companies are required to submit a foreign investment approval application to the Investment Commission of the R.O.C. MOEA, or other government authority and enjoy benefits granted under the Statute for Foreigners Investment and
the Statute for Overseas Chineses Investment. The Investment Commission of the R.O.C. MOEA or other government authority reviews each foreign investment approval application and approves or disapproves the application after consultation with
other governmental agencies, if necessary. Any non-R.O.C. person possessing a foreign investment approval may repatriate annual net profits and interests attributable to an approved investment. Investment capital and capital gains attributable to
the investment may be repatriated with approval of the Investment Commission of the R.O.C. MOEA or other government authority.

In addition to the general restrictions against direct investments by foreign investors in R.O.C. companies, foreign investors are
currently prohibited from investing in certain prohibited industries in Taiwan under the Negative List. The prohibition on direct foreign investment in the prohibited industries in the Negative List is absolute in the absence of a
specific exemption from the application of the Negative List. Under the Negative List, some other industries are restricted so that foreign investors may directly invest only up to a specified level and with the specific approval of the relevant
authority responsible for enforcing the legislation which the Negative List is intended to implement. Our business is not a restricted industry under the Negative List.

In June of 2009, the R.O.C. MOEA further allowed PRC persons to make direct investments in Taiwan. However, such direct investment is still subject to various restrictions, such as that that only the
industries listed in the Positive List, as promulgated by the Executive Yuan, are legally permitted targets and that all the PRC persons who wish to make direct investments in R.O.C. are required to submit an investment approval
application to the Investment Commission of the R.O.C. MOEA.

Exchange Controls

Taiwans Foreign Exchange Control Statute and regulations provide that all foreign exchange transactions must be executed by banks
designed to handle foreign exchange transactions by the Ministry of Finance and by the CBC. Current regulations favor trade-related foreign exchange transactions. Consequently, foreign currency earned from exports of merchandise and services may now
be retained and used freely by exporters. All foreign currency needed for the importation of merchandise and services may be purchased from the designated foreign exchange banks.

Aside from trade-related foreign exchange transactions, R.O.C. companies and residents may remit to and from Taiwan foreign currencies of
up to US$50 million (or its equivalent) and US$5 million, (or its equivalent) respectively in each calendar year. These limits apply to remittances involving a conversion between NT dollars and U.S. dollars or other foreign currencies. A requirement
is also imposed on all private enterprises to register all medium and long-term foreign debt with the CBC.



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In addition, foreign currency earned from or needed to be paid for direct investment or
portfolio investments, which are approved by the competent authorities, may be retained or sold by the investors or purchased freely from the designated bank.

Aside from the transactions discussed above, a foreign person without an alien resident card (or who has relevant resident card with a validity of less than one year) or an unrecognized foreign entity may
remit to and from Taiwan foreign currencies of up to US$100,000 per remittance without obtaining prior approval or permit if required documentation is provided to Taiwan authorities. This limit applies to remittances involving a conversion between
NT dollars and U.S. dollars or other foreign currencies.

Depositary Receipts

In April 1992, the R.O.C. SFB (the predecessor of the R.O.C. FSC) began allowing R.O.C. companies listed on the Taiwan Stock Exchange to
sponsor the issuance and sale of depositary receipts evidencing depositary shares. Notifications for these issuances are still required. In December 1994, the Ministry of Finance began allowing companies whose shares are traded on the GreTai
Securities Market to sponsor the issuance and sale of depositary receipts evidencing depositary shares. On October 24, 2002, the R.O.C. SFB began allowing public companies that are not listed on the Taiwan Stock Exchange or the GreTai
Securities Market to sponsor the issuance and sale of depositary receipts by way of private placements outside the R.O.C.

A
holder of depositary shares wishing to withdraw common shares underlying depositary shares is required to appoint a local agent or representative with qualifications set forth by the R.O.C. FSC to, among other things, open a securities trading
account with a local brokerage firm, pay R.O.C. taxes, remit funds, and exercise stockholders right. In addition, the withdrawing holder is also required to appoint a custodian bank with qualifications set forth by the R.O.C. FSC to hold the
securities in safekeeping, make confirmations, settle trades and report all relevant information. Without making this appointment and the opening of accounts, the withdrawing holder would be unable to subsequently sell the common shares withdrawn
from a depositary receipt facility on either the Taiwan Stock Exchange or the GreTai Securities Market.

After the issuance of
a depositary share, a holder of the depositary share may immediately, comparing to a three-month waiting period restriction which was lifted in 2003, request the depositary issuing the depositary share to cause the underlying common shares to be
sold in the R.O.C. or to withdraw the common shares represented by the depositary receipt and deliver the common shares to the holder. On April 30, 2009 and July 3, 2009, the R.O.C. Executive Yuan approved the Regulations Governing
Securities Investment and Futures Trading in Taiwan by Mainland Area Investors and the Regulations Governing Investment in Taiwan by Mainland Area Persons, respectively, under which qualified PRC persons are permitted to invest in Taiwan companies
under limited circumstances, including purchase of the depositary receipts issued by a Taiwan company. However, prior approval from the Investment Commission of the R.O.C. Ministry of Economic Affairs is required for a qualified PRC persons
ownership of 10% or more of the issued and outstanding shares of a listed R.O.C. company or certain other manners of investment by a qualified PRC person.

No deposits of shares may be made in a depositary receipt facility and no depositary receipts may be issued against deposits without specific R.O.C. FSC approval, unless they are:



| | (1) | stock dividends;
| | --- | ----------------



| | (2) | free distributions of common shares;
| | --- | ------------------------------------



| | (3) | due to the exercise by a holder of his or her preemptive rights in the event of capital increases for cash; or
| | --- | --------------------------------------------------------------------------------------------------------------



| | (4) | permitted under the deposit agreement and the custody agreement, due to the direct purchase of shares or purchase through the depositary in the domestic market or the
surrender of shares under the possession of investors and then delivery of such shares to the custodian for deposit in the depositary receipt facility, provided that the total number of depositary receipts outstanding after an issuance cannot exceed
the number of issued depositary shares previously approved by the R.O.C. FSC in connection with the offering plus any depositary shares issued pursuant to the events described in (1), (2) and (3) above. These issuances may only be made to
the extent previously issued depositary shares have been withdrawn.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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A depositary may convert New Taiwan dollars from the proceeds of the sale of common shares
or cash distributions received into other currencies, including U.S. dollars. A depositary may be required to obtain foreign exchange approval from the CBC on a payment-by-payment basis for conversion into New Taiwan dollars of subscription payments
for rights offerings or conversion into foreign currencies from the proceeds from the sale of subscription rights for new common shares. It is expected that the CBC will grant this approval as a routine matter.

A holder of depositary shares may convert NT dollars into other currencies from proceeds from the sale of any underlying common shares.
Proceeds from the sale of the underlying common shares withdrawn from the depositary receipt facility may be used for reinvestment in securities listed on both the Taiwan Stock Exchange and the GreTai Securities Market, provided that the investor
designates a local securities firm or financial institution as agent to open an NT dollar bank account in advance.



|E. | Taxation
|-- | --------

R.O.C. Tax Considerations

The following summarizes the principal R.O.C. tax consequences of owning and disposing of the ADSs or shares to a holder
of ADSs or shares that is not a resident of the R.O.C. An individual holder will be considered as not a resident of the R.O.C. for the purposes of this section if he or she is not physically present in Taiwan for 183 days or more during any calendar
year, except if the individual holder has both R.O.C. and non-R.O.C. nationalities and has a registered address in the R.O.C. An entity holder will be considered as not a resident of the R.O.C. if it is organized under the laws of a jurisdiction
other than Taiwan and has no fixed place of business or other permanent establishment or business agent in the R.O.C. Prospective purchasers of ADSs or shares should consult their own tax advisors concerning the tax consequences of owning ADSs or
shares in the R.O.C. and any other relevant taxing jurisdiction to which they are subject.

Dividends

Dividends, whether in cash or shares, declared by us out of retained earnings and paid out to a holder that is not an R.O.C. resident in
respect of shares represented by ADSs are subject to R.O.C. withholding tax at the time of distribution. Effective from January 1, 2010, the rate of withholding for non-resident individuals and non-resident entities is 20% of the amount of the
distribution in the case of cash dividends or of the par value of the shares distributed in the case of stock dividends. Under current practice adopted by tax authorities, a 20% withholding rate is applied to a non-resident ADS holder without
requiring the holder to apply for or obtain foreign investment approval. As discussed in the section Tax Reform below, certain of our retained earnings will be subject to a 10% undistributed retained earnings tax. To the extent
dividends are paid out of retained earnings which have been subject to the retained earnings tax, the amount of such tax will be used by us to offset a non-residents withholding tax liability on such dividend. Consequently, the effective rate
of withholding on dividends paid out of retained earnings previously subject to the retained earnings tax may be less than 20%. There is no withholding tax with respect to stock dividends declared out of our capital reserve.

Capital Gains

Under current R.O.C. law, gains realized on R.O.C. securities transactions are primarily exempt from income tax. However, subject to the
AMT Act, gains realized from various securities transactions by an R.O.C.-resident entity and from some securities transactions by an R.O.C.-resident individual, such as securities not listed on the Taiwan Stock Exchange or the GreTai Securities
Market, shall be calculated as taxable income for the purpose of the AMT and may further be subject to income tax. In addition, transfers of ADSs by non-resident holders are not regarded as sales of R.O.C. securities and, as a result, any gains
derived therefrom are currently not subject to R.O.C. income tax.



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Securities Transaction Tax

The R.O.C. government imposes a securities transaction tax that will apply to sales of shares, but not to sales of ADSs. The transaction
tax, which is payable by the seller, is generally levied on sales of shares at the rate of 0.3% of the sales proceeds. Withdrawals of our shares from our depositary facility are not subject to the R.O.C. securities transaction tax.

Preemptive Rights

Distribution of statutory preemptive rights for shares in compliance with the R.O.C. Company Act is not subject to R.O.C. tax. Proceeds
derived from sales of statutory preemptive rights evidenced by securities by a non-resident holder may be subject to the R.O.C. securities transaction tax, currently at the rate of 0.3% of the gross amount received. Proceeds derived from sales of
statutory preemptive rights which are not evidenced by securities are subject to capital gains tax at the rate of 20% of the gains realized for non-R.O.C. entity holders and non-R.O.C. individual holders. Subject to compliance with the R.O.C. law,
we have sole discretion to determine whether statutory preemptive rights are evidenced by securities or not.

Estate Taxation and Gift
Tax

R.O.C. estate tax is payable on any property within the R.O.C. of a deceased individual who is a non-resident
individual and R.O.C. gift tax is payable on any property located within the R.O.C. donated by any such person. Under the newly amended Articles 13 and 19 of the R.O.C. Estate and Gift Tax Act, which became effective on January 23, 2009, estate
tax is currently payable at the rate of 10% and gift tax is payable at the rate of 10%. Under R.O.C. estate and gift tax laws, the shares will be deemed located in the R.O.C. irrespective of the location of the owner. It is unclear whether a holder
of ADSs will be considered to own shares for this purpose.

Tax Treaties

The Republic of China does not have an income tax treaty with the United States. On the other hand, the Republic of China has income tax
treaties with Indonesia, Singapore, South Africa, Australia, Vietnam, New Zealand, Malaysia, Macedonia, Swaziland, the Netherlands, the United Kingdom, Gambia, Senegal, Sweden, Belgium, Denmark, Israel, Paraguay, Hungary, France, India, Slovakia,
and Switzerland which may limit the rate of Republic of China withholding tax on dividends paid with respect to common shares in Taiwan companies. It is unclear whether a non-R.O.C. holder of ADSs will be considered to own shares for the purposes of
such treaties. Accordingly, a holder of ADSs who is otherwise entitled to the benefit of a treaty should consult its own tax advisors concerning eligibility for benefits under the treaty with respect to the ADSs.

Tax Reform

In
order to increase Taiwans competitiveness, an amendment to the R.O.C. Income Tax law was enacted on January 1, 1998, to integrate the corporate income tax and the stockholder dividend tax with the aim of eliminating the double taxation
effect for resident stockholders of Taiwanese corporations.

Under this amendment, a 10% retained earnings tax will be imposed
on a company for its after-tax earnings generated after January 1, 1998 which are not distributed in the following year. The retained earnings tax so paid will further reduce the retained earnings available for future distribution. When the
company declares dividends out of those retained earnings, up to a maximum amount of 10% of the declared dividends will be credited against the 20% withholding tax imposed on the non-resident holders of its shares.



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U.S. Federal Income Tax Considerations For U.S. Persons

The following is a summary of certain U.S. federal income tax consequences for beneficial owners of our shares or ADSs, that hold the
shares or ADSs as capital assets and that are U.S. holders that are not citizens of the R.O.C., do not have a permanent establishment in the R.O.C. and are not physically present in the R.O.C. for 183 days or more within a calendar year. You are a
U.S. holder if you are, for U.S. federal income tax purposes, any of the following:



| |  |  | an individual citizen or resident of the United States;
| | - |  | -------------------------------------------------------



| |  |  | a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United
States, any state thereof or the District of Columbia;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an estate the income of which is subject to U.S. federal income taxation regardless of its source;
| | - |  | --------------------------------------------------------------------------------------------------



| |  |  | a trust that is subject to the primary supervision of a court within the United States and that has one or more U.S. persons with the authority to
control all substantial decisions of the trust; or
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a trust that has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.
| | - |  | ----------------------------------------------------------------------------------------------------------------------

This summary is based on the provisions of the Internal Revenue Code of 1986, as amended, or the Code, and regulations, rulings and
judicial decisions thereunder as of the date hereof, and such authorities may be replaced, revoked or modified so as to result in U.S. federal income tax consequences different from those discussed below. It is for general purposes only and you
should not consider it to be tax advice. In addition, it is based in part on representations by the depositary and assumes that each obligation under the deposit agreement and any related agreement will be performed in accordance with its terms.
This summary does not represent a detailed description of all the U.S. federal income tax consequences to you in light of your particular circumstances and does not address the effects of any state, local or non-U.S. tax laws (or other U.S. federal
tax consequences, such as U.S. federal estate or gift tax consequences). In addition, it does not represent a detailed description of the U.S. federal income tax consequences applicable to you if you are subject to special treatment under the U.S.
federal income tax laws, including if you are:



| |  |  | a dealer in securities or currencies;
| | - |  | -------------------------------------



| |  |  | a trader in securities if you elect to use a mark-to-market method of accounting for your securities holdings;
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | a financial institution or an insurance company;
| | - |  | ------------------------------------------------



| |  |  | a tax-exempt organization;
| | - |  | --------------------------



| |  |  | a regulated investment company;
| | - |  | -------------------------------



| |  |  | a real estate investment trust;
| | - |  | -------------------------------



| |  |  | a person liable for alternative minimum tax;
| | - |  | --------------------------------------------



| |  |  | a person holding shares or ADSs as part of a hedging, integrated or conversion transaction, constructive sale or straddle;
| | - |  | --------------------------------------------------------------------------------------------------------------------------



| |  |  | a partnership or other pass-through entity for U.S. federal income tax purposes;
| | - |  | --------------------------------------------------------------------------------



| |  |  | a person owning, actually or constructively, 10% or more of our voting stock; or
| | - |  | --------------------------------------------------------------------------------



| |  |  | a U.S. holder whose functional currency is not the U.S. dollar.
| | - |  | -----------------------------------------------------------------



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We cannot assure you that a later change in law will not alter significantly the tax
considerations that we describe in this summary.

If a partnership holds our shares or ADSs, the tax treatment of a partner
will generally depend upon the status of the partner and the activities of the partnership. If you are a partner of a partnership holding our shares or ADSs, you should consult your tax advisor.

You should consult your own tax advisor concerning the particular U.S. federal income tax consequences to you of the ownership and
disposition of the shares or ADSs, as well as the consequences to you arising under the laws of any other taxing jurisdiction.

In general, for U.S. federal income tax purposes, a U.S. person who is the beneficial owner of an ADS will be treated as the owner of the shares underlying its ADS. Accordingly, deposits or withdrawals of
shares by U.S. holders for ADSs generally will not be subject to U.S. federal income tax. However, the U.S. Treasury has expressed concerns that intermediaries in the chain of ownership between the holder of an ADS and the issuer of the security
underlying the ADS may be taking actions that are inconsistent with the claiming of foreign tax credits by the U.S. holders of ADSs. Such actions would also be inconsistent with the claiming of the reduced rate of tax, described below, applicable to
dividends received by certain non-corporate holders. Accordingly, the analysis of the creditability of R.O.C. taxes and the availability of the reduced tax rate for dividends received by certain non-corporate holders, each described below could be
affected by actions taken by intermediaries in the chain of ownership between the holder of an ADS and our company.

Taxation of Dividends

Except as discussed below with respect to the passive foreign investment company rules, the amount of distributions
(including net amounts withheld in respect of R.O.C. withholding taxes) you receive on your shares or ADSs (other than certain pro rata distributions of shares to all stockholders) will generally be treated as dividend income to you if the
distributions are made from our current and accumulated earnings and profits as calculated according to U.S. federal income tax principles. In determining the net amounts withheld in respect of R.O.C. taxes, any reduction in the amount withheld on
account of an R.O.C. credit in respect of the 10% retained earnings tax imposed on us is not considered a withholding tax and will not be treated as distributed to you or creditable by you against your U.S. federal income tax. Such income will be
includible in your gross income as ordinary income on the day you actually or constructively receive it, which in the case of an ADS will be the date actually or constructively received by the depositary. The amount of any distribution of property
other than cash will be the fair market value of such property on the date it is distributed. You will not be entitled to claim a dividend received deduction with respect to distributions you receive from us.

With respect to non-corporate U.S. holders, certain dividends received from a qualified foreign corporation in taxable years beginning
prior to January 1, 2013 may be subject to reduced rates of taxation. A foreign corporation is treated as a qualified foreign corporation with respect to dividends paid by that corporation on shares (or ADSs backed by such shares) that are
readily tradable on an established securities market in the United States. U.S. Treasury Department guidance indicates that our ADSs (which are listed on the NYSE), but not our shares, are readily tradable on an established securities market in the
United States. Thus, we do not believe that dividends we pay on our shares that are not backed by ADSs currently meet the conditions required for these reduced tax rates. Moreover, there can be no assurance that our ADSs will continue to be readily
tradable on an established securities market in later years. Non-corporate U.S. holders that do not meet a minimum holding period requirement during which they are not protected from the risk of loss or that elect to treat the dividend income as
investment income pursuant to Section 163(d)(4) of the Code will not be eligible for the reduced rates of taxation regardless of our status as a qualified foreign corporation. In addition, the rate reduction will not apply to
dividends if the recipient of a dividend is obligated to make related payments with respect to positions in substantially similar or related property. This disallowance applies even if the minimum holding period has been met. Non-corporate U.S.
holders will also not be eligible for the reduced rates of taxation on dividends if we are a passive foreign investment company in the taxable year in which such dividends are paid or in the preceding taxable year. Holders should consult their own
tax advisors regarding the application of these rules given their particular circumstances.



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The amount of any dividend paid in NT dollars will equal the U.S. dollar value of the NT
dollars you receive (calculated by reference to the exchange rate in effect on the date you actually or constructively receive the dividend, which in the case of an ADS will be the date actually or constructively received by the depositary),
regardless of whether the NT dollars are actually converted into U.S. dollars. If the NT dollars received as a dividend are not converted into U.S. dollars on the date of receipt, you will have a basis in the NT dollars equal to their U.S. dollar
value on the date of receipt. Any gain or loss you realize if you subsequently sell or otherwise dispose of the NT dollars will be ordinary income or loss from sources within the United States for foreign tax credit limitation purposes.

Subject to certain limitations under the Code, you may be entitled to a credit or deduction against your U.S. federal income taxes for
the net amount of any R.O.C. taxes that are withheld from dividend distributions made to you. The election to receive a credit or deduction must be made annually, and applies to all foreign taxes for the applicable tax year. The limitation on
foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends we pay with respect to shares or ADS will generally be considered passive category income from sources outside the
United States. Furthermore, you will not be allowed a foreign tax credit for foreign taxes imposed on dividends paid on shares or ADSs if you (1) have held the shares or ADSs for less than a specified minimum period during which you are not
protected from risk of loss, or (2) are obligated to make payments related to the dividends. The rules governing the foreign tax credit are complex. We therefore urge you to consult your tax advisors regarding the availability of the foreign
tax credit under your particular circumstances.

To the extent that the amount of any distribution you receive exceeds our
current and accumulated earnings and profits for a taxable year, as determined under U.S. federal income tax principles, the distribution will first be treated as a tax-free return of capital, causing a reduction in your adjusted basis in the shares
or ADSs and thereby increasing the amount of gain, or decreasing the amount of loss, you will recognize on a subsequent disposition of the shares or ADSs. The balance in excess of adjusted basis, if any, will be taxable to you as capital gain
recognized on a sale or exchange. However, we do not expect to keep earnings and profits in accordance with U.S. federal income tax principles. Therefore, you should expect that a distribution will generally be treated as a dividend (as discussed
above).

It is possible that pro rata distributions of shares or ADSs to all stockholders may be made in a manner that is not
subject to U.S. federal income tax. In the event that such distributions are tax-free, the basis of any new shares or ADSs so received will generally be determined by allocating the U.S. holders basis in the old shares or ADSs between the old
shares or ADSs and the new shares or ADSs, based on their relative fair market values on the date of distribution. For U.S. tax purposes, any such tax-free share or ADS distribution generally would not result in foreign source income to you.
Consequently, you may not be able to use the foreign tax credit associated with any R.O.C. withholding tax imposed on such distributions unless you can use the credit against U.S. tax due on other foreign source income in the appropriate category
for foreign tax credit purposes. You should consult your own tax advisors regarding all aspects of the foreign tax credit.

Taxation of
Capital Gains

Except as discussed below with respect to the passive foreign investment company rules, when you sell or
otherwise dispose of your shares or ADSs, you will generally recognize capital gain or loss in an amount equal to the difference between the U.S. dollar value of the amount realized for the shares or ADSs and your basis in the shares or ADSs,
determined in U.S. dollars. If you are an individual, and the shares or ADSs being sold or otherwise disposed of our capital assets that you have held for more than one year, your gain recognized will be eligible for reduced rates of taxation. Your
ability to deduct capital losses is subject to limitations. Any gain or loss you recognize will generally be treated as U.S. source gain or loss.

If you pay any R.O.C. securities transaction tax, such tax is not treated as an income tax for U.S. federal income tax purposes, and therefore will not be a creditable foreign tax for U.S. federal income
tax purposes. However, subject to limitations under the Code, such tax may be deductible. You are urged to consult your tax advisors regarding the U.S. federal income tax consequences of these taxes.



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Passive Foreign Investment Company

Based on the current and projected composition of our income and valuation of our assets, including goodwill, we do not believe that we
are currently (or that we were in 2011) a passive foreign investment company, or PFIC, and we do not expect to become one in the future, although there can be no assurance in this regard.

In general, a company is considered a PFIC for any taxable year if either:



| |  |  | at least 75% of its gross income is passive income, which generally includes income derived from certain dividends, interest, royalties and rents
(other than royalties and rents derived in the active conduct of a trade or business and not derived from a related person), annuities or property transactions; or
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | at least 50% of the value of its assets is attributable to assets that produce or are held for the production of passive income.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------

The 50% of value test is based on the average of the value of our assets for each quarter during the
taxable year. If we own at least 25% by value of another companys stock, we will be treated, for purposes of the PFIC rules, as owning our proportionate share of the assets and receiving our proportionate share of the income of that company.

In determining that we do not expect to be a PFIC, we are relying on our projected capital expenditure plans and projected
revenues for the current year and for future years. In addition, our determination is based on a current valuation of our assets, including goodwill. In calculating goodwill, we have valued our total assets based on our total market value, which is
based on the market value of our shares and ADSs and is subject to change. In addition, we have made a number of assumptions regarding the allocation of goodwill to active and passive assets. We believe our valuation approach is reasonable. However,
it is possible that the Internal Revenue Service will challenge the valuation or allocation of our goodwill, which may also result in us being classified as a PFIC.

In addition, the determination of whether we are a PFIC is made annually. Accordingly, it is possible that we may become a PFIC in the current or any future taxable year due to changes in our asset or
income composition. Because we have valued our goodwill based on the market value of our shares, a decrease in the price of our shares may also result in our becoming a PFIC.

If we are a PFIC for any taxable year during which you hold shares or ADSs, you will be subject to special tax rules with respect to any excess distribution that you receive and any gain you
realize from a sale or other disposition (including a pledge) of shares or ADSs. Distributions you receive in a taxable year that are greater than 125% of the average annual distributions you received during the shorter of the three preceding
taxable years or your holding period for shares or ADSs will be treated as excess distributions. Under these special tax rules:



| |  |  | the excess distribution or gain will be allocated ratably over your holding period for shares or ADSs;
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we were a PFIC, will be treated as
ordinary income; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the amount allocated to each other year will be subject to tax at the highest tax rate in effect for that year and the interest charge generally
applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

If you hold shares or ADSs in any year in which we are a PFIC, you are required to file Internal Revenue Service Form 8621.

If we are a PFIC for any taxable year and any of our non-U.S. subsidiaries is also a PFIC, a U.S. Holder would be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC
for purposes of the application of these rules. You are urged to consult your tax advisors about the application of the PFIC rules to any of our subsidiaries.



87



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Under certain circumstances, a U.S. holder, in lieu of being subject to the PFIC rules
discussed above, may make an election to include gain on the stock of a PFIC as ordinary income under a mark-to-market method provided that such stock is regularly traded on a qualified exchange. Under this method, any difference between the
stocks fair market value and its adjusted basis at the end of the year is accounted for by either an inclusion in income or, subject to limitations, a deduction from income, as described below. Under current U.S. Treasury Department guidance,
the mark-to-market election may be available to holders of ADSs because the ADSs are listed on the NYSE, which constitutes a qualified exchange, although there can be no assurance that the ADSs will be regularly traded for purposes of
the mark-to-market election. You should also note that only the ADSs and not the shares are listed on the NYSE. Our shares are listed on the Taiwan Stock Exchange, which must meet certain trading, listing, financial disclosure and other requirements
to be treated as a qualified exchange under applicable U.S. Treasury regulations for purposes of the mark-to-market election, and no assurance can be given that the shares will be regularly traded for purposes of the mark-to-market
election.

If you make an effective mark-to-market election, you will include in income each year as ordinary income the
excess of the fair market value of your shares or ADSs at the end of the year over your adjusted tax basis in the shares or ADSs. You will be entitled to deduct as an ordinary loss each year the excess of your adjusted tax basis in the shares or
ADSs over their fair market value at the end of the year, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. If you make an effective mark-to-market election, any gain you recognize
upon the sale or other disposition of your shares or ADSs will be treated as ordinary income and any loss will be treated as ordinary loss, but only to the extent of the net amount of previously included income as a result of the mark-to-market
election.

Your adjusted tax basis in shares or ADSs will be increased by the amount of any income inclusion and decreased by
the amount of any deductions under the mark-to-market rules. If you make a mark-to-market election it will be effective for the taxable year for which the election is made and all subsequent taxable years unless the shares or ADSs are no longer
regularly traded on a qualified exchange or the Internal Revenue Service consents to the revocation of the election. You should consult your tax advisors about the availability of the mark-to-market election, and whether making the election would be
advisable under your particular circumstances.

Alternatively, a U.S. holder of shares or ADSs in a PFIC can sometimes avoid
the rules described above by electing to treat the PFIC as a qualified electing fund under Section 1295 of the Code. This option is not available to you because we do not intend to comply with the requirements necessary to permit
you to make this election.

Non-corporate U.S. holders will not be eligible for reduced rates of taxation on any dividends
received from us in taxable years beginning prior to January 1, 2013, if we are a PFIC in the taxable year in which such dividends are paid or in the preceding taxable year. You should consult your own tax advisors concerning the U.S. federal
income tax consequences of holding shares or ADSs if we are considered a PFIC in any taxable year.

Information Reporting and Backup
Withholding

In general, unless you are an exempt recipient such as a corporation, information reporting will apply to
dividends in respect of the shares or ADSs and to the proceeds from the sale, exchange or redemption of your shares or ADSs that are paid to you within the United States (and in some cases, outside of the United States). Additionally, if you fail to
provide your taxpayer identification number, or fail either to report in full dividend and interest income or to make the necessary certifications of other exempt status, you may be subject to backup withholding.

Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your U.S. federal income tax
liability, provided you furnish the required information to the Internal Revenue Service.



|F. | Dividends and Paying Agents
|-- | ---------------------------

Not applicable.



88



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##### Table of Contents

|G. | Statement by Experts
|-- | --------------------

Not
applicable.



|H. | Documents on Display
|-- | --------------------

We
have filed this annual report on Form 20-F, including exhibits, with the Securities and Exchange Commission. As allowed by the Securities and Exchange Commission, in Item 19 of this annual report, we incorporate by reference certain information
we filed with the Securities and Exchange Commission. This means that we can disclose important information to you by referring you to another document filed separately with the Securities and Exchange Commission. The information incorporated by
reference is considered to be part of this annual report.

You may read and copy this annual report, including the exhibits
incorporated by reference in this annual report, at the Securities and Exchange Commissions Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 and at the Securities and Exchange Commissions regional offices in New York,
New York and Chicago, Illinois. You can also request copies of this annual report, including the exhibits incorporated by reference in this annual report, upon payment of a duplicating fee, by writing information on the operation of the Securities
and Exchange Commissions Public Reference Room.

The Securities and Exchange Commission also maintains a website at
www.sec.gov that contains reports, proxy statements and other information regarding registrants that file electronically with the Securities and Exchange Commission. Our annual report and some of the other information submitted by us to the
Securities and Exchange Commission may be accessed through this web site.



|I. | Subsidiary Information
|-- | ----------------------

Not applicable.



|ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|-------- | ----------------------------------------------------------

Market risk is the risk of loss related to adverse changes in market prices, including interest rates and foreign exchange rates, of financial instruments. We are exposed to various types of market risks,
including changes in interest rates and foreign currency exchange rates, in the normal course of business.

We use financial
instruments, including variable rate debt and swaps and forward contracts, to manage risks associated with our interest rate and foreign currency exposures through a controlled program of risk management in accordance with established policies.
These policies are reviewed and approved by our board of directors and stockholders meeting. Our treasury operations are subject to internal audit on a regular basis. We do not hold or issue derivative financial instruments for speculatively
purposes.

Since export sales are primarily conducted in U.S. dollars, we had U.S. dollar-denominated accounts receivables of
US$461 million as of December 31, 2011. As of the same date, we also had Japanese Yen-denominated accounts receivable of ¥833 million attributable to our Japanese operations and Europe-denominated accounts receivable of
3 million attributable to our Europe operations. We had U.S. dollar- and Japanese Yen-denominated accounts payables of US$84 million and ¥2,004 million, respectively, as of December 31, 2011.

Our primary market risk exposures relate to interest rate movements on borrowings and exchange rate movements on foreign
currency-denominated accounts receivables, capital expenditures relating to equipment used in manufacturing processes (including photo etching and chemical vapor deposition) and purchased primarily from Japan and the United States. The fair value of
foreign currency forward contracts and interest rate swaps is determined based on valuation reports we receive from counterparties after we verify the reasonableness of such reports.

The following table provides information as of December 31, 2011 on our market risk sensitive financial instruments.



89



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|                                                     |  |                         |        |  |            |   |        | 
|---------------------------------------------------- |  | ----------------------- | ------ |  | ---------- | - | ------ | 
|                                                     |  | As of December 31, 2011 |       
|                                                     |  | Book Value              |        |  | Fair Value |  
|                                                     |  | (in NT$ millions)       |       
|Foreign exchange rate contracts: Non-Trading Purpose |  | $                       |       |  |            | $ |       | 
|Time Deposits: Non-Trading Purpose                   |  | $                       | 31,738 |  |            | $ | 31,738 | 
|Short-term Loans: Non-Trading Purpose                |  | $                       | 9,412  |  |            | $ | 9,412  | 
|Bonds: Non-Trading Purpose                           |  | $                       | 17,405 |  |            | $ | 15,458 | 
|Long-term loans: Non-Trading Purpose                 |  | $                       | 11,693 |  |            | $ | 11,693 | 

Interest Rate Risk

Our major market risk exposure is changing interest rates. Our exposure to market risk for changes in interest rates relates primarily to our long-term debt obligations. We primarily enter into debt
obligations to support general corporate purposes including capital expenditures and working capital needs.

The tables below
provide information as of December 31, 2011 and 2010 about our financial instruments that are sensitive to changes in interest rates, including debt obligations and certain assets. For debt obligations, the table presents principal cash flows
and related weighted average interest rates by expected maturity dates. The information is presented in the currencies in which the instruments are denominated.



|                                 |  |                                                |        |   |                    |  |        |       |  |  |            |   |  |  |        |   |  |  |        |   |  |  |        |   |  |  |        |  
|-------------------------------- |  | ---------------------------------------------- | ------ | - | ------------------ |  | ------ | ----- |  |  | ---------- | - |  |  | ------ | - |  |  | ------ | - |  |  | ------ | - |  |  | ------ | -
|                                 |  | Expected Maturity DatesAs of
December 31, 2011 |        |   | 2016
andthereunder |  |        | Total |  |  | Fair Value |  
|                                 |  | 2012                                           |        |   | 2013               |  |        | 2014  |  |  | 2015       |   |  |  |       
|                                 |  | (in millions, except percentages)              |       
|Time Deposits:                   |  |                                                |        |   |                    |  |        |       |  |  |            |   |  |  |        |   |  |  |        |   |  |  |        |   |  |  |        |  
|Fixed Rate (US$)                 |  |                                                | 17     |   |                    |  |       |       |  |  |           |   |  |  |       |   |  |  |       |   |  |  | 17     |   |  |  | 17     |  
|Average Interest Rate            |  |                                                | 0.68   | % |                    |  |       |       |  |  |           |   |  |  |       |   |  |  |       |   |  |  | 0.68   | % |  |  | 0.68   | %
|Fixed Rate (¥)                   |  |                                                | 23,000 |   |                    |  |       |       |  |  |           |   |  |  |       |   |  |  |       |   |  |  | 23,000 |   |  |  | 23,000 |  
|Average Interest Rate            |  |                                                | 0.1    | % |                    |  |       |       |  |  |           |   |  |  |       |   |  |  |       |   |  |  | 0.1    | % |  |  | 0.1    | %
|Fixed Rate (NT$)                 |  |                                                | 8,686  |   |                    |  |       |       |  |  |           |   |  |  |       |   |  |  |       |   |  |  | 8,686  |   |  |  | 8,686  |  
|Average Interest Rate            |  |                                                | 0.55   | % |                    |  |       |       |  |  |           |   |  |  |       |   |  |  |       |   |  |  | 0.55   | % |  |  | 0.55   | %
|Unsecured Long-term Loans:       |  |                                                |        |   |                    |  |        |       |  |  |            |   |  |  |        |   |  |  |        |   |  |  |        |   |  |  |        |  
|Variable Rate (NT$)              |  |                                                | 227    |   |                    |  | 370    |       |  |  | 308        |   |  |  | 308    |   |  |  | 2,000  |   |  |  | 3,216  |   |  |  | 3,216  |  
|Average Interest Rate            |  |                                                | 1.3984 | % |                    |  | 1.3984 | %     |  |  | 1.3984     | % |  |  | 1.3984 | % |  |  | 1.3984 | % |  |  | 1.3984 | % |  |  | 1.3984 | %
|Secured Long-term Loans:         |  |                                                |        |   |                    |  |        |       |  |  |            |   |  |  |        |   |  |  |        |   |  |  |        |   |  |  |        |  
|Variable Rate (NT$)              |  |                                                | 233    |   |                    |  | 233    |       |  |  |           |   |  |  |       |   |  |  |       |   |  |  | 466    |   |  |  | 466    |  
|Average Interest Rate            |  |                                                | 1.575  | % |                    |  | 1.575  | %     |  |  |           |   |  |  |       |   |  |  |       |   |  |  | 1.575  | % |  |  | 1.575  | %
|Bonds:                           |  |                                                |        |   |                    |  |        |       |  |  |            |   |  |  |        |   |  |  |        |   |  |  |        |   |  |  |        |  
|Unsecured (NT$)                  |  |                                                |       |   |                    |  |       |       |  |  |           |   |  |  |       |   |  |  |       |   |  |  |       |   |  |  |       |  
|Variable Rate                    |  |                                                |       |   |                    |  |       |       |  |  |           |   |  |  |       |   |  |  |       |   |  |  |       |   |  |  |       |  
|Unsecured (US$)                  |  |                                                |       |   |                    |  |       |       |  |  | 124        |   |  |  |       |   |  |  |       |   |  |  |       |   |  |  |       |  
|Fixed Rate                       |  |                                                |       |   |                    |  |       |       |  |  | 0          | % |  |  |       |   |  |  |       |   |  |  |       |   |  |  |       |  
|Unsecured (US$)                  |  |                                                |       |   |                    |  |       |       |  |  | 78         |   |  |  |       |   |  |  |       |   |  |  |       |   |  |  |       |  
|Fixed Rate                       |  |                                                |       |   |                    |  |       |       |  |  | 0          | % |  |  |       |   |  |  |       |   |  |  |       |   |  |  |       |  
|Interest Rate Derivatives        |  |                                                |        |   |                    |  |        |       |  |  |            |   |  |  |        |   |  |  |        |   |  |  |        |   |  |  |        |  
|Interest Rate Swaps:             |  |                                                |        |   |                    |  |        |       |  |  |            |   |  |  |        |   |  |  |        |   |  |  |        |   |  |  |        |  
|Variable to Fixed (denomination) |  |                                                |       |   |                    |  |       |       |  |  |           |   |  |  |       |   |  |  |       |   |  |  |       |   |  |  |       |  
|Average pay rate                 |  |                                                |       |   |                    |  |       |       |  |  |           |   |  |  |       |   |  |  |       |   |  |  |       |   |  |  |       |  
|Average receive rate             |  |                                                |       |   |                    |  |       |       |  |  |           |   |  |  |       |   |  |  |       |   |  |  |       |   |  |  |       |  



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|                                 |  |                                                 |        |   |                    |  |       |       |  |  |            |   |  |  |       |   |  |  |       |   |  |  |        |   |  |  |        |  
|-------------------------------- |  | ----------------------------------------------- | ------ | - | ------------------ |  | ----- | ----- |  |  | ---------- | - |  |  | ----- | - |  |  | ----- | - |  |  | ------ | - |  |  | ------ | -
|                                 |  | Expected Maturity 
DatesAs of December 31, 2010 |        |   | 2015
andthereunder |  |       | Total |  |  | Fair Value |  
|                                 |  | 2011                                            |        |   | 2012               |  |       | 2013  |  |  | 2014       |   |  |  |      
|                                 |  | (in millions, except percentages)               |       
|Time Deposits:                   |  |                                                 |        |   |                    |  |       |       |  |  |            |   |  |  |       |   |  |  |       |   |  |  |        |   |  |  |        |  
|Fixed Rate (US$)                 |  |                                                 | 144    |   |                    |  |      |       |  |  |           |   |  |  |      |   |  |  |      |   |  |  | 144    |   |  |  | 144    |  
|Average Interest Rate            |  |                                                 | 0.3    | % |                    |  |      |       |  |  |           |   |  |  |      |   |  |  |      |   |  |  | 0.3    | % |  |  | 0.3    | %
|Fixed Rate (¥)                   |  |                                                 | 4,400  |   |                    |  |      |       |  |  |           |   |  |  |      |   |  |  |      |   |  |  | 4,400  |   |  |  | 4,400  |  
|Average Interest Rate            |  |                                                 | 0.1136 | % |                    |  |      |       |  |  |           |   |  |  |      |   |  |  |      |   |  |  | 0.1136 | % |  |  | 0.1136 | %
|Fixed Rate (NT$)                 |  |                                                 | 18,710 |   |                    |  |      |       |  |  |           |   |  |  |      |   |  |  |      |   |  |  | 18,710 |   |  |  | 18,710 |  
|Average Interest Rate            |  |                                                 | 0.3    | % |                    |  |      |       |  |  |           |   |  |  |      |   |  |  |      |   |  |  | 0.3    | % |  |  | 0.3    | %
|Unsecured Long-term Loans:       |  |                                                 |        |   |                    |  |       |       |  |  |            |   |  |  |       |   |  |  |       |   |  |  |        |   |  |  |        |  
|Variable Rate (NT$)              |  |                                                 | 132    |   |                    |  | 187   |       |  |  | 124        |   |  |  | 61    |   |  |  | 61    |   |  |  | 566    |   |  |  | 566    |  
|Average Interest Rate            |  |                                                 | 1.503  | % |                    |  | 1.503 | %     |  |  | 1.503      | % |  |  | 1.503 | % |  |  | 1.503 | % |  |  | 1.503  | % |  |  | 1.503  | %
|Secured Long-term Loans:         |  |                                                 |        |   |                    |  |       |       |  |  |            |   |  |  |       |   |  |  |       |   |  |  |        |   |  |  |        |  
|Variable Rate (NT$)              |  |                                                 | 233    |   |                    |  | 233   |       |  |  | 233        |   |  |  |      |   |  |  |      |   |  |  | 700    |   |  |  | 700    |  
|Average Interest Rate            |  |                                                 | 1.375  | % |                    |  | 1.375 | %     |  |  | 1.375      | % |  |  |      |   |  |  |      |   |  |  | 1.375  | % |  |  | 1.375  | %
|Bonds:                           |  |                                                 |        |   |                    |  |       |       |  |  |            |   |  |  |       |   |  |  |       |   |  |  |        |   |  |  |        |  
|Unsecured (NT$)                  |  |                                                 |       |   |                    |  |      |       |  |  |           |   |  |  |      |   |  |  |      |   |  |  |       |   |  |  |       |  
|Variable Rate                    |  |                                                 |       |   |                    |  |      |       |  |  |           |   |  |  |      |   |  |  |      |   |  |  |       |   |  |  |       |  
|Unsecured (US$)                  |  |                                                 |       |   |                    |  |      |       |  |  |           |   |  |  | 127   |   |  |  |      |   |  |  | 127    |   |  |  | 109    |  
|Fixed Rate                       |  |                                                 |       |   |                    |  |      |       |  |  |           |   |  |  | 0     | % |  |  |      |   |  |  | 0      | % |  |  | 0      | %
|Unsecured (US$)                  |  |                                                 |       |   |                    |  |      |       |  |  |           |   |  |  | 80    |   |  |  |      |   |  |  | 80     |   |  |  | 68     |  
|Fixed Rate                       |  |                                                 |       |   |                    |  |      |       |  |  |           |   |  |  | 0     | % |  |  |      |   |  |  | 0      | % |  |  | 0      | %
|Interest Rate Derivatives        |  |                                                 |        |   |                    |  |       |       |  |  |            |   |  |  |       |   |  |  |       |   |  |  |        |   |  |  |        |  
|Average pay rate                 |  |                                                 |       |   |                    |  |      |       |  |  |           |   |  |  |      |   |  |  |      |   |  |  |       |   |  |  |       |  
|Interest Rate Swaps:             |  |                                                 |        |   |                    |  |       |       |  |  |            |   |  |  |       |   |  |  |       |   |  |  |        |   |  |  |        |  
|Variable to Fixed (denomination) |  |                                                 |       |   |                    |  |      |       |  |  |           |   |  |  |      |   |  |  |      |   |  |  |       |   |  |  |       |  
|Average receive rate             |  |                                                 |       |   |                    |  |      |       |  |  |           |   |  |  |      |   |  |  |      |   |  |  |       |   |  |  |       |  

Foreign Currency Risk

Although the majority of our transactions are in NT dollars, some transactions are based in other currencies. The primary currencies to which we are exposed are the U.S. dollar and the Japanese Yen. We
have in the past, and may in the future, enter into short-term, foreign currency forward contracts to hedge the impact of foreign currency fluctuations on certain underlying assets, liabilities, and firm commitments for operating expenses and
capital expenditures denominated in U.S. dollars and other foreign currencies. The purpose of entering into these hedges is to minimize the impact of foreign currency fluctuations on the results of operations. Gains and losses on foreign currency
forward contracts and foreign currency-denominated assets and liabilities are recorded in the period of the exchange rate changes. The contracts have maturity dates that do not exceed three months.

As of December 31, 2010 and 2011, we had US$26 million and nil outstanding in foreign currency forward contracts to sell US dollars
against NT dollars, respectively. As of March 31, 2012, we had nil foreign currency forward contracts to sell US dollars against NT dollars.



|                                    |  |                                                |               |  |                    |  |   |       |  |  |            |  |  |  |   |  |  |  |   |  |  |     |               |  |  |  |      | 
|----------------------------------- |  | ---------------------------------------------- | ------------- |  | ------------------ |  | - | ----- |  |  | ---------- |  |  |  | - |  |  |  | - |  |  | --- | ------------- |  |  |  | ---- | 
|                                    |  | Expected Maturity DatesAs of
December 31, 2010 |               |  | 2015
andthereunder |  |   | Total |  |  | Fair Value | 
|                                    |  | 2011                                           |               |  | 2012               |  |   | 2013  |  |  | 2014       |  |  |  |  
|                                    |  | (in millions, except percentages)              |              
|Foreign Currency Forward Contracts: |  |                                                |               |  |                    |  |   |       |  |  |            |  |  |  |   |  |  |  |   |  |  |     |               |  |  |  |      | 
|Sell US$ against NT$                |  |                                                |               |  |                    |  |   |       |  |  |            |  |  |  |   |  |  |  |   |  |  |     |               |  |  |  |      | 
|Contract Amount                     |  | US$                                            | 26            |  |                    |  |  |       |  |  |           |  |  |  |  |  |  |  |  |  |  | US$ | 26            |  |  |  | NT$3 | 
|Average Contractual Exchange Rate   |  | US$                                            | 1= NT$29.8950 |  |                    |  |  |       |  |  |           |  |  |  |  |  |  |  |  |  |  | US$ | 1= NT$29.8950 |  |  |  |     | 



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|ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
|-------- | ------------------------------------------------------



|A. | Debt Securities
|-- | ---------------

Not
applicable.



|B. | Warrants and Rights
|-- | -------------------

Not
applicable.



|C. | Other Securities
|-- | ----------------

Not
applicable.



|D. | American Depositary Shares
|-- | --------------------------

Depositary
Fees and Charges

Under the terms of the deposit agreement for our ADSs, an ADS holder may have to pay the following
service fees to the depositary:



|                                                                                                  |  |                               
|------------------------------------------------------------------------------------------------- |  | ------------------------------
|Service                                                                                           |  | Fees                          
|Issuance of ADSs                                                                                  |  | Up to US$0.05 per ADS issued  
|Cancellation of ADSs                                                                              |  | Up to US$0.05 per ADS canceled
|Distribution of cash dividends or other cash distributions                                        |  | Up to US$0.05 per ADS held    
|Distribution of ADSs pursuant to stock dividends, free stock distributions or exercises of rights |  | Up to US$0.05 per ADS held    
|Distribution of securities other than ADSs or rights to purchase additional ADSs.                 |  | Up to US$0.05 per ADS held    

In addition, an ADS holder shall be responsible for the following charges:



| |  |  | taxes (including applicable interest and penalties) and other governmental charges;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | such registration fees as may from time to time be in effect for the registration of common shares or other deposited securities on the share register
and applicable to transfers of common shares or other deposited securities to or from the name of the custodian, the depositary or any nominees upon the making of deposits and withdrawals, respectively;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | such cable, telex and facsimile transmission and delivery expenses as are expressly provided in the deposit agreement to be at the expense of ADS
holders and beneficial owners of ADSs;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the expenses and charges incurred by the depositary in the conversion of foreign currency;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | such fees and expenses as are incurred by the depositary in connection with compliance with exchange control regulations and other regulatory
requirements applicable to common shares, deposited securities, ADSs and ADRs; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the fees and expenses incurred by the depositary, the custodian or any nominee in connection with the servicing or delivery of deposited securities.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------

Depositary fees payable upon the issuance and cancellation of ADSs are typically paid to the depositary by
the brokers (on behalf of their clients) receiving the newly-issued ADSs from the depositary and by the brokers (on behalf of their clients) delivering the ADSs to the depositary for cancellation. The brokers in turn charge these transaction fees to
their clients.



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Depositary fees payable in connection with distributions of cash or securities to ADS
holders and the depositary services fee are charged by the depositary to the holders of record of ADSs as of the applicable ADS record date. The depositary fees payable for cash distributions are generally deducted from the cash being distributed.
In the case of distributions other than cash (i.e., stock dividends, rights offerings), the depositary charges the applicable fee to the ADS record date holders concurrent with the distribution. In the case of ADSs registered in the name of the
investor (whether certificated or un-certificated in direct registration), the depositary sends invoices to the applicable record date ADS holders. In the case of ADSs held in brokerage and custodian accounts via the central clearing and settlement
system, The Depository Trust Company, or DTC, the depositary generally collects its fees through the systems provided by DTC (whose nominee is the registered holder of the ADSs held in DTC) from the brokers and custodians holding ADSs in their DTC
accounts. The brokers and custodians who hold their clients ADSs in DTC accounts in turn charge their clients accounts the amount of the fees paid to the depositary.

In the event of refusal to pay the depositary fees, the depositary may, under the terms of the deposit agreement, refuse the requested
service until payment is received or may set off the amount of the depositary fees from any distribution to be made to the ADS holder.

The fees and charges ADS holders may be required to pay may vary over time and may be changed by us and by the depositary. ADS holders will receive prior notice of such changes.

Depositary Payments

In
2011, we received the following payments from JPMorgan Chase & Co., the depositary for our ADR program through December 31, 2011.



|                                                                                                   |  |      |              | 
|-------------------------------------------------------------------------------------------------- |  | ---- | ------------ | 
|Service                                                                                            |  | Fees |             
|Reimbursement of listing fees                                                                      |  | US$  | 212,001.50   | 
|Reimbursement of SEC filing fees                                                                   |  | US$  | 5,490.00     | 
|Reimbursement of accounting supporting fees for FASB and Public Company Accounting Oversight Board |  | US$  | 15,636.50    | 
|Reimbursement of annual ordinary stockholders meeting expenses                                    |  |      |              | 
|Reimbursement of fees in connection with annual financial and Sarbanes-Oxley Act of 2002 audit     |  | US$  | 1,880,100.00 | 
|Contribution to our companys investor relations efforts                                           |  | US$  | 12,786.68    | 
|Others                                                                                             |  | US$  | 67,925.00    | 
|Total                                                                                              |  | US$  | 2,193,939.68 | 

PART II



|ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
|-------- | -----------------------------------------------

None of these events occurred in any of 2009, 2010 or 2011.



|ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
|-------- | ----------------------------------------------------------------------------

None.



|ITEM 15. | CONTROLS AND PROCEDURES
|-------- | -----------------------

Disclosure
Controls and Procedures

As of December 31, 2011, an evaluation has been carried out under the supervision and with
the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as such term is defined under Rules 13a-15(e) and 15d-15(e) promulgated under
the Securities Exchange Act of 1934, as amended. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of December 31, 2011.



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Managements Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined
in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended, for our company. A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As required by Section 404 of the Sarbanes-Oxley Act of 2002 and related rules as promulgated by the Securities and Exchange Commission, our
management assessed the effectiveness of our internal control over financial reporting as of December 31, 2011 using the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission, or the COSO criteria. Based on this assessment, our management concluded that our internal control over financial reporting was effective as of December 31, 2011 based on the COSO criteria. Our independent registered public
accounting firm, Ernst & Young has issued an attestation report with unqualified opinion on the effectiveness of our internal control over financial reporting as of December 31, 2011, which is included immediately following this
report.



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Attestation Report of the Independent Registered Public Accounting Firm

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of United Microelectronics Corporation:

We have
audited United Microelectronics Corporation and subsidiaries (the Company) internal control over financial reporting as of December 31, 2011, based on criteria established in Internal ControlIntegrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Companys management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting included in the accompanying Managements Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Companys internal control
over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included
obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing
such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors
of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the companys assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, United Microelectronics Corporation and subsidiaries maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2011, based onthe COSO criteria.

We also have audited, in accordance with the standards generally
accepted in the Republic of China and the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of United Microelectronics Corporation and subsidiaries as of December 31, 2011 and 2010, and the
related consolidated statements of income, changes in stockholders equity and cash flows for each of the three years in the period ended December 31, 2011 of United Microelectronics Corporation and subsidiaries and our report dated April 26,
2012 expressed an unqualified opinion thereon.

Ernst & Young

Taipei, Taiwan

Republic of China

April 26, 2012



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Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the year ended December 31, 2011 that
have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



|ITEM 16. | 
|-------- | 



|ITEM 16A. | AUDIT COMMITTEE FINANCIAL EXPERT
|--------- | --------------------------------

Our Board of Directors have determined that Paul S.C. Hsu and Cheng-Li Huang, two of our independent directors, qualifies as audit committee financial experts and meet the independence requirement as
defined in Item 16A to Form 20-F.

The U.S. Securities and Exchange Commission has indicated that the designation of
Mr. Hsu and Mr. Huang as the audit committee financial experts does not: (i) make Mr. Hsu or Mr. Huang an expert for any purpose, including without limitation for purposes of Section 11 of the Securities Act
of 1933, as amended, as a result of this designation; (ii) impose any duties, obligations or liability on Mr. Hsu or Mr. Huang that are greater than those imposed on him as a member of the audit committee and the board of directors in
the absence of such designation; or (iii) affect the duties, obligations or liability of any other member of the audit committee or the board of directors.



|ITEM 16B. | CODE OF ETHICS
|--------- | --------------

We
amended the Code of Ethics for Directors and Officers in June 2009, and the Employee Code of Conduct in October 2011. The Employee Code of Conduct, which is applicable to all employees, replaced the code of ethics filed with the Securities and
Exchange Commission in our 2003 annual report on Form 20-F. We have also created a separate code of ethics applicable to our directors and officers. A copy of each of the Code of Ethics for Directors and Officers and the Employee Code of Conduct are
displayed on our website at http://www.umc.com/english/pdf/Code of Ethics.pdf and http://www.umc.com/english/pdf/Code of Conduct.pdf, respectively. Stockholders may request a hard copy of the Code of Ethics for Directors and Officers and the
Employee Code of Conduct free of charge. Please contact the investor relations department of our company at ir@umc.com.



|ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES
|--------- | --------------------------------------

The following table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered by Ernst & Young, our principal external auditors, for
the years indicated.



|                      |  |                                 |        |  |                |  |        |     |  |  |       | 
|--------------------- |  | ------------------------------- | ------ |  | -------------- |  | ------ | --- |  |  | ----- | 
|                      |  | For the year ended December 31, |       
|                      |  | 2010                            |        |  | 2011           | 
|                      |  | NT$                             |        |  | NT$            |  |        | US$ | 
|                      |  |                                 |        |  | (in thousands) |  |        |     | 
|Audit Fees(1)         |  |                                 | 65,568 |  |                |  | 73,532 |     |  |  | 2,429 | 
|Audit-related Fees(2) |  |                                 | 1,513  |  |                |  | 1,798  |     |  |  | 59    | 
|Tax Fees(3)           |  |                                 | 2,966  |  |                |  | 3,266  |     |  |  | 108   | 
|All Other Fees(4)     |  |                                 | 14,570 |  |                |  | 15,135 |     |  |  | 500   | 
|                      |  |                                 |        |  |                |  |        |     |  |  |       | 
|Total                 |  |                                 | 84,617 |  |                |  | 93,731 |     |  |  | 3,096 | 
|                      |  |                                 |        |  |                |  |        |     |  |  |       | 



|(1) | Audit fees consist of fees associated with the annual audit, review of our quarterly financial statements, statutory audits and internal control review. They also
include fees billed for those services that are normally provided by the independent accountants in connection with statutory and regulatory filings.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Audit-related fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial
statements but not described in footnote (1) above. These services include review of regulatory checklist for the adoption of our employee stock option plan, certification of our Singapore Branch to Singapore authorities and application for
corporation registration.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(3) | Tax fees include fees billed for professional services rendered by Ernst & Young, primarily in connection with our tax compliance activities.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------

|(4) | All Other Fees consists of professional services rendered by Ernst & Young for IFRS adoption.
|--- | ---------------------------------------------------------------------------------------------

All audit and non-audit services performed by Ernst & Young were pre-approved by our audit committee. In certain circumstances,
the audit committee delegates to one designated member to pre-approve such audit and non-audit services. Pre-approval by a designated member should be reported to the audit committee at its upcoming meeting.



|ITEM 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
|--------- | ----------------------------------------------------------

None.



|ITEM 16E. | PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
|--------- | ---------------------------------------------------------------------

Since March 2004, we have from time to time announced plans, which were not binding on us, to buy back our shares up to a certain amount on the Taiwan Stock Exchange. Set for below contains certain
information regarding our share buyback programs in 2009, 2010, and we did not buy back any of our shares during 2011.



|                                  |  |                                       |             |  |                                       |  |       |                                                                                   |  |  |                                                                        |  |  |  |             | 
|--------------------------------- |  | ------------------------------------- | ----------- |  | ------------------------------------- |  | ----- | --------------------------------------------------------------------------------- |  |  | ---------------------------------------------------------------------- |  |  |  | ----------- | 
|Period                            |  | Total Number ofCommon
SharesPurchased |             |  | Average PricePaidper CommonShare(NT$) |  |       | Total Number ofCommon
SharesPurchased as 
PartofPubliclyAnnouncedPlans or Program |  |  | Maximum Numberof Shares
thatMayYet bePurchasedUnder the PlansorProgram | 
|2008                              |  |                                       |            |  |                                       |  |      |                                                                                   |  |  |                                                                       |  |  |  |            | 
|December (from December 17, 2008) |  |                                       |            |  |                                       |  |      |                                                                                   |  |  |                                                                       |  |  |  | 300,000,000 | 
|January                           |  |                                       | 110,412,000 |  |                                       |  | 7.81  |                                                                                   |  |  | 110,412,000                                                            |  |  |  | 189,588,000 | 
|February (to February 16, 2009)   |  |                                       | 189,588,000 |  |                                       |  | 8.08  |                                                                                   |  |  | 300,000,000                                                            |  |  |  |            | 
|2010                              |  |                                       |             |  |                                       |  |       |                                                                                   |  |  |                                                                        |  |  |  |             | 
|February (from February 3, 2010)  |  |                                       | 147,845,000 |  |                                       |  | 15.98 |                                                                                   |  |  | 147,845,000                                                            |  |  |  | 152,155,000 | 
|March (to March 22)               |  |                                       | 152,155,000 |  |                                       |  | 16.31 |                                                                                   |  |  | 300,000,000                                                            |  |  |  |            | 



|(1) | The 13th share buy-back plan was announced on December 16, 2008 to repurchase 300 million shares during the period from December 17, 2008 to
February 16, 2009.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The 14th share buy-back plan was announced on February 2, 2010 to repurchase 300 million shares during the period from February 3, 2010 to April 2,
2010.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------



|ITEM 16F. | CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT
|--------- | --------------------------------------------

Not applicable.



|ITEM 16G. | CORPORATE GOVERNANCE
|--------- | --------------------

As
a R.O.C. company listed on the New York Stock Exchange, or NYSE, we are subject to the U.S. corporate governance rules to the extent that these rules are applicable to foreign private issuers. The following summary details the significant
differences between our corporate governance practices and corporate governance standards for U.S. companies (i.e. non-foreign private issuers) under the NYSE listing standards.

The Legal Framework. In general, corporate governance principles for Taiwanese companies are set forth in the Company Act of the
Republic of China, or R.O.C. Company Act, the R.O.C. Securities Exchange Act and, to the extent they are listed on the Taiwan Stock Exchange, listing rules of the Taiwan Stock Exchange. Corporate governance principles under provisions of R.O.C. law
may differ in significant ways to corporate governance standards for U.S. companies listed on the NYSE. Committed to high standards of corporate governance, we have generally brought our corporate governance in line with U.S. regulations, including
the formation of an audit committee. However, we have not adopted certain recommended NYSE corporate governance standards where such standards are contrary to R.O.C. laws or regulations or generally prevailing business practices in Taiwan.





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Independent Board Members. Under the NYSE listing standards applicable to U.S.
companies, independent directors must comprise a majority of the board of directors. We currently have three independent directors out of a total of nine directors on our board of directors. Our standards in determining director independence
substantially comply with the NYSE listing standards, which include detailed tests for determining director independence. In addition, even though our independent directors meet in committee meetings of which they are committee members, we will not
hold executive sessions of non-management directors. Such requirement is contrary to R.O.C. Company Act.

Board
Committees. Under the NYSE listing standards, companies are required to have a nominating/corporate governance committee, composed entirely of independent directors. In addition to identifying individuals qualified to become board members, the
nominating/corporate committee must develop and recommend to the board a set of corporate governance principles. We do not currently have a corporate governance committee or a nominating committee. In accordance with an interpretation letter issued
under the R.O.C. Company Act, the power to nominate directors shall not vest only in the directors. Any holder of the companys voting common stock may nominate directors to be voted on by stockholders. Therefore, we do not have a nominating
committee because vesting such nominating rights in a body of independent directors may result in conflict with the R.O.C. Company Act. Furthermore, we do not have a corporate governance committee as such committee is not required under R.O.C.
requirements. Our board of directors is responsible for regularly reviewing our corporate governance standards and practices.

Under the NYSE listing standards, companies are required to have a compensation committee, composed entirely of independent directors.
Under the R.O.C. Company Act, however, companies incorporated in the R.O.C. are not required to have a compensation committee. The R.O.C. Company Act requires that director compensation be determined either in accordance with the companys
articles of incorporation or by the approval of the stockholders. Currently, in addition to compensation approved at the stockholders meeting, in the event we have net income, we will distribute 0.1% of our earnings after payment of all income
taxes, deduction of any past losses and allocation of 10% of our net income for legal reserves, as remunerations to our directors pursuant to our articles of incorporation. Currently, our board of directors is responsible for determining the form
and amount of compensation for each of our directors and executive officers within the guidelines of our articles of incorporation.

Equity Compensation Plans. The NYSE listing standards also require that a companys stockholders must approve equity compensation plans. Under the corresponding requirements in the R.O.C.
Company Act and the R.O.C. Securities Exchange Act, stockholders approval is required for the distribution of employee bonuses in the form of stock, while the board of director has authority, subject to the approval of the R.O.C. Securities
and Futures Bureau, to approve employee stock option plans and to grant options to employees pursuant to such plans and has also authority to approve share buy-back programs for the purpose of selling shares so purchased to employees and the sale of
such shares to employees pursuant to such programs. We intend to follow only the R.O.C. requirements.



|ITEM 16H. | MINE SAFETY DISCLOSURE
|--------- | ----------------------

Not applicable.

PART III



|ITEM 17. | FINANCIAL STATEMENTS
|-------- | --------------------

The
Registrant has elected to provide the financial statements and related information specified in Item 18.



|ITEM 18. | FINANCIAL STATEMENTS
|-------- | --------------------

The following is a list of the audited consolidated financial statements and report of independent registered public accounting firm included in this annual report beginning on page F-1.



|                                                                                                                               |  |      |      | 
|------------------------------------------------------------------------------------------------------------------------------ |  | ---- | ---- | 
|                                                                                                                               |  | Page |     
|                                                                                                                               | 
|Consolidated Financial Statements of United Microelectronics Corporation and
Subsidiaries                                      |  |      |      | 
|                                                                                                                               | 
|Report of Independent Registered Public Accounting
Firm                                                                        |  |      | F-2  | 
|                                                                                                                               | 
|Consolidated Balance Sheets at December 31, 2010 and 2011                                                                      |  |      | F-3  | 
|                                                                                                                               | 
|Consolidated Statements of Income for each of the three years ended December 31, 2009, 2010 and
2011                           |  |      | F-4  | 
|                                                                                                                               | 
|Consolidated Statements of Changes in Stockholders Equity for each of the three years ended December 31,
 2009, 2010 and 2011 |  |      | F-5  | 
|                                                                                                                               | 
|Consolidated Statements of Cash Flows for each of the three years ended December 
31, 2009, 2010 and 2011                      |  |      | F-8  | 
|                                                                                                                               | 
|Notes to the Consolidated Financial Statements                                                                                 |  |      | F-10 | 



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|ITEM 19. | EXHIBITS
|-------- | --------



|              |  |                                                                                                                                                                                                                                                                            
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description of Exhibits                                                                                                                                                                                                                                                    
|              | 
|*1.1          |  | Articles of Incorporation of the Company as last amended on June 15, 2011                                                                                                                                                                                                  
|              | 
|2.1           |  | Form of Amendment No. 1 to Deposit Agreement among the Company, and Holders and Beneficial Owners of American Depositary Shares issued thereunder, including the form of American
Depositary Shares (1)                                                                    
|              | 
|2.2           |  | Form of Amendment No. 2 to Deposit Agreement among the Company, and Holders and Beneficial Owners of American Depositary Shares issued thereunder, including the form of American
Depositary Shares (2)                                                                    
|              | 
|4.1           |  | Lease Agreement with Hsinchu Science Park Administration in relation to government-owned land located at Hsinchu Science Park, Ko-Kuan Section, No. 20-22, Hsinchu, Taiwan, R.O.C.,
the site of Fab 6A (in Chinese with English summary translation) (3)                   
|              | 
|4.2           |  | Lease Agreement with Hsinchu Science Park Administration in relation to government-owned land located at Hsinchu Science Park, third section of first phase, Hsinchu, Taiwan, R.O.C.,
the site of Fab 8A and United Tower (in Chinese with English summary translation) (4)
|              | 
|4.3           |  | Lease Agreement with Hsinchu Science Park Administration in relation to government-owned land located at Hsinchu Science Park, third section of first phase, Hsinchu, Taiwan, R.O.C.,
the site of Fab 8C (in Chinese with English summary translation) (5)                 
|              | 
|4.4           |  | Lease Agreement with Hsinchu Science Park Administration in relation to government-owned land located at Hsinchu Science Park, third section of first phase, Hsinchu, Taiwan, R.O.C.,
the site of Fab 8D (in Chinese with English summary translation) (6)                 
|              | 
|4.5           |  | Lease Agreement with Hsinchu Science Park Administration in relation to government-owned land located at Hsinchu Science Park, third section of second phase, Hsinchu, Taiwan,
R.O.C., the site of Fab 8E (in Chinese with English summary translation) (7)                
|              | 
|4.6           |  | Lease Agreement with Hsinchu Science Park Administration in relation to government-owned land located at Hsinchu Science Park, Gin-Shan section, Hsinchu, Taiwan, R.O.C., the site of
Fab 8F (in Chinese with English summary translation) (8)                             
|              | 
|4.7           |  | Lease Agreement with Southern Taiwan Science Park Administration in relation to government-owned land located at Tainan Science Park, Tainan, Taiwan, R.O.C., the site of Fab 12A (in
Chinese with English summary translation) (9)                                        
|              | 
|4.8           |  | Merger Agreement, entered into as of February 26, 2004, between United Microelectronics Corporation and SiS Microelectronics Corporation (English Translation) (10)                                                                                                        
|              | 
|4.9           |  | Lease Agreement with Hsinchu Science Park Administration in relation to government-owned land located at Hsinchu Science Park, Ko-Kuan section, Hsinchu, Taiwan, R.O.C., the site of
Fab 8S (in Chinese with English summary translation) (11)                             
|              | 
|4.10          |  | Lease Agreement with JTC Corporation in relation to land located at Pasir Ris Wafer Fab Park, Singapore, the site of Fab12i (summary) (12)                                                                                                                                 
|              | 
|4.11          |  | Merger Agreement, entered into as of April 29, 2009, among United Microelectronics Corporation, Infoshine Technology Limited and Best Elite International Limited
(13)                                                                                                     
|              | 
|*8.1          |  | List of Significant Subsidiaries of United Microelectronics Corporation                                                                                                                                                                                                    
|              | 
|11.1          |  | Code of Ethics for Directors and Officers (14)                                                                                                                                                                                                                             
|              | 
|11.2          |  | Employee Code of Conduct (15)                                                                                                                                                                                                                                              
|              | 
|*12.1         |  | Certification of our Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                     
|              | 
|*12.2         |  | Certification of our Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                     
|              | 
|*13.1         |  | Certification of our Chief Executive Officer pursuant to 18 U.S.C.§ 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                             
|              | 
|*13.2         |  | Certification of our Chief Financial Officer pursuant to 18 U.S.C.§ 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                             
|              | 
|*15.1         |  | Consent of Independent Registered Public Accounting Firm                                                                                                                                                                                                                   
|              | 
|99.1          |  | Form 6-K furnished to the Commission on April 29, 2009 (File No. 001-15128) (16)                                                                                                                                                                                           
|              | 
|99.2          |  | Form 6-K furnished to the Commission on October 28, 2009 (File No. 001-15128) (17)                                                                                                                                                                                         
|              | 
|99.3          |  | Form 6-K furnished to the Commission on December 21, 2009 (File No. 001-15128) (18)                                                                                                                                                                                        



|* | Filed herewith.
|- | ---------------

|(1) | Incorporated by reference to Exhibit (a) to the Registrants Registration Statement on Form F-6 (File No. 333-13796) filed with the Commission on
March 2, 2006.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Incorporated by reference to Exhibit (a)(iii) to the Registrants Registration Statement on Form F-6 (File No. 333-98591) filed with the Commission on
March 19, 2007.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(3) | Incorporated by reference to Exhibit 4.1 to Registrants Annual Report on Form 20-F for the fiscal year ended December 31, 2006 (File No. 001-15128)
filed with the Commission on May 9, 2007.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Incorporated by reference to Exhibit 10.7 to the Registrants Registration Statement on Form F-1 (File No. 333-12444) filed with the Commission on
August 28, 2000, as amended.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Incorporated by reference to Exhibit 10.8 to the Registrants Registration Statement on Form F-1 (File No. 333-12444) filed with the Commission on
August 28, 2000, as amended.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Incorporated by reference to Exhibit 10.9 to the Registrants Registration Statement on Form F-1 (File No. 333-12444) filed with the Commission on
August 28, 2000, as amended.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Incorporated by reference to Exhibit 10.10 to the Registrants Registration Statement on Form F-1 (File No. 333-12444) filed with the Commission on
August 28, 2000, as amended.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | Incorporated by reference to Exhibit 10.11 to the Registrants Registration Statement on F-1 (File No. 333-12444) filed with the Commission on August 28,
2000, as amended.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(9) | Incorporated by reference to Exhibit 10.12 to the Registrants Registration Statement on F-1 (File No. 333-12444) filed with the Commission on August 28,
2000, as amended.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(10) | Incorporated by reference to Exhibit 4.8 to the Registrants Annual Report on Form 20-F for the fiscal year ended December 31, 2003 (File No. 1-15128)
filed with the Commission on June 17, 2004.
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(11) | Incorporated by reference to Exhibit 4.9 to Registrants Annual Report on Form 20-F for the fiscal year ended December 31, 2006 (File No. 001-15128)
filed with the Commission on May 9, 2007.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(12) | Incorporated by reference to Exhibit 4.10 to Registrants Annual Report on Form 20-F for the fiscal year ended December 31, 2006 (File No. 001-15128)
filed with the Commission on May 9, 2007.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(13) | Incorporated by reference to Exhibit 99.1 to the Form 6-K furnished to the Commission on May 8, 2009.
|---- | -----------------------------------------------------------------------------------------------------

|(14) | Incorporated by reference to Exhibit 99.1 to the Form 6-K furnished to the Commission on May 25, 2005.
|---- | ------------------------------------------------------------------------------------------------------

|(15) | Incorporated by reference to Exhibit 99.2 to the Form 6-K furnished to the Commission on March 26, 2006.
|---- | --------------------------------------------------------------------------------------------------------

|(16) | Incorporated by reference to Exhibit 99 to the Form 6-K furnished to the Commission on April 29, 2009.
|---- | ------------------------------------------------------------------------------------------------------

|(17) | Incorporated by reference to Exhibit 99 to the Form 6-K furnished to the Commission on October 28, 2009.
|---- | --------------------------------------------------------------------------------------------------------

|(18) | Incorporated by reference to Exhibit 99 to the Form 6-K furnished to the Commission on December 21, 2009.
|---- | ---------------------------------------------------------------------------------------------------------



100



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##### Table of Contents

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.



|                                    |  |                               
|----------------------------------- |  | ------------------------------
|UNITED MICROELECTRONICS CORPORATION
|                                    | 
|By:                                 |  | /S/ CHITUNG LIU               
|                                    |  | Name: Chitung Liu             
|                                    |  | Title: Chief Financial Officer

Date: April 26, 2012



101



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##### Table of Contents

UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



United Microelectronics Corporation and Subsidiaries

Consolidated Financial Statements for years ended December 31, 2009, 2010 and 2011

Together with Report of Independent Registered Public Accounting Firm



F-1



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##### Table of Contents

UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of United Microelectronics Corporation

We
have audited the accompanying consolidated balance sheets of United Microelectronics Corporation and subsidiaries (the Company) as of December 31, 2011 and 2010, and the related consolidated statements of income, changes in
stockholders equity and cash flows for each of the three years in the period ended December 31, 2011. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the
Republic of China (R.O.C.) and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of United Microelectronics Corporation and
subsidiaries at December 31, 2011 and 2010, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2011, in conformity with the requirements of the Guidelines
Governing the Preparation of Financial Reports by Securities Issuers and accounting principles generally accepted in the Republic of China, which differ in certain respects from U.S. generally accepted accounting principles (see Note 35 to the
consolidated financial statements).

As described in Note 3 to the consolidated financial statements, effective from January 1,
2011, the Company has adopted the third revision of the Statement of Financial Accounting Standards No. 34, Financial Instruments: Recognition and Measurement, and the newly issued Statement of Financial Accounting Standards
No. 41, Operating Segments of the Republic of China.

We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), United Microelectronics Corporation and subsidiaries internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control 
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 26, 2012 expressed an unqualified opinion thereon.

ERNST & YOUNG

CERTIFIED PUBLIC ACCOUNTANTS

Taipei, Taiwan

Republic of China

April 26, 2012



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##### Table of Contents

UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Expressed in Thousands)





|                                                                    |  |       |               |  |                    |  |              |      |  |  |              |   |  |  |             |  
|------------------------------------------------------------------- |  | ----- | ------------- |  | ------------------ |  | ------------ | ---- |  |  | ------------ | - |  |  | ----------- | -
|                                                                    |  |       |               |  | As of December 31, | 
|                                                                    |  | Notes |               |  | 2010               |  |              | 2011 | 
|                                                                    |  |       |               |  | NT$                |  |              | NT$  |  |  | US$          |  
|Assets                                                              |  |       |               |  |                    |  |              |      |  |  |              |   |  |  |             |  
|Current assets                                                      |  |       |               |  |                    |  |              |      |  |  |              |   |  |  |             |  
|Cash and cash equivalents                                           |  |       | 2,4           |  |                    |  | 51,271,105   |      |  |  | 49,070,128   |   |  |  | 1,621,081   |  
|Financial assets at fair value through profit or loss, current      |  |       | 2,5           |  |                    |  | 1,139,943    |      |  |  | 695,931      |   |  |  | 22,991      |  
|Available-for-sale financial assets, current                        |  |       | 2,8           |  |                    |  | 7,044,673    |      |  |  | 5,124,780    |   |  |  | 169,302     |  
|Held-to-maturity financial assets, current                          |  |       | 2             |  |                    |  |             |      |  |  | 13,524       |   |  |  | 447         |  
|Notes receivable                                                    |  |       | 2,3           |  |                    |  | 115,833      |      |  |  | 74,572       |   |  |  | 2,463       |  
|Accounts receivable, net                                            |  |       | 2,3,6         |  |                    |  | 18,110,521   |      |  |  | 14,390,541   |   |  |  | 475,406     |  
|Accounts receivable-related parties, net                            |  |       | 2,3,26        |  |                    |  | 759,644      |      |  |  | 130,553      |   |  |  | 4,313       |  
|Other receivables                                                   |  |       | 2,3           |  |                    |  | 569,559      |      |  |  | 724,563      |   |  |  | 23,937      |  
|Inventories, net                                                    |  |       | 2,7           |  |                    |  | 13,032,623   |      |  |  | 12,709,276   |   |  |  | 419,864     |  
|Prepaid expenses                                                    |  |       |               |  |                    |  | 848,349      |      |  |  | 804,789      |   |  |  | 26,587      |  
|Non-current assets held for sale                                    |  |       | 2             |  |                    |  | 16,233       |      |  |  | 583          |   |  |  | 19          |  
|Deferred income tax assets, current                                 |  |       | 2,24          |  |                    |  | 834,737      |      |  |  | 297,943      |   |  |  | 9,843       |  
|Restricted assets                                                   |  |       |               |  |                    |  | 26,077       |      |  |  | 20,331       |   |  |  | 672         |  
|                                                                    |  |       |               |  |                    |  |              |      |  |  |              |   |  |  |             |  
|Total current assets                                                |  |       |               |  |                    |  | 93,769,297   |      |  |  | 84,057,514   |   |  |  | 2,776,925   |  
|                                                                    |  |       |               |  |                    |  |              |      |  |  |              |   |  |  |             |  
|Funds and investments                                               |  |       |               |  |                    |  |              |      |  |  |              |   |  |  |             |  
|Financial assets at fair value through profit or loss, noncurrent   |  |       | 2,5           |  |                    |  | 79,920       |      |  |  | 119,711      |   |  |  | 3,955       |  
|Available-for-sale financial assets, noncurrent                     |  |       | 2,8,13        |  |                    |  | 30,254,065   |      |  |  | 18,835,224   |   |  |  | 622,241     |  
|Financial assets measured at cost, noncurrent                       |  |       | 2,9,13        |  |                    |  | 7,651,864    |      |  |  | 8,298,967    |   |  |  | 274,165     |  
|Long-term investments accounted for under the equity method         |  |       | 2,10,13,26,32 |  |                    |  | 9,193,239    |      |  |  | 11,275,894   |   |  |  | 372,510     |  
|Prepayment for long-term investments                                |  |       |               |  |                    |  |             |      |  |  | 44,392       |   |  |  | 1,466       |  
|                                                                    |  |       |               |  |                    |  |              |      |  |  |              |   |  |  |             |  
|Total funds and investments                                         |  |       |               |  |                    |  | 47,179,088   |      |  |  | 38,574,188   |   |  |  | 1,274,337   |  
|                                                                    |  |       |               |  |                    |  |              |      |  |  |              |   |  |  |             |  
|Property, plant and equipment                                       |  |       | 2,11,13,27,28 |  |                    |  |              |      |  |  |              |   |  |  |             |  
|Land                                                                |  |       |               |  |                    |  | 1,555,904    |      |  |  | 2,065,194    |   |  |  | 68,226      |  
|Buildings                                                           |  |       |               |  |                    |  | 26,156,284   |      |  |  | 26,631,417   |   |  |  | 879,796     |  
|Machinery and equipment                                             |  |       |               |  |                    |  | 498,122,888  |      |  |  | 559,032,330  |   |  |  | 18,468,197  |  
|Transportation equipment                                            |  |       |               |  |                    |  | 72,938       |      |  |  | 64,918       |   |  |  | 2,145       |  
|Furniture and fixtures                                              |  |       |               |  |                    |  | 3,594,261    |      |  |  | 4,378,308    |   |  |  | 144,642     |  
|Leasehold improvements                                              |  |       |               |  |                    |  | 728,030      |      |  |  | 836,313      |   |  |  | 27,628      |  
|                                                                    |  |       |               |  |                    |  |              |      |  |  |              |   |  |  |             |  
|Total cost                                                          |  |       |               |  |                    |  | 530,230,305  |      |  |  | 593,008,480  |   |  |  | 19,590,634  |  
|Less : Accumulated depreciation                                     |  |       |               |  |                    |  | (428,492,265 | )    |  |  | (463,622,840 | ) |  |  | (15,316,249 | )
|Less : Accumulated impariment                                       |  |       |               |  |                    |  | (1,725,272   | )    |  |  | (3,115,991   | ) |  |  | (102,940    | )
|Add : Construction in progress and prepayments                      |  |       |               |  |                    |  | 32,749,232   |      |  |  | 23,054,651   |   |  |  | 761,634     |  
|                                                                    |  |       |               |  |                    |  |              |      |  |  |              |   |  |  |             |  
|Property, plant and equipment, net                                  |  |       |               |  |                    |  | 132,762,000  |      |  |  | 149,324,300  |   |  |  | 4,933,079   |  
|                                                                    |  |       |               |  |                    |  |              |      |  |  |              |   |  |  |             |  
|Trademarks                                                          |  |       | 2             |  |                    |  |             |      |  |  | 317          |   |  |  | 11          |  
|Goodwill                                                            |  |       | 2,13          |  |                    |  | 304,728      |      |  |  | 50,863       |   |  |  | 1,680       |  
|Other intangible assets                                             |  |       | 2             |  |                    |  |             |      |  |  | 299,680      |   |  |  | 9,900       |  
|Deferred charges                                                    |  |       | 2             |  |                    |  | 1,287,212    |      |  |  | 1,513,157    |   |  |  | 49,989      |  
|Deferred income tax assets, noncurrent                              |  |       | 2,24          |  |                    |  | 2,889,902    |      |  |  | 2,993,953    |   |  |  | 98,908      |  
|Other assets-others                                                 |  |       | 2,12,13,27    |  |                    |  | 2,694,769    |      |  |  | 3,017,774    |   |  |  | 99,695      |  
|                                                                    |  |       |               |  |                    |  |              |      |  |  |              |   |  |  |             |  
|Total assets                                                        |  |       |               |  |                    |  | 280,886,996  |      |  |  | 279,831,746  |   |  |  | 9,244,524   |  
|                                                                    |  |       |               |  |                    |  |              |      |  |  |              |   |  |  |             |  
|Liabilities and Stockholders Equity                                |  |       |               |  |                    |  |              |      |  |  |              |   |  |  |             |  
|Current liabilities                                                 |  |       |               |  |                    |  |              |      |  |  |              |   |  |  |             |  
|Short-term loans                                                    |  |       | 14            |  |                    |  | 4,124,115    |      |  |  | 9,411,877    |   |  |  | 310,931     |  
|Financial liabilities at fair value through profit or loss, current |  |       | 2,15          |  |                    |  | 2,254,937    |      |  |  | 741,531      |   |  |  | 24,497      |  
|Notes and accounts payable                                          |  |       |               |  |                    |  | 7,024,359    |      |  |  | 5,010,222    |   |  |  | 165,518     |  
|Income tax payable                                                  |  |       | 2             |  |                    |  | 1,563,391    |      |  |  | 514,977      |   |  |  | 17,013      |  
|Accrued expenses                                                    |  |       | 2,22          |  |                    |  | 11,263,161   |      |  |  | 9,756,579    |   |  |  | 322,318     |  
|Payable on equipment                                                |  |       |               |  |                    |  | 12,619,400   |      |  |  | 8,517,694    |   |  |  | 281,391     |  
|Current portion of long-term liabilities                            |  |       | 2,16,17,27    |  |                    |  | 5,706,189    |      |  |  | 8,002,051    |   |  |  | 264,356     |  
|Deferred income tax liabilities, current                            |  |       | 2,24          |  |                    |  | 11,586       |      |  |  | 32,985       |   |  |  | 1,090       |  
|Other current liabilities                                           |  |       |               |  |                    |  | 877,487      |      |  |  | 918,038      |   |  |  | 30,328      |  
|                                                                    |  |       |               |  |                    |  |              |      |  |  |              |   |  |  |             |  
|Total current liabilities                                           |  |       |               |  |                    |  | 45,444,625   |      |  |  | 42,905,954   |   |  |  | 1,417,442   |  
|                                                                    |  |       |               |  |                    |  |              |      |  |  |              |   |  |  |             |  
|Long-term liabilities                                               |  |       |               |  |                    |  |              |      |  |  |              |   |  |  |             |  
|Bonds payable                                                       |  |       | 2,16          |  |                    |  |             |      |  |  | 11,984,404   |   |  |  | 395,917     |  
|Long-term loans                                                     |  |       | 17,27         |  |                    |  | 6,799,390    |      |  |  | 9,110,982    |   |  |  | 300,990     |  
|Accrued pension liabilities                                         |  |       | 2,18          |  |                    |  | 3,299,416    |      |  |  | 3,261,101    |   |  |  | 107,734     |  
|Deposits-in                                                         |  |       |               |  |                    |  | 24,205       |      |  |  | 105,617      |   |  |  | 3,489       |  
|Deferred income tax liabilities, noncurrent                         |  |       | 2,24          |  |                    |  | 20,807       |      |  |  | 35,908       |   |  |  | 1,186       |  
|Other liabilities-others                                            |  |       | 2             |  |                    |  | 162,524      |      |  |  | 302,817      |   |  |  | 10,004      |  
|                                                                    |  |       |               |  |                    |  |              |      |  |  |              |   |  |  |             |  
|Total long-term liabilities                                         |  |       |               |  |                    |  | 10,306,342   |      |  |  | 24,800,829   |   |  |  | 819,320     |  
|                                                                    |  |       |               |  |                    |  |              |      |  |  |              |   |  |  |             |  
|Total liabilities                                                   |  |       |               |  |                    |  | 55,750,967   |      |  |  | 67,706,783   |   |  |  | 2,236,762   |  
|                                                                    |  |       |               |  |                    |  |              |      |  |  |              |   |  |  |             |  
|Commitments and Contingent                                          |  |       | 28            |  |                    |  |              |      |  |  |              |   |  |  |             |  
|                                                                    |  |       |               | 
|Capital Stock                                                       |  |       | 2,19,20       |  |                    |  | 129,879,123  |      |  |  | 130,844,556  |   |  |  | 4,322,582   |  
|Additional Paid-in Capital                                          |  |       | 2,10,20,22    |  |                    |  | 45,048,975   |      |  |  | 46,460,665   |   |  |  | 1,534,875   |  
|Retained earnings                                                   |  |       | 2,10,22       |  |                    |  | 28,195,559   |      |  |  | 24,499,124   |   |  |  | 809,353     |  
|Cumulative translation adjustment                                   |  |       | 2             |  |                    |  | (5,279,000   | )    |  |  | (2,268,792   | ) |  |  | (74,952     | )
|Unrealized gain or loss on financial instruments                    |  |       | 2,8           |  |                    |  | 27,715,983   |      |  |  | 14,424,891   |   |  |  | 476,541     |  
|Treasury stock                                                      |  |       | 2,19,21       |  |                    |  | (6,223,357   | )    |  |  | (6,223,357   | ) |  |  | (205,595    | )
|                                                                    |  |       |               |  |                    |  |              |      |  |  |              |   |  |  |             |  
|Total stockholders equity of the Company                           |  |       |               |  |                    |  | 219,337,283  |      |  |  | 207,737,087  |   |  |  | 6,862,804   |  
|                                                                    |  |       |               |  |                    |  |              |      |  |  |              |   |  |  |             |  
|Minority interests                                                  |  |       |               |  |                    |  | 5,798,746    |      |  |  | 4,387,876    |   |  |  | 144,958     |  
|                                                                    |  |       |               |  |                    |  |              |      |  |  |              |   |  |  |             |  
|Total stockholders equity                                          |  |       |               |  |                    |  | 225,136,029  |      |  |  | 212,124,963  |   |  |  | 7,007,762   |  
|                                                                    |  |       |               |  |                    |  |              |      |  |  |              |   |  |  |             |  
|Total liabilities and stockholders equity                          |  |       |               |  |                    |  | 280,886,996  |      |  |  | 279,831,746  |   |  |  | 9,244,524   |  
|                                                                    |  |       |               |  |                    |  |              |      |  |  |              |   |  |  |             |  

The accompanying notes are an integral part of these consolidated financial statements



F-3



---

##### Table of Contents

UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Expressed in Thousands, Except for Earnings per Share )



|                                                           |  |       |              |  |                                  |  |             |      |  |  |             |   |  |     |             |   |  |  |            |  
|---------------------------------------------------------- |  | ----- | ------------ |  | -------------------------------- |  | ----------- | ---- |  |  | ----------- | - |  | --- | ----------- | - |  |  | ---------- | -
|                                                           |  |       |              |  | For the years ended December 31, | 
|                                                           |  | Notes |              |  | 2009                             |  |             | 2010 |  |  | 2011        |  
|                                                           |  |       |              |  | NT$                              |  |             | NT$  |  |  | NT$         |   |  | US$ |            
|Net operating revenues                                     |  |       | 2,26         |  |                                  |  | 91,389,765  |      |  |  | 126,441,544 |   |  |     | 116,702,723 |   |  |  | 3,855,392  |  
|Cost of goods sold                                         |  |       | 2,7,18,20,23 |  |                                  |  | (75,974,607 | )    |  |  | (89,517,205 | ) |  |     | (95,416,529 | ) |  |  | (3,152,181 | )
|                                                           |  |       |              |  |                                  |  |             |      |  |  |             |   |  |     |             |   |  |  |            |  
|Gross profit                                               |  |       |              |  |                                  |  | 15,415,158  |      |  |  | 36,924,339  |   |  |     | 21,286,194  |   |  |  | 703,211    |  
|                                                           |  |       |              |  |                                  |  |             |      |  |  |             |   |  |     |             |   |  |  |            |  
|Operating expenses                                         |  |       | 2,18,20,23   |  |                                  |  |             |      |  |  |             |   |  |     |             |   |  |  |            |  
|Sales and marketing expenses                               |  |       |              |  |                                  |  | (2,800,226  | )    |  |  | (2,565,821  | ) |  |     | (3,369,589  | ) |  |  | (111,318   | )
|General and administrative expenses                        |  |       |              |  |                                  |  | (2,723,288  | )    |  |  | (3,598,361  | ) |  |     | (3,341,672  | ) |  |  | (110,396   | )
|Research and development expenses                          |  |       |              |  |                                  |  | (8,044,155  | )    |  |  | (8,740,479  | ) |  |     | (9,395,066  | ) |  |  | (310,375   | )
|                                                           |  |       |              |  |                                  |  |             |      |  |  |             |   |  |     |             |   |  |  |            |  
|                                                           |  |       |              |  |                                  |  | (13,567,669 | )    |  |  | (14,904,661 | ) |  |     | (16,106,327 | ) |  |  | (532,089   | )
|                                                           |  |       |              |  |                                  |  |             |      |  |  |             |   |  |     |             |   |  |  |            |  
|Operating income                                           |  |       |              |  |                                  |  | 1,847,489   |      |  |  | 22,019,678  |   |  |     | 5,179,867   |   |  |  | 171,122    |  
|                                                           |  |       |              |  |                                  |  |             |      |  |  |             |   |  |     |             |   |  |  |            |  
|Non-operating income                                       |  |       |              |  |                                  |  |             |      |  |  |             |   |  |     |             |   |  |  |            |  
|Interest revenue                                           |  |       |              |  |                                  |  | 170,495     |      |  |  | 143,480     |   |  |     | 229,244     |   |  |  | 7,573      |  
|Investment gain accounted for under the equity method, net |  |       | 2,10         |  |                                  |  | 180,263     |      |  |  | 114,608     |   |  |     |            |   |  |  |           |  
|Dividend income                                            |  |       |              |  |                                  |  | 941,170     |      |  |  | 1,344,017   |   |  |     | 1,715,111   |   |  |  | 56,660     |  
|Gain on disposal of property, plant and equipment          |  |       | 2            |  |                                  |  | 12,721      |      |  |  | 50,383      |   |  |     | 30,685      |   |  |  | 1,014      |  
|Gain on disposal of investments                            |  |       | 2,26         |  |                                  |  | 1,965,468   |      |  |  | 2,020,797   |   |  |     | 1,688,016   |   |  |  | 55,765     |  
|Exchange gain, net                                         |  |       | 2            |  |                                  |  |            |      |  |  |            |   |  |     | 463,730     |   |  |  | 15,320     |  
|Gain on valuation of financial assets                      |  |       |              |  |                                  |  | 512,586     |      |  |  |            |   |  |     |            |   |  |  |           |  
|Gain on valuation of financial liabilities                 |  |       | 2,15         |  |                                  |  |            |      |  |  |            |   |  |     | 1,341,249   |   |  |  | 44,310     |  
|Other income                                               |  |       |              |  |                                  |  | 1,258,535   |      |  |  | 1,019,469   |   |  |     | 2,054,687   |   |  |  | 67,879     |  
|                                                           |  |       |              |  |                                  |  |             |      |  |  |             |   |  |     |             |   |  |  |            |  
|                                                           |  |       |              |  |                                  |  | 5,041,238   |      |  |  | 4,692,754   |   |  |     | 7,522,722   |   |  |  | 248,521    |  
|                                                           |  |       |              |  |                                  |  |             |      |  |  |             |   |  |     |             |   |  |  |            |  
|Non-operating expenses                                     |  |       |              |  |                                  |  |             |      |  |  |             |   |  |     |             |   |  |  |            |  
|Interest expense                                           |  |       | 2,11         |  |                                  |  | (58,255     | )    |  |  | (16,800     | ) |  |     | (306,015    | ) |  |  | (10,110    | )
|Investment loss accounted for under the equity method, net |  |       | 2,10         |  |                                  |  |            |      |  |  |            |   |  |     | (312,261    | ) |  |  | (10,316    | )
|Other investment loss                                      |  |       |              |  |                                  |  |            |      |  |  |            |   |  |     | (362        | ) |  |  | (12        | )
|Loss on disposal of property, plant and equipment          |  |       | 2            |  |                                  |  | (2,529      | )    |  |  | (9,259      | ) |  |     | (8,542      | ) |  |  | (282       | )
|Exchange loss, net                                         |  |       | 2            |  |                                  |  | (135,202    | )    |  |  | (150,905    | ) |  |     |            |   |  |  |           |  
|Financial expenses                                         |  |       |              |  |                                  |  | (90,957     | )    |  |  | (64,595     | ) |  |     | (53,831     | ) |  |  | (1,778     | )
|Impairment loss                                            |  |       | 2,13         |  |                                  |  | (4,007,078  | )    |  |  | (113,879    | ) |  |     | (2,246,490  | ) |  |  | (74,215    | )
|Loss on valuation of financial assets                      |  |       | 2,5          |  |                                  |  |            |      |  |  | (217,895    | ) |  |     | (343,855    | ) |  |  | (11,360    | )
|Loss on valuation of financial liabilities                 |  |       | 2,15         |  |                                  |  | (822,321    | )    |  |  | (665,116    | ) |  |     |            |   |  |  |           |  
|Other losses                                               |  |       |              |  |                                  |  | (99,385     | )    |  |  | (90,362     | ) |  |     | (50,882     | ) |  |  | (1,681     | )
|                                                           |  |       |              |  |                                  |  |             |      |  |  |             |   |  |     |             |   |  |  |            |  
|                                                           |  |       |              |  |                                  |  | (5,215,727  | )    |  |  | (1,328,811  | ) |  |     | (3,322,238  | ) |  |  | (109,754   | )
|                                                           |  |       |              |  |                                  |  |             |      |  |  |             |   |  |     |             |   |  |  |            |  
|Income before income tax and minority interests            |  |       |              |  |                                  |  | 1,673,000   |      |  |  | 25,383,621  |   |  |     | 9,380,351   |   |  |  | 309,889    |  
|Income tax expense                                         |  |       | 2,24         |  |                                  |  | (651,068    | )    |  |  | (1,606,114  | ) |  |     | (913,435    | ) |  |  | (30,176    | )
|Extraordinary gain                                         |  |       | 32           |  |                                  |  | 648,958     |      |  |  | 68,449      |   |  |     |            |   |  |  |           |  
|                                                           |  |       |              |  |                                  |  |             |      |  |  |             |   |  |     |             |   |  |  |            |  
|Net income                                                 |  |       |              |  |                                  |  | 1,670,890   |      |  |  | 23,845,956  |   |  |     | 8,466,916   |   |  |  | 279,713    |  
|                                                           |  |       |              |  |                                  |  |             |      |  |  |             |   |  |     |             |   |  |  |            |  
|Attributable to :                                          |  |       |              |  |                                  |  |             |      |  |  |             |   |  |     |             |   |  |  |            |  
|the Company                                                |  |       |              |  |                                  |  | 3,874,028   |      |  |  | 23,898,905  |   |  |     | 10,609,695  |   |  |  | 350,502    |  
|Minority interests loss                                    |  |       |              |  |                                  |  | (2,203,138  | )    |  |  | (52,949     | ) |  |     | (2,142,779  | ) |  |  | (70,789    | )
|                                                           |  |       |              |  |                                  |  |             |      |  |  |             |   |  |     |             |   |  |  |            |  
|Net income                                                 |  |       |              |  |                                  |  | 1,670,890   |      |  |  | 23,845,956  |   |  |     | 8,466,916   |   |  |  | 279,713    |  
|                                                           |  |       |              |  |                                  |  |             |      |  |  |             |   |  |     |             |   |  |  |            |  
|Earnings per share-basic (in dollars)                      |  |       | 2,25         |  |                                  |  | 0.31        |      |  |  | 1.91        |   |  |     | 0.84        |   |  |  |            |  
|                                                           |  |       |              |  |                                  |  |             |      |  |  |             |   |  |     |             |   |  |  |            |  
|Shares used in per share calculation-basic                 |  |       |              |  |                                  |  | 12,699,072  |      |  |  | 12,496,485  |   |  |     | 12,561,249  |   |  |  |            |  
|                                                           |  |       |              |  |                                  |  |             |      |  |  |             |   |  |     |             |   |  |  |            |  
|Earnings per share-diluted (in dollars)                    |  |       | 2,25         |  |                                  |  | 0.30        |      |  |  | 1.87        |   |  |     | 0.81        |   |  |  |            |  
|                                                           |  |       |              |  |                                  |  |             |      |  |  |             |   |  |     |             |   |  |  |            |  
|Shares used in per share calculation-diluted               |  |       |              |  |                                  |  | 12,786,448  |      |  |  | 12,767,590  |   |  |     | 13,241,680  |   |  |  |            |  
|                                                           |  |       |              |  |                                  |  |             |      |  |  |             |   |  |     |             |   |  |  |            |  

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



F-4



---

##### Table of Contents

UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY

(Expressed in Thousands)



|                                                                                |  |             |             |  |        |  |            |                          |  |  |              |   |  |                                            |             |   |                                 |  |             |                                            |  |  |               |   |  |                   |            |   |       |  |            |   |  |  |            |   |  |  |             |  
|------------------------------------------------------------------------------- |  | ----------- | ----------- |  | ------ |  | ---------- | ------------------------ |  |  | ------------ | - |  | ------------------------------------------ | ----------- | - | ------------------------------- |  | ----------- | ------------------------------------------ |  |  | ------------- | - |  | ----------------- | ---------- | - | ----- |  | ---------- | - |  |  | ---------- | - |  |  | ----------- | -
|                                                                                |  | Capital     |             |  |        |  |            | Retained Earnings        |  |  |              |   |  |                                            |             |   |                                 |  |             |                                            |  |  |               |  
|                                                                                |  | CommonStock |             |  | Shares |  |            | AdditionalPaid-inCapital |  |  | LegalReserve |   |  | UnappropriatedEarnings(Accumulateddeficit) |             |   | CumulativeTranslationAdjustment |  |             | UnrealizedGain/Loss onFinancialInstruments |  |  | TreasuryStock |   |  | MinorityInterests |            |   | Total | 
|                                                                                |  | NT$         |             |  |        |  |            | NT$                      |  |  | NT$          |   |  | NT$                                        |             |   | NT$                             |  |             | NT$                                        |  |  | NT$           |   |  | NT$               |            |   | NT$   | 
|Balance as of January 1, 2009                                                   |  |             | 129,877,713 |  |        |  | 12,987,771 |                          |  |  | 58,149,513   |   |  |                                            | 19,711,865  |   |                                 |  | (26,748,416 | )                                          |  |  | 1,347,373     |   |  |                   | 2,457,922  |   |       |  | (119,801   | ) |  |  | 6,982,125  |   |  |  | 191,658,294 |  
|Treasury stock acquired                                                         |  |             |            |  |        |  |           |                          |  |  |             |   |  |                                            |            |   |                                 |  |            |                                            |  |  |              |   |  |                   |           |   |       |  | (2,393,337 | ) |  |  |           |   |  |  | (2,393,337  | )
|Legal reserve and additional paid-in capital used to cover accumulated deficits |  |             |            |  |        |  |           |                          |  |  | (7,036,551   | ) |  |                                            | (19,711,865 | ) |                                 |  | 26,748,416  |                                            |  |  |              |   |  |                   |           |   |       |  |           |   |  |  |           |   |  |  |            |  
|Net income in 2009                                                              |  |             |            |  |        |  |           |                          |  |  |             |   |  |                                            |            |   |                                 |  | 3,874,028   |                                            |  |  |              |   |  |                   |           |   |       |  |           |   |  |  | (2,203,138 | ) |  |  | 1,670,890   |  
|Compensation cost of employee stock options                                     |  |             |            |  |        |  |           |                          |  |  | 136,306      |   |  |                                            |            |   |                                 |  |            |                                            |  |  |              |   |  |                   |           |   |       |  |           |   |  |  |           |   |  |  | 136,306     |  
|Treasury stock sold to employees                                                |  |             |            |  |        |  |           |                          |  |  | 26,147       |   |  |                                            |            |   |                                 |  |            |                                            |  |  |              |   |  |                   |           |   |       |  | 622,993    |   |  |  |           |   |  |  | 649,140     |  
|Adjustment of additional paid-in capital accounted for under the equity method  |  |             |            |  |        |  |           |                          |  |  | (6,911,617   | ) |  |                                            |            |   |                                 |  |            |                                            |  |  |              |   |  |                   |           |   |       |  |           |   |  |  |           |   |  |  | (6,911,617  | )
|Adjustment of funds and investments disposal                                    |  |             |            |  |        |  |           |                          |  |  | 1,251        |   |  |                                            |            |   |                                 |  |            |                                            |  |  | (991          | ) |  |                   | (10,592    | ) |       |  |           |   |  |  |           |   |  |  | (10,332     | )
|Adjustment of retained earnings accounted for under the equity method           |  |             |            |  |        |  |           |                          |  |  |             |   |  |                                            |            |   |                                 |  | 6,774,785   |                                            |  |  |              |   |  |                   |           |   |       |  |           |   |  |  |           |   |  |  | 6,774,785   |  
|Changes in unrealized gain on available-for-sale financial assets               |  |             |            |  |        |  |           |                          |  |  |             |   |  |                                            |            |   |                                 |  |            |                                            |  |  |              |   |  |                   | 20,143,875 |   |       |  |           |   |  |  |           |   |  |  | 20,143,875  |  
|Changes in unrealized gain on financial instruments of investees                |  |             |            |  |        |  |           |                          |  |  |             |   |  |                                            |            |   |                                 |  |            |                                            |  |  |              |   |  |                   | 8,323,874  |   |       |  |           |   |  |  |           |   |  |  | 8,323,874   |  
|Changes in cumulative translation adjustment                                    |  |             |            |  |        |  |           |                          |  |  |             |   |  |                                            |            |   |                                 |  |            |                                            |  |  | (1,664,570    | ) |  |                   |           |   |       |  |           |   |  |  |           |   |  |  | (1,664,570  | )
|Changes in minority interests                                                   |  |             |            |  |        |  |           |                          |  |  |             |   |  |                                            |            |   |                                 |  |            |                                            |  |  |              |   |  |                   |           |   |       |  |           |   |  |  | (4,281,052 | ) |  |  | (4,281,052  | )
|                                                                                |  |             |             |  |        |  |            |                          |  |  |              |   |  |                                            |             |   |                                 |  |             |                                            |  |  |               |   |  |                   |            |   |       |  |            |   |  |  |            |   |  |  |             |  
|Balance as of December 31, 2009                                                 |  |             | 129,877,713 |  |        |  | 12,987,771 |                          |  |  | 44,365,049   |   |  |                                            |            |   |                                 |  | 10,648,813  |                                            |  |  | (318,188      | ) |  |                   | 30,915,079 |   |       |  | (1,890,145 | ) |  |  | 497,935    |   |  |  | 214,096,256 |  
|                                                                                |  |             |             |  |        |  |            |                          |  |  |              |   |  |                                            |             |   |                                 |  |             |                                            |  |  |               |   |  |                   |            |   |       |  |            |   |  |  |            |   |  |  |             |  

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



F-5



---

##### Table of Contents

UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY

(Expressed in Thousands)



|                                                                      |  |             |             |  |        |  |            |                          |  |  |              |  |  |                        |           |  |                                 |  |            |                                            |  |  |               |   |  |                   |            |   |       |  |            |   |  |  |           |   |  |  |             |  
|--------------------------------------------------------------------- |  | ----------- | ----------- |  | ------ |  | ---------- | ------------------------ |  |  | ------------ |  |  | ---------------------- | --------- |  | ------------------------------- |  | ---------- | ------------------------------------------ |  |  | ------------- | - |  | ----------------- | ---------- | - | ----- |  | ---------- | - |  |  | --------- | - |  |  | ----------- | -
|                                                                      |  | Capital     |             |  |        |  |            | Retained Earnings        |  |  |              |  |  |                        |           |  |                                 |  |            |                                            |  |  |               |  
|                                                                      |  | CommonStock |             |  | Shares |  |            | AdditionalPaid-inCapital |  |  | LegalReserve |  |  | UnappropriatedEarnings |           |  | CumulativeTranslationAdjustment |  |            | UnrealizedGain/Losson FinancialInstruments |  |  | TreasuryStock |   |  | MinorityInterests |            |   | Total | 
|                                                                      |  | NT$         |             |  |        |  |            | NT$                      |  |  | NT$          |  |  | NT$                    |           |  | NT$                             |  |            | NT$                                        |  |  | NT$           |   |  | NT$               |            |   | NT$   | 
|Balance as of January 1, 2010                                         |  |             | 129,877,713 |  |        |  | 12,987,771 |                          |  |  | 44,365,049   |  |  |                        |          |  |                                 |  | 10,648,813 |                                            |  |  | (318,188      | ) |  |                   | 30,915,079 |   |       |  | (1,890,145 | ) |  |  | 497,935   |   |  |  | 214,096,256 |  
|Appropriation of 2009 retained earnings                               |  |             |             |  |        |  |            |                          |  |  |              |  |  |                        |           |  |                                 |  |            |                                            |  |  |               |   |  |                   |            |   |       |  |            |   |  |  |           |   |  |  |             |  
|Legal reserve                                                         |  |             |            |  |        |  |           |                          |  |  |             |  |  |                        | 1,064,881 |  |                                 |  | (1,064,881 | )                                          |  |  |              |   |  |                   |           |   |       |  |           |   |  |  |          |   |  |  |            |  
|Cash dividends                                                        |  |             |            |  |        |  |           |                          |  |  |             |  |  |                        |          |  |                                 |  | (6,233,002 | )                                          |  |  |              |   |  |                   |           |   |       |  |           |   |  |  |          |   |  |  | (6,233,002  | )
|Net income in 2010                                                    |  |             |            |  |        |  |           |                          |  |  |             |  |  |                        |          |  |                                 |  | 23,898,905 |                                            |  |  |              |   |  |                   |           |   |       |  |           |   |  |  | (52,949   | ) |  |  | 23,845,956  |  
|Treasury stock acquired                                               |  |             |            |  |        |  |           |                          |  |  |             |  |  |                        |          |  |                                 |  |           |                                            |  |  |              |   |  |                   |           |   |       |  | (4,843,588 | ) |  |  |          |   |  |  | (4,843,588  | )
|Compensation cost of employee stock options                           |  |             |            |  |        |  |           |                          |  |  | 254,106      |  |  |                        |          |  |                                 |  |           |                                            |  |  |              |   |  |                   |           |   |       |  |           |   |  |  |          |   |  |  | 254,106     |  
|Treasury stock sold to employees                                      |  |             |            |  |        |  |           |                          |  |  | 420,648      |  |  |                        |          |  |                                 |  |           |                                            |  |  |              |   |  |                   |           |   |       |  | 510,376    |   |  |  |          |   |  |  | 931,024     |  
|Adjustment of funds and investments disposal                          |  |             |            |  |        |  |           |                          |  |  |             |  |  |                        |          |  |                                 |  |           |                                            |  |  | (30           | ) |  |                   |           |   |       |  |           |   |  |  |          |   |  |  | (30         | )
|Adjustment of retained earnings accounted for under the equity method |  |             |            |  |        |  |           |                          |  |  |             |  |  |                        |          |  |                                 |  | (119,157   | )                                          |  |  |              |   |  |                   |           |   |       |  |           |   |  |  |          |   |  |  | (119,157    | )
|Cash dividends allocated to subsidaries                               |  |             |            |  |        |  |           |                          |  |  | 8,040        |  |  |                        |          |  |                                 |  |           |                                            |  |  |              |   |  |                   |           |   |       |  |           |   |  |  |          |   |  |  | 8,040       |  
|Changes in unrealized loss on available-for-sale financial assets     |  |             |            |  |        |  |           |                          |  |  |             |  |  |                        |          |  |                                 |  |           |                                            |  |  |              |   |  |                   | (1,268,275 | ) |       |  |           |   |  |  |          |   |  |  | (1,268,275  | )
|Changes in unrealized loss on financial instruments of investees      |  |             |            |  |        |  |           |                          |  |  |             |  |  |                        |          |  |                                 |  |           |                                            |  |  |              |   |  |                   | (1,930,821 | ) |       |  |           |   |  |  |          |   |  |  | (1,930,821  | )
|Exercise employee stock options                                       |  |             | 1,410       |  |        |  | 141        |                          |  |  | 1,132        |  |  |                        |          |  |                                 |  |           |                                            |  |  |              |   |  |                   |           |   |       |  |           |   |  |  |          |   |  |  | 2,542       |  
|Changes in cumulative translation adjustment                          |  |             |            |  |        |  |           |                          |  |  |             |  |  |                        |          |  |                                 |  |           |                                            |  |  | (4,960,782    | ) |  |                   |           |   |       |  |           |   |  |  |          |   |  |  | (4,960,782  | )
|Changes in minority interests                                         |  |             |            |  |        |  |           |                          |  |  |             |  |  |                        |          |  |                                 |  |           |                                            |  |  |              |   |  |                   |           |   |       |  |           |   |  |  | 5,353,760 |   |  |  | 5,353,760   |  
|                                                                      |  |             |             |  |        |  |            |                          |  |  |              |  |  |                        |           |  |                                 |  |            |                                            |  |  |               |   |  |                   |            |   |       |  |            |   |  |  |           |   |  |  |             |  
|Balance as of December 31, 2010                                       |  |             | 129,879,123 |  |        |  | 12,987,912 |                          |  |  | 45,048,975   |  |  |                        | 1,064,881 |  |                                 |  | 27,130,678 |                                            |  |  | (5,279,000    | ) |  |                   | 27,715,983 |   |       |  | (6,223,357 | ) |  |  | 5,798,746 |   |  |  | 225,136,029 |  
|                                                                      |  |             |             |  |        |  |            |                          |  |  |              |  |  |                        |           |  |                                 |  |            |                                            |  |  |               |   |  |                   |            |   |       |  |            |   |  |  |           |   |  |  |             |  

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



F-6



---

##### Table of Contents

UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY

(Expressed in Thousands)



|                                                                               |  |             |             |  |        |  |            |                     |  |  |                          |  |  |              |            |   |                        |  |           |                                 |  |  |                                            |   |  |               |            |   |                   |  |             |       |  |  |            |   |  |  |            |   |  |  |             |  
|------------------------------------------------------------------------------ |  | ----------- | ----------- |  | ------ |  | ---------- | ------------------- |  |  | ------------------------ |  |  | ------------ | ---------- | - | ---------------------- |  | --------- | ------------------------------- |  |  | ------------------------------------------ | - |  | ------------- | ---------- | - | ----------------- |  | ----------- | ----- |  |  | ---------- | - |  |  | ---------- | - |  |  | ----------- | -
|                                                                               |  | Capital     |             |  |        |  |            | Retained Earnings   |  |  |                          |  |  |              |            |   |                        |  |           |                                 |  |  |                                            |  
|                                                                               |  | CommonStock |             |  | Shares |  |            | Collected inAdvance |  |  | AdditionalPaid-inCapital |  |  | LegalReserve |            |   | UnappropriatedEarnings |  |           | CumulativeTranslationAdjustment |  |  | UnrealizedGain/Loss onFinancialInstruments |   |  | TreasuryStock |            |   | MinorityInterests |  |             | Total | 
|                                                                               |  | NT$         |             |  |        |  |            | NT$                 |  |  | NT$                      |  |  | NT$          |            |   | NT$                    |  |           | NT$                             |  |  | NT$                                        |   |  | NT$           |            |   | NT$               |  |             | NT$   | 
|Balance as of January 1, 2011                                                  |  |             | 129,879,123 |  |        |  | 12,987,912 |                     |  |  |                         |  |  |              | 45,048,975 |   |                        |  | 1,064,881 |                                 |  |  | 27,130,678                                 |   |  |               | (5,279,000 | ) |                   |  | 27,715,983  |       |  |  | (6,223,357 | ) |  |  | 5,798,746  |   |  |  | 225,136,029 |  
|Appropriation of 2010 retained earnings                                        |  |             |             |  |        |  |            |                     |  |  |                          |  |  |              |            |   |                        |  |           |                                 |  |  |                                            |   |  |               |            |   |                   |  |             |       |  |  |            |   |  |  |            |   |  |  |             |  
|Legal reserve                                                                  |  |             |            |  |        |  |           |                     |  |  |                         |  |  |              |           |   |                        |  | 2,377,975 |                                 |  |  | (2,377,975                                 | ) |  |               |           |   |                   |  |            |       |  |  |           |   |  |  |           |   |  |  |            |  
|Cash dividends                                                                 |  |             |            |  |        |  |           |                     |  |  |                         |  |  |              |           |   |                        |  |          |                                 |  |  | (14,033,575                                | ) |  |               |           |   |                   |  |            |       |  |  |           |   |  |  |           |   |  |  | (14,033,575 | )
|Net income in 2011                                                             |  |             |            |  |        |  |           |                     |  |  |                         |  |  |              |           |   |                        |  |          |                                 |  |  | 10,609,695                                 |   |  |               |           |   |                   |  |            |       |  |  |           |   |  |  | (2,142,779 | ) |  |  | 8,466,916   |  
|Compensation cost of employee stock options                                    |  |             |            |  |        |  |           |                     |  |  |                         |  |  |              | 213,639    |   |                        |  |          |                                 |  |  |                                           |   |  |               |           |   |                   |  |            |       |  |  |           |   |  |  |           |   |  |  | 213,639     |  
|Treasury stock sold to employees                                               |  |             |            |  |        |  |           |                     |  |  |                         |  |  |              | 599,139    |   |                        |  |          |                                 |  |  |                                           |   |  |               |           |   |                   |  |            |       |  |  |           |   |  |  |           |   |  |  | 599,139     |  
|Embedded conversion options derived from convertible bonds                     |  |             |            |  |        |  |           |                     |  |  |                         |  |  |              | 679,612    |   |                        |  |          |                                 |  |  |                                           |   |  |               |           |   |                   |  |            |       |  |  |           |   |  |  |           |   |  |  | 679,612     |  
|Derecognise convertible bonds                                                  |  |             |            |  |        |  |           |                     |  |  |                         |  |  |              | (137,088   | ) |                        |  |          |                                 |  |  |                                           |   |  |               |           |   |                   |  |            |       |  |  |           |   |  |  |           |   |  |  | (137,088    | )
|Adjustment of additional paid-in capital accounted for under the equity method |  |             |            |  |        |  |           |                     |  |  |                         |  |  |              | (103       | ) |                        |  |          |                                 |  |  |                                           |   |  |               |           |   |                   |  |            |       |  |  |           |   |  |  |           |   |  |  | (103        | )
|Adjustment of funds and investments disposal                                   |  |             |            |  |        |  |           |                     |  |  |                         |  |  |              |           |   |                        |  |          |                                 |  |  |                                           |   |  |               | (5         | ) |                   |  |            |       |  |  |           |   |  |  |           |   |  |  | (5          | )
|Adjustment of retained earnings accounted for under the equity method          |  |             |            |  |        |  |           |                     |  |  |                         |  |  |              |           |   |                        |  |          |                                 |  |  | (272,555                                   | ) |  |               |           |   |                   |  |            |       |  |  |           |   |  |  |           |   |  |  | (272,555    | )
|Cash dividends allocated to subsidaries                                        |  |             |            |  |        |  |           |                     |  |  |                         |  |  |              | 17,874     |   |                        |  |          |                                 |  |  |                                           |   |  |               |           |   |                   |  |            |       |  |  |           |   |  |  |           |   |  |  | 17,874      |  
|Changes in unrealized loss on available-for-sale financial assets              |  |             |            |  |        |  |           |                     |  |  |                         |  |  |              |           |   |                        |  |          |                                 |  |  |                                           |   |  |               |           |   |                   |  | (10,470,556 | )     |  |  |           |   |  |  |           |   |  |  | (10,470,556 | )
|Changes in unrealized loss on financial instruments of investees               |  |             |            |  |        |  |           |                     |  |  |                         |  |  |              |           |   |                        |  |          |                                 |  |  |                                           |   |  |               |           |   |                   |  | (2,820,536  | )     |  |  |           |   |  |  |           |   |  |  | (2,820,536  | )
|Exercise of employee stock options                                             |  |             | 964,293     |  |        |  | 96,430     |                     |  |  | 1,140                    |  |  |              | 38,617     |   |                        |  |          |                                 |  |  |                                           |   |  |               |           |   |                   |  |            |       |  |  |           |   |  |  |           |   |  |  | 1,004,050   |  
|Changes in cumulative translation adjustment                                   |  |             |            |  |        |  |           |                     |  |  |                         |  |  |              |           |   |                        |  |          |                                 |  |  |                                           |   |  |               | 3,010,213  |   |                   |  |            |       |  |  |           |   |  |  |           |   |  |  | 3,010,213   |  
|Changes in minority interests                                                  |  |             |            |  |        |  |           |                     |  |  |                         |  |  |              |           |   |                        |  |          |                                 |  |  |                                           |   |  |               |           |   |                   |  |            |       |  |  |           |   |  |  | 731,909    |   |  |  | 731,909     |  
|                                                                               |  |             |             |  |        |  |            |                     |  |  |                          |  |  |              |            |   |                        |  |           |                                 |  |  |                                            |   |  |               |            |   |                   |  |             |       |  |  |            |   |  |  |            |   |  |  |             |  
|Balance as of December 31, 2011                                                |  |             | 130,843,416 |  |        |  | 13,084,342 |                     |  |  | 1,140                    |  |  |              | 46,460,665 |   |                        |  | 3,442,856 |                                 |  |  | 21,056,268                                 |   |  |               | (2,268,792 | ) |                   |  | 14,424,891  |       |  |  | (6,223,357 | ) |  |  | 4,387,876  |   |  |  | 212,124,963 |  
|                                                                               |  |             |             |  |        |  |            |                     |  |  |                          |  |  |              |            |   |                        |  |           |                                 |  |  |                                            |   |  |               |            |   |                   |  |             |       |  |  |            |   |  |  |            |   |  |  |             |  

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



F-7



---

##### Table of Contents

UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in Thousands)



|                                                                                         |  |                                  |             |   |      |  |             |      |  |  |             |   |  |  |            |  
|---------------------------------------------------------------------------------------- |  | -------------------------------- | ----------- | - | ---- |  | ----------- | ---- |  |  | ----------- | - |  |  | ---------- | -
|                                                                                         |  | For the years ended December 31, |            
|                                                                                         |  | 2009                             |             |   | 2010 |  |             | 2011 | 
|                                                                                         |  | NT$                              |             |   | NT$  |  |             | NT$  |  |  | US$         |  
|Cash flows from operating activities:                                                    |  |                                  |             |   |      |  |             |      |  |  |             |   |  |  |            |  
|Net income attributable to stockholders of the Company                                   |  |                                  | 3,874,028   |   |      |  | 23,898,905  |      |  |  | 10,609,695  |   |  |  | 350,502    |  
|Net loss attributable to minority interests                                              |  |                                  | (2,203,138  | ) |      |  | (52,949     | )    |  |  | (2,142,779  | ) |  |  | (70,789    | )
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |                                  |             |   |      |  |             |      |  |  |             |   |  |  |            |  
|Extraordinary gain                                                                       |  |                                  | (648,958    | ) |      |  | (82,469     | )    |  |  |            |   |  |  |           |  
|Depreciation                                                                             |  |                                  | 33,530,254  |   |      |  | 29,951,312  |      |  |  | 31,915,068  |   |  |  | 1,054,346  |  
|Amortization                                                                             |  |                                  | 699,541     |   |      |  | 544,321     |      |  |  | 455,731     |   |  |  | 15,056     |  
|Bad debt expense (reversal)                                                              |  |                                  | (22,225     | ) |      |  | 20,748      |      |  |  | 578,805     |   |  |  | 19,121     |  
|Donation income                                                                          |  |                                  |            |   |      |  |            |      |  |  | (691,611    | ) |  |  | (22,848    | )
|Loss (Gain) on decline (recovery) in market value, scrap and obsolescence of inventories |  |                                  | (2,414,592  | ) |      |  | 82,453      |      |  |  | 1,754,699   |   |  |  | 57,968     |  
|Cash dividends received under the equity method                                          |  |                                  | 901         |   |      |  | 48,753      |      |  |  | 305,396     |   |  |  | 10,089     |  
|Investment loss (gain) accounted for under the equity method                             |  |                                  | (180,263    | ) |      |  | (114,608    | )    |  |  | 312,261     |   |  |  | 10,316     |  
|Loss (Gain) on valuation of financial assets and liabilities                             |  |                                  | 309,735     |   |      |  | 883,011     |      |  |  | (997,394    | ) |  |  | (32,950    | )
|Impairment loss                                                                          |  |                                  | 4,007,078   |   |      |  | 113,879     |      |  |  | 2,246,490   |   |  |  | 74,215     |  
|Gain on disposal of investments                                                          |  |                                  | (1,965,468  | ) |      |  | (2,020,797  | )    |  |  | (1,688,016  | ) |  |  | (55,765    | )
|Gain on disposal of property, plant and equipment                                        |  |                                  | (10,192     | ) |      |  | (41,124     | )    |  |  | (22,143     | ) |  |  | (732       | )
|Gain on disposal of non-current assets held for sale                                     |  |                                  | (91,413     | ) |      |  | (449        | )    |  |  | (193,855    | ) |  |  | (6,404     | )
|Gain on reacquisition of bonds                                                           |  |                                  |            |   |      |  |            |      |  |  | (167,311    | ) |  |  | (5,527     | )
|Amortization of financial assets discounts                                               |  |                                  |            |   |      |  | (7,253      | )    |  |  |            |   |  |  |           |  
|Amortization of bond discounts                                                           |  |                                  | 20,018      |   |      |  | 227,139     |      |  |  | 300,389     |   |  |  | 9,924      |  
|Amortization of administrative expenses from syndicated loans                            |  |                                  |            |   |      |  | 273         |      |  |  | 4,051       |   |  |  | 134        |  
|Exchange loss (gain) on financial assets and liabilities                                 |  |                                  | 4,754       |   |      |  | (327,341    | )    |  |  | 77,874      |   |  |  | 2,573      |  
|Exchange loss (gain) on long-term liabilities                                            |  |                                  | (27,466     | ) |      |  | (498,520    | )    |  |  | 188,531     |   |  |  | 6,228      |  
|Exchange loss (gain) on disposal of non-current assets held for sale                     |  |                                  |            |   |      |  | 266         |      |  |  | (767        | ) |  |  | (25        | )
|Amortization of deferred income                                                          |  |                                  | (202,460    | ) |      |  | (145,764    | )    |  |  | (98,940     | ) |  |  | (3,269     | )
|Stock-based payment                                                                      |  |                                  | 162,157     |   |      |  | 646,968     |      |  |  | 796,253     |   |  |  | 26,305     |  
|Changes in assets and liabilities:                                                       |  |                                  |             |   |      |  |             |      |  |  |             |   |  |  |            |  
|Financial assets and liabilities at fair value through profit or loss                    |  |                                  | 182,985     |   |      |  | 612,802     |      |  |  | (140,618    | ) |  |  | (4,645     | )
|Notes receivable and Accounts receivable                                                 |  |                                  | (8,370,011  | ) |      |  | (2,315,832  | )    |  |  | 3,762,332   |   |  |  | 124,292    |  
|Other receivables                                                                        |  |                                  | 397,018     |   |      |  | 1,380,061   |      |  |  | (124,682    | ) |  |  | (4,119     | )
|Inventories                                                                              |  |                                  | 1,292,621   |   |      |  | (3,334,002  | )    |  |  | (1,250,546  | ) |  |  | (41,313    | )
|Prepaid expenses                                                                         |  |                                  | (295,271    | ) |      |  | (586,039    | )    |  |  | 65,796      |   |  |  | 2,174      |  
|Deferred income tax assets and liabilities                                               |  |                                  | 462,075     |   |      |  | 69,112      |      |  |  | 469,352     |   |  |  | 15,505     |  
|Notes and accounts payable                                                               |  |                                  | 3,103,407   |   |      |  | 1,776,366   |      |  |  | (2,054,788  | ) |  |  | (67,882    | )
|Accrued expenses                                                                         |  |                                  | 1,114,607   |   |      |  | 3,893,450   |      |  |  | (2,811,033  | ) |  |  | (92,865    | )
|Other current liabilities                                                                |  |                                  | (359,970    | ) |      |  | (1,271,666  | )    |  |  | 12,722      |   |  |  | 420        |  
|Accrued pension liabilities                                                              |  |                                  | 41,432      |   |      |  | 38,378      |      |  |  | (32,378     | ) |  |  | (1,070     | )
|Other liabilities-others                                                                 |  |                                  | 10,670      |   |      |  | 105,629     |      |  |  | 215,216     |   |  |  | 7,110      |  
|                                                                                         |  |                                  |             |   |      |  |             |      |  |  |             |   |  |  |            |  
|Net cash provided by operating activities                                                |  |                                  | 32,421,854  |   |      |  | 53,495,013  |      |  |  | 41,653,800  |   |  |  | 1,376,075  |  
|                                                                                         |  |                                  |             |   |      |  |             |      |  |  |             |   |  |  |            |  
|Cash flows from investing activities:                                                    |  |                                  |             |   |      |  |             |      |  |  |             |   |  |  |            |  
|Acquisition of financial assets at fair value through profit or loss                     |  |                                  | (388,701    | ) |      |  | (163,620    | )    |  |  | (85,451     | ) |  |  | (2,823     | )
|Proceeds from disposal of financial assets at fair value through profit or loss          |  |                                  | 275,400     |   |      |  |            |      |  |  | 29,656      |   |  |  | 980        |  
|Acquisition of available-for-sale financial assets                                       |  |                                  | (108,222    | ) |      |  | (232,092    | )    |  |  | (98,188     | ) |  |  | (3,244     | )
|Proceeds from disposal of available-for-sale financial assets                            |  |                                  | 2,790,430   |   |      |  | 3,485,293   |      |  |  | 3,103,136   |   |  |  | 102,515    |  
|Acquisition of financial assets measured at cost                                         |  |                                  | (984,369    | ) |      |  | (835,525    | )    |  |  | (1,517,080  | ) |  |  | (50,118    | )
|Proceeds from disposal of financial assets measured at cost                              |  |                                  | 316,295     |   |      |  | 333,977     |      |  |  | 409,240     |   |  |  | 13,520     |  
|Acquisition of long-term investments accounted for under the equity method               |  |                                  | (1,201,107  | ) |      |  | (597,459    | )    |  |  | (3,325,272  | ) |  |  | (109,854   | )
|Proceeds from disposal of long-term investments accounted for under the equity method    |  |                                  |            |   |      |  | 157,734     |      |  |  | 119,643     |   |  |  | 3,952      |  
|Acquisition of held-to-maturity financial assets                                         |  |                                  | (64,233     | ) |      |  |            |      |  |  |            |   |  |  |           |  
|Proceeds from disposal of held-to-maturity financial assets                              |  |                                  | 408,364     |   |      |  |            |      |  |  |            |   |  |  |           |  
|Prepayment for long-term investments                                                     |  |                                  | (322,290    | ) |      |  |            |      |  |  | (43,921     | ) |  |  | (1,451     | )
|Proceeds from capital reduction and liquidation of investments                           |  |                                  | 239,284     |   |      |  | 52,914      |      |  |  | 251,584     |   |  |  | 8,311      |  
|Net cash received from acquisition of subsidiaries                                       |  |                                  | 7,500       |   |      |  | 1,859,186   |      |  |  | 29,350      |   |  |  | 970        |  
|Net cash paid for disposal of subsidiaries                                               |  |                                  | (18,803     | ) |      |  | (176,217    | )    |  |  | (93,668     | ) |  |  | (3,094     | )
|Other receivables                                                                        |  |                                  |            |   |      |  | 27,108      |      |  |  |            |   |  |  |           |  
|Acquisition of minority interests                                                        |  |                                  | (1,862,598  | ) |      |  | (266,382    | )    |  |  | (111,533    | ) |  |  | (3,685     | )
|Acquisition of property, plant and equipment                                             |  |                                  | (17,617,854 | ) |      |  | (61,322,819 | )    |  |  | (53,326,115 | ) |  |  | (1,761,682 | )
|Proceeds from disposal of property, plant and equipment                                  |  |                                  | 38,458      |   |      |  | 76,044      |      |  |  | 44,962      |   |  |  | 1,485      |  
|Proceeds from disposal of non-current assets held for sale                               |  |                                  | 462,376     |   |      |  | 405,098     |      |  |  | 594,738     |   |  |  | 19,648     |  
|Increase in deferred charges                                                             |  |                                  | (1,146,421  | ) |      |  | (382,050    | )    |  |  | (392,956    | ) |  |  | (12,982    | )
|Acquisition of intangible assets                                                         |  |                                  |            |   |      |  |            |      |  |  | (287,203    | ) |  |  | (9,488     | )
|Decrease (increase) in restricted assets                                                 |  |                                  |            |   |      |  | (26,077     | )    |  |  | 4,806       |   |  |  | 159        |  
|Increase in other assets-others                                                          |  |                                  | (52,137     | ) |      |  | (174,066    | )    |  |  | (425,788    | ) |  |  | (14,066    | )
|                                                                                         |  |                                  |             |   |      |  |             |      |  |  |             |   |  |  |            |  
|Net cash used in investing activities                                                    |  |                                  | (19,228,628 | ) |      |  | (57,778,953 | )    |  |  | (55,120,060 | ) |  |  | (1,820,947 | )
|                                                                                         |  |                                  |             |   |      |  |             |      |  |  |             |   |  |  |            |  

The accompanying notes are an integral part of these consolidated financial statements



F-8



---

##### Table of Contents

UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in Thousands)



|                                                                       |  |                                  |            |   |      |  |             |      |  |  |             |   |  |  |           |  
|---------------------------------------------------------------------- |  | -------------------------------- | ---------- | - | ---- |  | ----------- | ---- |  |  | ----------- | - |  |  | --------- | -
|                                                                       |  | For the years ended December 31, |           
|                                                                       |  | 2009                             |            |   | 2010 |  |             | 2011 | 
|                                                                       |  | NT$                              |            |   | NT$  |  |             | NT$  |  |  | US$         |  
|Cash flows from financing activities:                                  |  |                                  |            |   |      |  |             |      |  |  |             |   |  |  |           |  
|Increase (decrease) in short-term loans                                |  |                                  | (8,240     | ) |      |  | 4,202,660   |      |  |  | 5,294,899   |   |  |  | 174,922   |  
|Proceeds from long-term loans                                          |  |                                  | 400,000    |   |      |  | 1,345,000   |      |  |  | 7,861,160   |   |  |  | 259,701   |  
|Repayments of long-term loans                                          |  |                                  | (300,000   | ) |      |  | (33,450     | )    |  |  | (3,457,383  | ) |  |  | (114,218  | )
|Increase in financial liabilities at fair value through profit or loss |  |                                  | 1,340,741  |   |      |  |            |      |  |  |            |   |  |  |          |  
|Proceeds from bonds issued                                             |  |                                  | 5,330,477  |   |      |  |            |      |  |  | 14,423,000  |   |  |  | 476,478   |  
|Bond issuance costs                                                    |  |                                  | (51,202    | ) |      |  |            |      |  |  | (67,322     | ) |  |  | (2,224    | )
|Redemption of bonds                                                    |  |                                  |           |   |      |  | (7,500,000  | )    |  |  |            |   |  |  |          |  
|Reacquisition of bonds                                                 |  |                                  |           |   |      |  |            |      |  |  | (1,725,732  | ) |  |  | (57,011   | )
|Cash dividends                                                         |  |                                  |           |   |      |  | (6,224,963  | )    |  |  | (14,015,701 | ) |  |  | (463,023  | )
|Exercise of employee stock options                                     |  |                                  |           |   |      |  | 2,542       |      |  |  | 1,004,050   |   |  |  | 33,170    |  
|Treasury stock acquired                                                |  |                                  | (2,393,337 | ) |      |  | (4,843,588  | )    |  |  |            |   |  |  |          |  
|Treasury stock sold to employees                                       |  |                                  | 623,166    |   |      |  | 510,517     |      |  |  |            |   |  |  |          |  
|Proceeds from disposal of treasury stock                               |  |                                  |           |   |      |  | 27,211      |      |  |  | 15,071      |   |  |  | 498       |  
|Increase in deposits-in                                                |  |                                  | 6,427      |   |      |  | 9,620       |      |  |  | 81,722      |   |  |  | 2,700     |  
|Increase (decrease) in minority stockholders                           |  |                                  | (4,239     | ) |      |  | 2,330,577   |      |  |  | 509,225     |   |  |  | 16,823    |  
|                                                                       |  |                                  |            |   |      |  |             |      |  |  |             |   |  |  |           |  
|Net cash provided by (used in) financing activities                    |  |                                  | 4,943,793  |   |      |  | (10,173,874 | )    |  |  | 9,922,989   |   |  |  | 327,816   |  
|                                                                       |  |                                  |            |   |      |  |             |      |  |  |             |   |  |  |           |  
|Effect of exchange rate changes on cash and cash equivalents           |  |                                  | (550,708   | ) |      |  | (424,041    | )    |  |  | 1,342,294   |   |  |  | 44,344    |  
|                                                                       |  |                                  |            |   |      |  |             |      |  |  |             |   |  |  |           |  
|Net increase (decrease) in cash and cash equivalents                   |  |                                  | 17,586,311 |   |      |  | (14,881,855 | )    |  |  | (2,200,977  | ) |  |  | (72,712   | )
|Cash and cash equivalents at beginning of period                       |  |                                  | 48,566,649 |   |      |  | 66,152,960  |      |  |  | 51,271,105  |   |  |  | 1,693,793 |  
|                                                                       |  |                                  |            |   |      |  |             |      |  |  |             |   |  |  |           |  
|Cash and cash equivalents at end of period                             |  |                                  | 66,152,960 |   |      |  | 51,271,105  |      |  |  | 49,070,128  |   |  |  | 1,621,081 |  
|                                                                       |  |                                  |            |   |      |  |             |      |  |  |             |   |  |  |           |  
|Supplemental disclosures of cash flow information:                     |  |                                  |            |   |      |  |             |      |  |  |             |   |  |  |           |  
|Cash paid for interest                                                 |  |                                  | 124,244    |   |      |  | 239,265     |      |  |  | 262,459     |   |  |  | 8,671     |  
|Less: Cash paid for capitalized interest                               |  |                                  | (39,106    | ) |      |  | (224,029    | )    |  |  | (72,495     | ) |  |  | (2,395    | )
|                                                                       |  |                                  |            |   |      |  |             |      |  |  |             |   |  |  |           |  
|Cash paid for interest excluding capitalized interest                  |  |                                  | 85,138     |   |      |  | 15,236      |      |  |  | 189,964     |   |  |  | 6,276     |  
|                                                                       |  |                                  |            |   |      |  |             |      |  |  |             |   |  |  |           |  
|Cash paid for income tax                                               |  |                                  | 709,186    |   |      |  | 117,584     |      |  |  | 1,452,646   |   |  |  | 47,990    |  
|                                                                       |  |                                  |            |   |      |  |             |      |  |  |             |   |  |  |           |  
|Investing activities partially paid by cash:                           |  |                                  |            |   |      |  |             |      |  |  |             |   |  |  |           |  
|Acquisition of property, plant and equipment                           |  |                                  | 21,387,628 |   |      |  | 67,623,874  |      |  |  | 49,286,693  |   |  |  | 1,628,236 |  
|Discount on property, plant and equipment                              |  |                                  |           |   |      |  | (1,592      | )    |  |  | (58,110     | ) |  |  | (1,920    | )
|Add: Payable at beginning of period                                    |  |                                  | 1,718,134  |   |      |  | 5,487,908   |      |  |  | 12,620,481  |   |  |  | 416,930   |  
|Add: Effect of acquisition of subsidiaries                             |  |                                  |           |   |      |  | 833,110     |      |  |  |            |   |  |  |          |  
|Less: Payable at end of period                                         |  |                                  | (5,487,908 | ) |      |  | (12,620,481 | )    |  |  | (8,517,694  | ) |  |  | (281,391  | )
|Less: Effect of disposal of subsidiaries                               |  |                                  |           |   |      |  |            |      |  |  | (5,255      | ) |  |  | (173      | )
|                                                                       |  |                                  |            |   |      |  |             |      |  |  |             |   |  |  |           |  
|Cash paid for acquiring property, plant and equipment                  |  |                                  | 17,617,854 |   |      |  | 61,322,819  |      |  |  | 53,326,115  |   |  |  | 1,761,682 |  
|                                                                       |  |                                  |            |   |      |  |             |      |  |  |             |   |  |  |           |  

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



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UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|1. | HISTORY AND ORGANIZATION
|-- | ------------------------

United
Microelectronics Corporation (UMC) was incorporated in May 1980 and commenced operations in April 1982. UMC is a full service semiconductor wafer foundry, and provides a variety of services to satisfy customer needs. UMCs common shares were
publicly listed on the Taiwan Stock Exchange (TSE) in July 1985 and its American Depositary Shares (ADSs) were listed on the New York Stock Exchange (NYSE) in September 2000.

The numbers of employees as of December 31, 2010 and 2011 were 15,656 and 15,820, respectively.



|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|-- | ------------------------------------------

The consolidated financial statements were prepared in conformity with requirements of the Guidelines Governing the Preparation of Financial Reports by Securities Issuers and accounting principles
generally accepted in the Republic of China (R.O.C.).

Summary of significant accounting policies is as follows:

General Descriptions of Reporting Entities

Principles of Consolidation

Investees in which UMC, directly or
indirectly, holds more than 50% of voting rights are consolidated into UMCs financial statements. (UMC and the consolidated entities are hereinafter referred to as the Company.)

Transactions between consolidated entities are eliminated in the consolidated financial statements. The difference between the acquisition
cost and the net equity of a subsidiary as of the acquisition date was amortized, and goodwill arising from new acquisitions is analyzed and accounted for under the R.O.C. Statement of Financial Accounting Standard (R.O.C. SFAS) No. 25,
Business Combination  Accounting Treatment under Purchase Method(R.O.C. SFAS 25), in which goodwill is not subject to amortization.



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UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



The consolidated entities are as follows:

As of December 31, 2010



|                      |  |                                                        |  |                                                        |  |                            |        | 
|--------------------- |  | ------------------------------------------------------ |  | ------------------------------------------------------ |  | -------------------------- | ------ | 
|Investor              |  | Subsidiary                                             |  | Business nature                                        |  | Percentage ofownership (%) |       
|                      |  |                                                        | 
|UMC                   |  | UMC GROUP (USA) (UMC-USA)                              |  | IC Sales                                               |  |                            | 100.00 | 
|                      |  |                                                        | 
|UMC                   |  | UNITED MICROELECTRONICS (EUROPE) B.V. (UME BV)         |  | Market development                                     |  |                            | 100.00 | 
|                      |  |                                                        | 
|UMC                   |  | UMC CAPITAL CORP.                                      |  | Investment holding                                     |  |                            | 100.00 | 
|                      |  |                                                        | 
|UMC                   |  | GREEN EARTH LIMITED                                    |  | Investment holding                                     |  |                            | 100.00 | 
|                      |  |                                                        | 
|UMC                   |  | TLC CAPITAL CO., LTD. (TLC)                            |  | New business investment                                |  |                            | 100.00 | 
|                      |  |                                                        | 
|UMC                   |  | UMC NEW BUSINESS INVESTMENT CORP. (NBI)                |  | Investment holding                                     |  |                            | 100.00 | 
|                      |  |                                                        | 
|UMC                   |  | ALPHA WISDOM LIMITED (AWL) (Note A)                    |  | Investment holding                                     |  |                            | 100.00 | 
|                      |  |                                                        | 
|UMC                   |  | FORTUNE VENTURE CAPITAL CORP. (FORTUNE)                |  | Consulting and planning for investment in new business |  |                            | 100.00 | 
|                      |  |                                                        | 
|UMC                   |  | UMC JAPAN (UMCJ)                                       |  | Sales and manufacturing of integrated circuits         |  |                            | 55.56  | 
|                      |  |                                                        | 
|UMC                   |  | NEXPOWER TECHNOLOGY CORP (NEXPOWER)                    |  | Sales and manufacturing of solar power batteries       |  |                            | 44.42  | 
|                      |  |                                                        | 
|FORTUNE               |  | UNITRUTH INVESTMENT CORP. (UNITRUTH)                   |  | Investment holding                                     |  |                            | 100.00 | 
|                      |  |                                                        | 
|FORTUNE               |  | MOS ART PACK CORP. (MAP) (Note B)                      |  | IC Packaging                                           |  |                            | 54.72  | 
|                      |  |                                                        | 
|FORTUNE               |  | NEXPOWER                                               |  | Sales and manufacturing of solar power batteries       |  |                            | 5.08   | 
|                      |  |                                                        | 
|UNITRUTH              |  | MAP                                                    |  | IC Packaging                                           |  |                            | 18.62  | 
|                      |  |                                                        | 
|UNITRUTH              |  | NEXPOWER                                               |  | Sales and manufacturing of solar power batteries       |  |                            | 2.27   | 
|                      |  |                                                        | 
|UMC CAPITAL CORP.     |  | UMC CAPITAL (USA)                                      |  | Investment holding                                     |  |                            | 100.00 | 
|                      |  |                                                        | 
|UMC CAPITAL CORP.     |  | ECP VITA LTD.                                          |  | Insurance                                              |  |                            | 100.00 | 
|                      |  |                                                        | 
|TLC                   |  | SOARING CAPITAL CORP.                                  |  | Investment holding                                     |  |                            | 100.00 | 
|                      |  |                                                        | 
|TLC                   |  | NEXPOWER                                               |  | Sales and manufacturing of solar power batteries       |  |                            | 5.90   | 
|                      |  |                                                        | 
|SOARING CAPITAL CORP. |  | UNITRUTH ADVISOR (SHANGHAI) CO., LTD.                  |  | Investment holding and advisory                        |  |                            | 100.00 | 
|                      |  |                                                        | 
|NBI                   |  | WAVETEK MICROELECTRONICS CORPORATION (WAVETEK)         |  | GaAs Foundry service                                   |  |                            | 99.79  | 
|                      |  |                                                        | 
|NBI                   |  | UNITED LIGHTING OPTO-ELECTRONIC INC. (UNITED LIGHTING) |  | LED lighting manufacturing and sale                    |  |                            | 94.65  | 



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|                |  |                                                                                |  |                                                                                                |  |                            |        | 
|--------------- |  | ------------------------------------------------------------------------------ |  | ---------------------------------------------------------------------------------------------- |  | -------------------------- | ------ | 
|Investor        |  | Subsidiary                                                                     |  | Business nature                                                                                |  | Percentage ofownership (%) |       
|                |  |                                                                                | 
|NBI             |  | EVERRICH ENERGY CORP. (EVERRICH)                                               |  | Solar engineering integrated design services                                                   |  |                            | 91.12  | 
|                |  |                                                                                | 
|NBI             |  | UNISTARS CORP. (UNISTARS)                                                      |  | High brightness LED packages                                                                   |  |                            | 65.63  | 
|                |  |                                                                                | 
|NBI             |  | TOPCELL SOLAR INTERNATIONAL CO., LTD. (TOPCELL)                                |  | Solar power cell manufacturing and sale                                                        |  |                            | 51.49  | 
|                |  |                                                                                | 
|UNITED LIGHTING |  | UNITED LIGHTING OPTO-ELECTRONIC INVESTMENT (HK) LIMITED                        |  | Investment holding                                                                             |  |                            | 100.00 | 
|                |  |                                                                                | 
|EVERRICH        |  | EVERRICH ENERGY INVESTMENT (HK) LIMITED (EVERRICH-HK)                          |  | Investment holding                                                                             |  |                            | 100.00 | 
|                |  |                                                                                | 
|EVERRICH-HK     |  | EVERRICH (SHANDONG) ENERGY CO., LTD (formerly YONGSHENG (SHANDONG) ENERGY CO.) |  | Solar engineering integrated design services                                                   |  |                            | 100.00 | 
|                |  |                                                                                | 
|AWL             |  | UMCJ                                                                           |  | Sales and manufacturing of integrated circuits                                                 |  |                            | 44.44  | 
|                |  |                                                                                | 
|NEXPOWER        |  | JENENERGY SYSTEM CORPORATION (JENENERGY)                                       |  | Energy Technology Service                                                                      |  |                            | 66.67  | 
|                |  |                                                                                | 
|JENENERGY       |  | SMART ENERGY ENTERPRISES LIMITED (SMART ENERGY)                                |  | Investment holding                                                                             |  |                            | 100.00 | 
|                |  |                                                                                | 
|SMART ENERGY    |  | SMART ENERGY SHANDONG CORPORATION                                              |  | Design of photovoltaic system and consulting services related to photovoltaic technology, etc. |  |                            | 100.00 | 

As of December 31, 2011



|         |  |                                |  |                                                        |  |                            |        | 
|-------- |  | ------------------------------ |  | ------------------------------------------------------ |  | -------------------------- | ------ | 
|Investor |  | Subsidiary                     |  | Business nature                                        |  | Percentage ofownership (%) |       
|         |  |                                | 
|UMC      |  | UMC-USA                        |  | IC Sales                                               |  |                            | 100.00 | 
|         |  |                                | 
|UMC      |  | UME BV                         |  | Market development                                     |  |                            | 100.00 | 
|         |  |                                | 
|UMC      |  | UMC CAPITAL CORP.              |  | Investment holding                                     |  |                            | 100.00 | 
|         |  |                                | 
|UMC      |  | GREEN EARTH LIMITED            |  | Investment holding                                     |  |                            | 100.00 | 
|         |  |                                | 
|UMC      |  | TLC                            |  | New business investment                                |  |                            | 100.00 | 
|         |  |                                | 
|UMC      |  | NBI                            |  | Investment holding                                     |  |                            | 100.00 | 
|         |  |                                | 
|UMC      |  | UMC INVESTMENT (SAMOA) LIMITED |  | Investment holding                                     |  |                            | 100.00 | 
|         |  |                                | 
|UMC      |  | FORTUNE                        |  | Consulting and planning for investment in new business |  |                            | 100.00 | 
|         |  |                                | 
|UMC      |  | UMCJ                           |  | Sales and manufacturing of integrated circuits         |  |                            | 100.00 | 



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UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|                      |  |                                                         |  |                                                  |  |                            |        | 
|--------------------- |  | ------------------------------------------------------- |  | ------------------------------------------------ |  | -------------------------- | ------ | 
|Investor              |  | Subsidiary                                              |  | Business nature                                  |  | Percentage ofownership (%) |       
|                      |  |                                                         | 
|UMC                   |  | NEXPOWER                                                |  | Sales and manufacturing of solar power batteries |  |                            | 44.16  | 
|                      |  |                                                         | 
|FORTUNE               |  | UNITRUTH                                                |  | Investment holding                               |  |                            | 100.00 | 
|                      |  |                                                         | 
|FORTUNE               |  | TOPCELL                                                 |  | Solar power cell manufacturing and sale          |  |                            | 8.81   | 
|                      |  |                                                         | 
|FORTUNE               |  | NEXPOWER                                                |  | Sales and manufacturing of solar power batteries |  |                            | 5.05   | 
|                      |  |                                                         | 
|UNITRUTH              |  | TOPCELL                                                 |  | Solar power cell manufacturing and sale          |  |                            | 3.81   | 
|                      |  |                                                         | 
|UNITRUTH              |  | NEXPOWER                                                |  | Sales and manufacturing of solar power batteries |  |                            | 2.25   | 
|                      |  |                                                         | 
|UMC CAPITAL CORP.     |  | UMC CAPITAL (USA)                                       |  | Investment holding                               |  |                            | 100.00 | 
|                      |  |                                                         | 
|UMC CAPITAL CORP.     |  | ECP VITA LTD.                                           |  | Insurance                                        |  |                            | 100.00 | 
|                      |  |                                                         | 
|TLC                   |  | SOARING CAPITAL CORP.                                   |  | Investment holding                               |  |                            | 100.00 | 
|                      |  |                                                         | 
|TLC                   |  | TOPCELL                                                 |  | Solar power cell manufacturing and sale          |  |                            | 8.81   | 
|                      |  |                                                         | 
|TLC                   |  | NEXPOWER                                                |  | Sales and manufacturing of solar power batteries |  |                            | 5.87   | 
|                      |  |                                                         | 
|SOARING CAPITAL CORP. |  | UNITRUTH ADVISOR (SHANGHAI) CO., LTD.                   |  | Investment holding and advisory                  |  |                            | 100.00 | 
|                      |  |                                                         | 
|NBI                   |  | GREEN FIELD (SAMOA) LIMITED                             |  | Investment holding                               |  |                            | 100.00 | 
|                      |  |                                                         | 
|NBI                   |  | TERA ENERGY DEVELOPMENT CO., LTD.                       |  | Energy Technical Services                        |  |                            | 100.00 | 
|                      |  |                                                         | 
|NBI                   |  | EVERRICH                                                |  | Solar engineering integrated design services     |  |                            | 90.61  | 
|                      |  |                                                         | 
|NBI                   |  | UNISTARS                                                |  | High brightness LED packages                     |  |                            | 72.83  | 
|                      |  |                                                         | 
|NBI                   |  | WAVETEK                                                 |  | GaAs Foundry service                             |  |                            | 72.16  | 
|                      |  |                                                         | 
|NBI                   |  | UNITED LIGHTING (Note C)                                |  | LED lighting manufacturing and sale              |  |                            | 55.25  | 
|                      |  |                                                         | 
|NBI                   |  | TOPCELL                                                 |  | Solar power cell manufacturing and sale          |  |                            | 48.66  | 
|                      |  |                                                         | 
|UNITED LIGHTING       |  | UNITED LIGHTING OPTO-ELECTRONIC INVESTMENT (HK) LIMITED |  | Investment holding                               |  |                            | 100.00 | 
|                      |  |                                                         | 
|UNITED LIGHTING       |  | POWER LIGHT
INVESTMENTS LIMITED (POWER LIGHT (SAMOA))   |  | Investment holding                               |  |                            | 100.00 | 



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UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|                            |  |                                                     |  |                                                                            |  |                            |        | 
|--------------------------- |  | --------------------------------------------------- |  | -------------------------------------------------------------------------- |  | -------------------------- | ------ | 
|Investor                    |  | Subsidiary                                          |  | Business nature                                                            |  | Percentage ofownership (%) |       
|                            |  |                                                     | 
|POWER LIGHT (SAMOA)         |  | BAO LIN (SHANDONG) GUANG DIAN KE JI YOU XIAN GONGSI |  | LED lighting manufacturing and sale                                        |  |                            | 100.00 | 
|                            |  |                                                     | 
|WAVETEK                     |  | WAVETEK MICROELECTRONICS INVESTMENT (HK) LIMITED    |  | Investment holding                                                         |  |                            | 100.00 | 
|                            |  |                                                     | 
|EVERRICH                    |  | EVERRICH-HK                                         |  | Investment holding                                                         |  |                            | 100.00 | 
|                            |  |                                                     | 
|EVERRICH                    |  | SMART ENERGY                                        |  | Investment holding                                                         |  |                            | 100.00 | 
|                            |  |                                                     | 
|EVERRICH-HK                 |  | EVERRICH (SHANDONG) ENERGY CO., LTD.                |  | Solar engineering integrated design services                               |  |                            | 100.00 | 
|                            |  |                                                     | 
|SMART ENERGY                |  | SMART ENERGY SHANDONG CORPORATION                   |  | Solar engineering integrated design services                               |  |                            | 100.00 | 
|                            |  |                                                     | 
|GREEN FIELD (SAMOA) LIMITED |  | NEW BUSINESS REALTY (SAMOA) LIMITED                 |  | Investment holding                                                         |  |                            | 100.00 | 
|                            |  |                                                     | 
|NEXPOWER                    |  | NEWENERGY HOLDING LIMITED                           |  | Investment holding                                                         |  |                            | 100.00 | 
|                            |  |                                                     | 
|NEXPOWER                    |  | NPT HOLDING LIMITED                                 |  | Investment holding                                                         |  |                            | 100.00 | 
|                            |  |                                                     | 
|NEWENERGY HOLDING LIMITED   |  | FUTUREPOWER HOLDING LIMITED                         |  | Investment holding                                                         |  |                            | 100.00 | 
|                            |  |                                                     | 
|FUTUREPOWER HOLDING LIMITED |  | NEXPOWER (SHANDONG) ENERGY CO., LTD.                |  | Sales and manufacturing of photovoltaic batteries and photovoltaic modules |  |                            | 100.00 | 
|                            |  |                                                     | 
|NPT HOLDING LIMITED         |  | NLL HOLDING LIMITED                                 |  | Investment holding                                                         |  |                            | 100.00 | 



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                        
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note A: |  | On March 25, 2011, AWL filed for liquidation through a decision at its stockholders meeting. The liquidation of AWL was
accounted for as an organization restructuring. As such, the Company continues accounting for ownership of AWL under equity method and it is included as a consolidated subsidiary until the liquidation has been completed. The liquidation was
completed on August 30, 2011.
|        | 
|Note B: |  | On March 10, 2011, MAP has filed for liquidation through a decision at its stockholders meeting. The Company ceased using the
equity method from that day, and MAP is not included as a consolidated subsidiary as of December 31, 2011.                                                                                                                                                              
|        | 
|Note C: |  | On April 1, 2011, UNITED LIGHTING merged with POWER LIGHT TECH CO., LTD. (PLT). After the business combination, PLT is the surviving
company and was renamed to UNITED LIGHTING.                                                                                                                                                                                                                       



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UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Use of Estimates

The preparation of the Companys consolidated financial statements in conformity with generally accepted accounting principles
requires management to make reasonable estimates and assumptions that will affect the amount of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues
and expenses during the reported periods. The actual results may differ from those estimates.

Foreign Currency
Transactions

Transactions denominated in foreign currencies are remeasured into the local functional currencies and
recorded based on the exchange rates prevailing at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are remeasured into the local functional currencies at the exchange rates prevailing at the balance sheet
date, with the related exchange gains or losses included in the consolidated statements of income. Translation gains or losses from investments in foreign entities are recognized as a cumulative translation adjustment in consolidated
stockholders equity.

Non-monetary assets and liabilities denominated in foreign currencies that are reported at fair
value with changes in fair value charged to the consolidated statements of income, are remeasured at the exchange rate at the balance sheet date, with related exchange gains or losses recorded in the consolidated statements of income. Non-monetary
assets and liabilities denominated in foreign currencies that are reported at fair value with changes in fair value charged to stockholders equity, are remeasured at the exchange rate at the balance sheet date, with related exchange gains or
losses recorded as adjustment items to a cumulative translation adjustment in consolidated stockholders equity. Non-monetary assets and liabilities denominated in foreign currencies and reported at cost are remeasured at historical exchange
rates.

Translation of Foreign Currency Financial Statements

The financial statements of foreign subsidiaries and UMCs Singapore branch (the Branch) are translated into New Taiwan Dollars using
the spot rates at the balance sheet date for asset and liability accounts and weighted average exchange rates for profit and loss accounts. The cumulative translation effects from the subsidiaries and the Branch using functional currencies other
than New Taiwan Dollars are included in the cumulative translation adjustment in consolidated stockholders equity.

Convenience Translation into US Dollars

Translations of amount from New Taiwan dollars into United States dollars for the readers convenience were calculated at the rate of US$1.00 to NT$30.27 on December 30, 2011 released by Board
of Governors of the Federal Reserve System. No representation is made that the NT$ amounts could have been, or could be, converted into United States dollars at such rate.



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UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Cash Equivalents

Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and with maturity dates
that do not present significant risks on changes in value resulting from changes in interest rates, including commercial paper with original maturities of three months or less and reverse repurchase agreements.

Financial Assets and Financial Liabilities

In accordance with R.O.C. SFAS No. 34, Financial Instruments: Recognition and Measurement (R.O.C. SFAS 34) and the Guidelines Governing the Preparation of Financial Reports by
Securities Issuers, financial assets are classified as either financial assets at fair value through profit or loss, financial assets measured at cost, available-for-sale financial assets or held-to-maturity financial assets. Financial
liabilities are recorded at fair value through profit or loss.

The Company accounts for purchase or sale of financial
instruments as of the trade date, which is the date the Company commits to purchase or sell the asset or liability. Financial assets and financial liabilities are initially recognized at fair value plus acquisition or issuance costs.



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

Financial assets or liabilities at fair value through profit or loss are comprised of financial assets held for trading and financial
assets designated as fair value through profit or loss.

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

If an entity is required to separate an embedded derivative from its host contract, but is unable to measure the embedded derivative separately either at acquisition or at the subsequent balance sheet
dates, the entire hybrid contract is designated as either a financial asset or liability at fair value through profit or loss.

This category of financial instruments is measured at fair value and changes in fair value are recognized in the consolidated statements
of income. Stock of listed companies, bonds, and closed-end funds are measured at closing prices as of the balance sheet date. Open-end funds are measured at the unit price of the net assets as of the balance sheet date. The fair value of derivative
financial instruments is determined by using valuation techniques commonly used by market participants in the industry.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



| | b. | Financial assets measured at cost
| | -- | ---------------------------------

Unlisted stock, funds, and other securities without reliable market prices are measured at cost. When objective evidence of impairment exists, the Company recognizes an impairment loss, which cannot be
reversed in subsequent periods.



| | c. | Available-for-sale financial assets
| | -- | -----------------------------------

Available-for-sale financial assets are non-derivative financial instruments not classified as financial assets at fair value through profit or loss, held-to-maturity financial assets, loans and
receivables. Subsequent measurement is calculated at fair value. Investments in listed companies are measured at closing prices as of the balance sheet date. Any gain or loss arising from the change in fair value, excluding impairment loss and
exchange gain or loss arising from monetary financial assets denominated in foreign currencies, is recognized as an adjustment to consolidated stockholders equity until such investment is reclassified or disposed of, upon which the cumulative
gain or loss previously charged to consolidated stockholders equity will be recorded in the consolidated statements of income.

The Company recognizes an impairment loss when objective evidence of impairment exists. Any reduction in the impairment loss of equity investments in subsequent periods will be recognized as an adjustment
to consolidated stockholders equity. The impairment loss of a debt security may be reversed and recognized in the consolidated statement of income if the security recovers and the Company concludes the recovery is related to improvements in
the factors or events that originally caused the impairment.



| | d. | Held-to-maturity financial assets
| | -- | ---------------------------------

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

The Company
recognizes an impairment loss if objective evidence of impairment loss exists. However, the impairment loss may be reversed if the value of asset recovers subsequently and the Company concludes the recovery is related to improvements in events or
factors that originally caused the impairment loss. The new cost basis as a result of the reversal cannot exceed the amortized cost prior to the impairment.



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UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Notes, Accounts and Other Receivables

Notes and accounts receivable are amounts owed to a business by a customer as a result of a purchase of goods or services from it on a
credit basis. Other receivables are any receivable not classified in notes and accounts receivable category. When the notes, accounts and other receivables are initially recognized, the Company measures them at their fair values. After initial
recognition, the notes, accounts and other receivables are measured at amortized cost deducting the impairment using the effective interest method. Short-term notes, accounts and other receivables with no stated interest rate are measured at the
original invoice amount if the effect of discounting is immaterial.

Prior to December 31, 2010, recognition of an
allowance for doubtful accounts was based on historical experience in analyzing the aging and determining the collectability of notes, accounts and other receivables as of the balance sheet date. Effective January 1, 2011, the Company first
assesses as of balance sheet date whether objective evidence of impairment exists for notes, accounts and other receivables that are individually significant. If there is objective evidence that an impairment loss has occurred, the amount of
impairment loss is assessed individually. For notes, accounts and other receivables other than those mentioned above, the Company groups those assets with similar credit risk characteristics and collectively assess them for impairment. If, in a
subsequent period, the amount of the impairment loss decreases, and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed and recognized through
profit or loss. The reversal shall not result in a carrying amount of notes, accounts and other receivables that exceeds what the amortized cost would have been had the impairment not been recognized at the date the impairment is reversed.

Inventories

Inventories are accounted for on a perpetual basis. Raw materials are recorded at actual purchase costs, while the work in process and finished goods are recorded at standard costs and subsequently
adjusted to costs using the weighted-average method at the end of each month. Allocation of fixed production overheads to the costs of conversion is based on the normal capacity of the production facilities. Inventories are valued at the lower of
cost and net realizable value item by item. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.



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UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Non-current Assets Held for Sale

Non-current assets that are available for immediate sale in their present condition subject only to terms that are usual and customary for
sales of such assets and that are highly probable to be sold within one year are classified as non-current assets held for sale. A held for sale non-current asset is measured at the lower of its carrying amount or fair value less costs to sell and
is recorded separately on the balance sheet. No further amortization or depreciation will be recorded once an asset is classified as held for sale.

Impairment losses of non-current assets held for sale are recognized for the excess of the carrying amounts over fair values less costs to sell and reported as losses in the current period. A gain is
recognized for any subsequent increase in fair value less costs to sell of an asset, but not in excess of the total amount of the accumulated impairment loss and the amount allowed to be reversed in accordance with the R.O.C. SFAS No. 35,
Impairment of Assets (R.O.C. SFAS 35).

Long-term Investments Accounted for Under the Equity Method (including
interests in Joint Ventures)

Investments in which the Company has ownership of at least 20% or exercises significant
influence on operating decisions are accounted for under the equity method. The difference of the acquisition cost and the underlying equity in the investees net assets as of acquisition date is amortized and goodwill arising from new
acquisitions is analyzed and accounted for under the R.O.C. SFAS 25, in which goodwill is not subject to amortization.

Investment in jointly controlled entity is accounted for under the equity method.

When an equity investee offsets its accumulated deficit with its additional paid-in capital, the Company would debit additional paid-in
capital and credit retained earnings in proportionate to its existing equity ownership to the extent that credit is available on the additional paid-in capital.

The change in the Companys proportionate share in the net assets of an investee resulting from its acquisition of additional stock issued by the investee at a rate not proportionate to its existing
equity ownership is charged to the additional paid-in capital and long-term investments accounts.

If the balance of the
additional paid-in capital is less than the amount needed, the excess would be charged to the retained earnings.

Unrealized
intercompany gains and losses arising from sales from the Company to equity method investees are eliminated in proportion to the Companys ownership percentage at the end of the period until realized through transactions with third parties.
Intercompany gains and losses arising from transactions between the Company and majority-owned (above 50%) subsidiaries are eliminated entirely until realized through transactions with third parties.



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UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Unrealized intercompany gains and losses due to sales from equity method investees to
the Company are eliminated in proportion to the Companys weighted-average ownership percentage of the investee until realized through transactions with third parties.

Unrealized intercompany gains and losses arising from transactions between two equity method investees are eliminated in proportion to the Companys multiplied weighted-average ownership percentage
with the investees until realized through transactions with third parties. Those intercompany gains and losses arising from transactions between two majority-owned subsidiaries are eliminated in proportion to the Companys weighted-average
ownership percentage in the subsidiary that incurred the gain or loss.

If the recoverable amount of investees accounted for
under the equity method is less than its carrying amount, the difference is recognized as impairment loss in the current period.

The total value of an investment and advances after recognition of the investment losses cannot be negative. If the Company has the
positive intention to continue to support the investees, or the losses of investees are only temporary, the Company will continue to recognize investment losses with its proportionate share. If, after the investment loss is recognized, the net book
value of the investment is less than zero, the investment is reclassified to liabilities on the consolidated balance sheet.

The Company ceases to use the equity method upon a loss of ability to exercise significant influence over an investee. In accordance with
R.O.C. SFAS 34, the carrying value of the investment upon the loss of significant influence remains as the carrying value of the investment. Any amount of the investees additional paid-in capital and other adjustment items recorded in the
consolidated stockholders equity of the Company are eliminated in proportion to the amount of the investment sold and recorded as a gain or loss on disposal of investments. Cash dividends received during the year of change are applied as a
reduction of the carrying amount of the investment. Dividends received in subsequent years are recorded in accordance with R.O.C. SFAS No. 32, Accounting for Revenue Recognition.

Gain or loss on disposal of long-term investments is based on the difference between selling price and book value of investments sold. Any
amount of the investees additional paid-in capital and other adjustment items recorded in the consolidated stockholders equity of the Company are eliminated in proportion to the amount of the investment sold and recorded as gain or loss
on disposal of investments.



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UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Property, Plant and Equipment

Property, plant and equipment are stated at cost. Interest incurred on loans used to finance the construction of property, plant and
equipment is capitalized and depreciated accordingly. Maintenance and repairs are charged to expense as incurred. Significant renewals and improvements are treated as capital expenditures and are depreciated over their estimated useful lives. Upon
disposal of property, plant and equipment, the original cost and accumulated depreciation are written off and the related gain or loss is classified as non-operating income or expense. Idle assets are classified as other assets at the lower of net
book or net realizable value, with the difference charged to non-operating expenses.

Depreciation is recognized on a
straight-line basis using the estimated economic life of the assets:



|                                         |  |                                                                  
|---------------------------------------- |  | -----------------------------------------------------------------
|Buildings                                |  | 3 ~ 55 years                                                     
|                                         | 
|Machinery and equipment                  |  | 2 ~ 8 years                                                      
|                                         | 
|Transportation equipment                 |  | 4 ~ 7 years                                                      
|                                         | 
|Furniture and fixtures                   |  | 2 ~ 20 years                                                     
|                                         | 
|Leased assets and leasehold improvements |  | The lease period or estimated economic life, whichever is shorter

Intangible Assets



| | a. | Trademarks are stated at cost and amortized over 10 years on a straight-line basis.
| | -- | -----------------------------------------------------------------------------------



| | b. | Goodwill generated from business combinations is not subject to amortization. After initial recognition, goodwill shall be carried at cost less any accumulated
impairment losses. Whenever impairment indicators exist or at least annually, the Company completes the goodwill impairment test to determine whether goodwill is impaired. Goodwill impairment shall not be reversed once recognized.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. | Other intangible assets are mainly the land-use right and amortized over 50 years on a straight-line basis.
| | -- | -----------------------------------------------------------------------------------------------------------

Deferred Charges

Deferred charges are stated at cost and amortized on a straight-line basis as follows:



|                                   |  |                                                                                  
|---------------------------------- |  | ---------------------------------------------------------------------------------
|Intellectual property license fees |  | The shorter of contract term or estimated economic life of the related technology
|                                   | 
|Software                           |  | 2 ~ 6 years                                                                      



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UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Bonds

Transaction costs related to the issuance of the bonds were allocated to liability and equity components of bonds in proportion to the allocation of the proceeds. For subsequent measurement of the
liability components, the host contract is accounted for at amortized cost using the effective interest method. If the difference between the straight-line method and the effective interest method is immaterial, the bond discount may be amortized
using the straight-line method and recorded as interest expense. Any embedded derivative instruments that are considered liability components and not clearly and closely related to the host debt instrument are measured at fair value and changes in
fair value are recognized as a gain or loss on the valuation of the financial liability. The equity component is measured as the residual amount after deducting the fair value of the liability component at date of issuance from the proceeds received
and is not subsequently remeasured.

In accordance with R.O.C. SFAS 34, since the economic and risk characteristics of the
embedded derivative instrument and the host contract are not clearly and closely related, derivative financial instruments embedded in exchangeable bonds are bifurcated and accounted as financial liabilities at fair value through profit or loss.

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

In accordance with R.O.C. SFAS 34, since the economic and risk characteristics of the embedded call or put option are clearly and closely
related to the host contract, the derivative financial instruments embedded in convertible bonds were not recognized separately.

If the convertible bondholders exercise their conversion right before maturity, the Company shall adjust the carrying amount of the
liability component. The adjusted carrying amount of the liability component at conversion and the carrying amount of equity component are credited to common stock and additional paid-in capital - premiums. No gain or loss is recognized upon bond
conversion.

Both the host contract and bifurcated embedded derivative financial instrument in exchangeable bonds are
classified as current liabilities if the bondholders have the right to demand settlement of the bonds within 12 months of the bonds become exchangeable. In addition, the liability component of convertible bonds is classified as a current liability
within 12 months of the date the bondholders may exercise the put right. After the put right expires, the liability component of the convertible bonds should be reclassified as a long-term liability if it meets the definition of a long-term
liability in all other respects.



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UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Pension Plan

All regular employees are entitled to a defined benefit pension plan that is managed by an independently administered pension fund
committee. Fund assets are deposited under the committees name in the Bank of Taiwan and hence, not associated with the Company. Therefore, fund assets are not to be included in the Companys financial statements. Pension benefits for
employees of the Branch and overseas subsidiaries are provided in accordance with the local regulations.

The Labor Pension Act
of the R.O.C. (the Act), which adopts a defined contribution plan, became effective on July 1, 2005. Employees eligible for the Labor Standards Law, a defined benefit plan, were allowed to elect either the pension calculation under the Act or
continue to be subject to the pension calculation under the Labor Standards Law. Those employees that elected to be subject to the Act will have their seniority achieved under the Labor Standards Law retained upon election of the Act, and the
Company will make monthly contributions of no less than 6% of these employees monthly wages to the employees individual pension accounts.

The accounting for UMCs pension liability is computed in accordance with R.O.C. SFAS No.18, Accounting for Pension. Net pension costs of the defined benefit plan are recorded based on an
independent actuarial valuation. Pension cost components such as service cost, interest cost, expected return on plan assets, the amortization of net obligation at transition, pension gain or loss, and prior service cost, are all taken into
consideration. UMC recognizes expenses from the defined contribution pension plan in the period in which the contribution becomes due.

Share-Based Payment

The Company used the intrinsic value method to
recognize compensation cost for its employee stock options issued between January 1, 2004 and December 31, 2007, in accordance with Accounting Research and Development Foundation (ARDF) Interpretation Nos. 92-070~072. For options granted
on or after January 1, 2008, the Company recognizes compensation cost using the fair value method in accordance with R.O.C. SFAS No. 39 Accounting for Share-Based Payment. (R.O.C. SFAS 39)

Employee Bonus and Remunerations Paid to Directors and Supervisors

Employee bonus and remunerations paid to directors and supervisors are charged to expense at fair value and are no longer accounted for as
an appropriation of retained earnings.

Treasury Stock

In accordance with R.O.C. SFAS No. 30, Accounting for Treasury Stock, treasury stock held by the Company is accounted for
under the cost method. The cost of treasury stock is shown as a deduction to consolidated stockholders equity, while any gain or loss from selling treasury stock is treated as an adjustment to additional paid-in capital. The Companys
stock held by its subsidiaries is also treated as treasury stock. Cash dividends received by subsidiaries from UMC are recorded as additional paid-in capital-treasury stock transactions.



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UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



For treasury stock sold to employees, the Company recognizes
compensation cost in accordance with R.O.C. SFAS 39 and ARDF Interpretation No. 96-266 Accounting for Treasury Stock Purchased by Employees and ARDF Interpretation No. 98-111 Determining the Grant Date of Share-Based
Payment

Revenue Recognition

The Company recognizes revenue when persuasive evidence of an arrangement exists, the product or service has been delivered, the sellers price to the buyer is fixed or determinable and
collectability is reasonably assured. Most of the Companys sales transactions have shipping term of Free Carrier (FCA), shipment in which title and the risk of loss or damage are transferred to the customer upon delivery of the product to a
carrier approved by the customer.

Allowance for sales returns and discounts are estimated based on history of customer
complaints, historical experiences, management judgment and any other known factors that might significantly affect collectability. Such allowances are recorded in the same period in which sales are made. Shipping and handling costs are included in
sales expenses.

Research and Development Expenditures

Research and development expenditures are charged to expenses as incurred.

Capital Expenditure versus Operating Expenditure

Expenditures are capitalized when it is probable that the Company will receive future economic benefits associated with the expenditures.

Income Tax

The Company adopted R.O.C. SFAS No. 22, Accounting for Income Taxes for inter-period and intra-period income tax allocation. The provision for income taxes includes deferred income tax
assets and liabilities that are a result of temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, loss carry-forward and investment tax credits. A
valuation allowance on deferred income tax assets is provided to the extent that it is more likely than not that the tax benefits will not be realized. A deferred tax asset or liability is classified as current or noncurrent in accordance with the
classification of its related asset or liability. However, if a deferred tax asset or liability does not relate to an asset or liability in the financial statements, its classification is based on the expected reversal date of the temporary
difference.



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UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



According to R.O.C. SFAS No. 12, Accounting for Income Tax Credits, the
Company recognizes the tax benefit from the purchase of equipment and technology, research and development expenditures, employee training, and certain equity investment by the flow-through method.

Income tax (10%) on unappropriated earnings is recorded as expense in the year when the stockholders have resolved that the earnings
shall be retained.

The Income Basic Tax Act of the R.O.C. (the IBTA) became effective on January 1, 2006. Set up by the
Executive Yuan, the IBTA is a supplemental 10% tax that is payable if the income tax payable determined by the R.O.C. Income Tax Act is below the minimum amount as prescribed by the IBTA. The IBTA is calculated based on taxable income as defined by
the IBTA, which includes most income that is exempted from income tax under various legislations. The impact of the IBTA has been considered in the Companys income tax for the current reporting period.

Earnings per Share

Earnings per share is computed according to R.O.C. SFAS No. 24, Earnings Per Share. Basic earnings per share is computed by dividing net income by the weighted-average number of common
shares outstanding during the current reporting period. Diluted earnings per share is computed by taking basic earnings per share into consideration plus additional common shares that would have been outstanding if the dilutive share equivalents had
been issued. Net income is also adjusted for interest and other income or expenses derived from any underlying dilutive share equivalents. The weighted-average of outstanding shares is adjusted retroactively for stock dividends and employee stock
bonus issues that are approved in the stockholders meetings prior to 2008.

Asset Impairment

Pursuant to R.O.C. SFAS 35, the Company assesses indicators of impairment for all its assets within the scope of the standard at each
balance sheet date. If impairment is indicated, the Company compares the assets carrying amount with the recoverable amount of the assets or the cash-generating unit (CGU) associated with the asset and writes down the carrying amount to the
recoverable amount where applicable. The recoverable amount is defined as the higher of fair value less the costs to sell, and the values in use. For previously recognized losses, the Company assesses at the balance sheet date if any indication that
the impairment loss no longer exists or may have diminished. If there is any such indication, the Company recalculates the recoverable amount of the asset, and if the recoverable amount has increased as a result of the increase in the estimated
service potential of the assets, the Company reverses the impairment loss so that the resulting carrying amount of the asset does not exceed the amount (net of amortization or depreciation) that would otherwise result had no impairment loss been
recognized for the assets in prior years.



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UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



In addition, a goodwill-allocated CGU or group of CGUs is tested for impairment each
year, regardless of whether impairment is indicated. If an impairment test reveals that the carrying amount, including goodwill, of CGU or group of CGUs is greater than its recoverable amount, it results in an impairment loss. The loss is first
recorded against the CGUs goodwill, with any remaining loss allocated to other assets on a pro rata basis proportionate to their carrying amounts. The write-down of goodwill cannot be reversed in subsequent periods under any circumstances.

Impairment losses and reversals are classified as non-operating expenses and income, respectively.

Operating Segment Information

An operating segment is a component of an entity that has the following characteristics:



| | a. | Engaging in business activities from which it may earn revenues and incur expenses;
| | -- | -----------------------------------------------------------------------------------



| | b. | Whose operating results are regularly reviewed by the entitys chief operating decision maker to make decisions about resources to be allocated to the segment and
assess its performance; and
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. | For which discrete financial information is available.
| | -- | ------------------------------------------------------



|3. | ACCOUNTING CHANGES
|-- | ------------------

Notes,
Accounts and Other Receivables

Effective January 1, 2011, the Company adopted the third revised R.O.C. SFAS 34. This
change in accounting principles had no significant effect on consolidated net income or consolidated earnings per share for the year ended December 31, 2011.

Operating Segment Information

Effective from January 1, 2011, the
Company adopted R.O.C. SFAS No. 41, Operating Segments (R.O.C. SFAS 41), to present operating segment information. The newly issued R.O.C. SFAS 41 replaced R.O.C. SFAS No. 20, Segment Reporting, the comparative
operating segment information has been presented accordingly. This change in accounting principles had no effect on consolidated net income or consolidated earnings per share for the years ended December 31, 2010 and 2011.



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UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|4. | CASH AND CASH EQUIVALENTS
|-- | -------------------------



|                              |  |                    |            |  |         |  |            | 
|----------------------------- |  | ------------------ | ---------- |  | ------- |  | ---------- | 
|                              |  | As of December 31, |           
|                              |  | 2010               |            |  | 2011    | 
|                              |  | NT$000            |            |  | NT$000 | 
|Cash                          |  |                    |            |  |         |  |            | 
|Cash on hand                  |  |                    | 4,080      |  |         |  | 4,470      | 
|Checking and savings accounts |  |                    | 13,149,234 |  |         |  | 13,795,814 | 
|Time deposits                 |  |                    | 34,360,417 |  |         |  | 31,737,840 | 
|                              |  |                    |            |  |         |  |            | 
|Subtotal                      |  |                    | 47,513,731 |  |         |  | 45,538,124 | 
|                              |  |                    |            |  |         |  |            | 
|Cash equivalents              |  |                    | 3,757,374  |  |         |  | 3,532,004  | 
|                              |  |                    |            |  |         |  |            | 
|Total                         |  |                    | 51,271,105 |  |         |  | 49,070,128 | 
|                              |  |                    |            |  |         |  |            | 



|5. | FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
|-- | -----------------------------------------------------



|                  |  |                    |           |  |         |  |         | 
|----------------- |  | ------------------ | --------- |  | ------- |  | ------- | 
|                  |  | As of December 31, |          
|                  |  | 2010               |           |  | 2011    | 
|                  |  | NT$000            |           |  | NT$000 | 
|Current           |  |                    |           |  |         |  |         | 
|Listed stocks     |  |                    | 636,446   |  |         |  | 202,081 | 
|Corporate bonds   |  |                    | 494,086   |  |         |  | 493,850 | 
|Forward contracts |  |                    | 9,411     |  |         |  |        | 
|                  |  |                    |           |  |         |  |         | 
|Subtotal          |  |                    | 1,139,943 |  |         |  | 695,931 | 
|                  |  |                    |           |  |         |  |         | 
|Noncurrent        |  |                    |           |  |         |  |         | 
|Preferred stocks  |  |                    |          |  |         |  | 26,295  | 
|Convertible bonds |  |                    | 79,920    |  |         |  | 93,416  | 
|                  |  |                    |           |  |         |  |         | 
|Subtotal          |  |                    | 79,920    |  |         |  | 119,711 | 
|                  |  |                    |           |  |         |  |         | 
|Total             |  |                    | 1,219,863 |  |         |  | 815,642 | 
|                  |  |                    |           |  |         |  |         | 

During the years ended December 31, 2009, 2010 and 2011, net gains (losses) arising from the changes
in fair value of financial assets at fair value through profit or loss were NT$513 million, NT$(222) million and NT$(324) million, respectively.



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UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|6. | ACCOUNTS RECEIVABLE, NET
|-- | ------------------------



|                                                |  |                    |            |   |         |  |            |  
|----------------------------------------------- |  | ------------------ | ---------- | - | ------- |  | ---------- | -
|                                                |  | As of December 31, |           
|                                                |  | 2010               |            |   | 2011    | 
|                                                |  | NT$000            |            |   | NT$000 | 
|Accounts receivable                             |  |                    | 18,363,983 |   |         |  | 15,235,258 |  
|Less: Allowance for sales returns and discounts |  |                    | (185,612   | ) |         |  | (165,000   | )
|Less: Allowance for doubtful accounts           |  |                    | (67,850    | ) |         |  | (679,717   | )
|                                                |  |                    |            |   |         |  |            |  
|Net                                             |  |                    | 18,110,521 |   |         |  | 14,390,541 |  
|                                                |  |                    |            |   |         |  |            |  



|7. | INVENTORIES, NET
|-- | ----------------



|                                                                     |  |                    |            |   |         |  |            |  
|-------------------------------------------------------------------- |  | ------------------ | ---------- | - | ------- |  | ---------- | -
|                                                                     |  | As of December 31, |           
|                                                                     |  | 2010               |            |   | 2011    | 
|                                                                     |  | NT$000            |            |   | NT$000 | 
|Raw materials                                                        |  |                    | 2,156,204  |   |         |  | 2,389,760  |  
|Supplies and spare parts                                             |  |                    | 2,205,471  |   |         |  | 2,281,665  |  
|Work in process                                                      |  |                    | 8,240,687  |   |         |  | 7,784,470  |  
|Finished goods                                                       |  |                    | 1,946,170  |   |         |  | 3,209,746  |  
|                                                                     |  |                    |            |   |         |  |            |  
|Total                                                                |  |                    | 14,548,532 |   |         |  | 15,665,641 |  
|Less: Allowance for loss on decline in market value and obsolescence |  |                    | (1,515,909 | ) |         |  | (2,956,365 | )
|                                                                     |  |                    |            |   |         |  |            |  
|Net                                                                  |  |                    | 13,032,623 |   |         |  | 12,709,276 |  
|                                                                     |  |                    |            |   |         |  |            |  



| | a. | The Company recognized a loss of NT$1,390 million as a result of the net realizable value of inventory being lower than its cost, and the loss was included in the cost
of goods sold for the year ended December 31, 2011. The Company previously recognized an inventory impairment loss prior to January 1, 2009. However, the circumstances that caused the net realizable value of inventory to be lower than its
cost reversed. As a result, the Company recognized a reversal gain of NT$2,597 million and NT$90 million for the year ended December 31, 2009 and 2010, respectively.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | Inventories were not pledged.
| | -- | -----------------------------



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UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|8. | AVAILABLE-FOR-SALE FINANCIAL ASSETS
|-- | -----------------------------------



|                    |  |                    |            |  |         |  |            | 
|------------------- |  | ------------------ | ---------- |  | ------- |  | ---------- | 
|                    |  | As of December 31, |           
|                    |  | 2010               |            |  | 2011    | 
|                    |  | NT$000            |            |  | NT$000 | 
|Current             |  |                    |            |  |         |  |            | 
|Common stocks       |  |                    | 7,044,673  |  |         |  | 5,124,780  | 
|                    |  |                    |            |  |         |  |            | 
|Noncurrent          |  |                    |            |  |         |  |            | 
|Common stocks       |  |                    | 29,796,192 |  |         |  | 18,767,614 | 
|Depositary receipts |  |                    | 403,805    |  |         |  | 37,400     | 
|Funds               |  |                    | 54,068     |  |         |  | 30,210     | 
|                    |  |                    |            |  |         |  |            | 
|Subtotal            |  |                    | 30,254,065 |  |         |  | 18,835,224 | 
|                    |  |                    |            |  |         |  |            | 
|Total               |  |                    | 37,298,738 |  |         |  | 23,960,004 | 
|                    |  |                    |            |  |         |  |            | 

During the years ended December 31, 2009, 2010 and 2011, the net unrealized gains (losses)
adjustments to consolidated stockholders equity due to changes in fair value of available-for-sale assets were NT$27,726 million, NT$(1,003) million and NT$(10,478) million, respectively. Additionally, the Company recognized gains of NT$1,858
million, NT$1,960 million and NT$1,492 million due to the disposal of available-for-sale assets during the years ended December 31, 2009, 2010 and 2011, respectively.

UMC issued bonds that are exchangeable at any time on or after January 1, 2010 and prior to November 22, 2014, into common stocks originally classified as available-for-sale financial assets,
noncurrent. Therefore, UMC reclassified the exchangeable shares to current assets.



|9. | FINANCIAL ASSETS MEASURED AT COST, NONCURRENT
|-- | ---------------------------------------------



|                  |  |                    |           |  |         |  |           | 
|----------------- |  | ------------------ | --------- |  | ------- |  | --------- | 
|                  |  | As of December 31, |          
|                  |  | 2010               |           |  | 2011    | 
|                  |  | NT$000            |           |  | NT$000 | 
|Common stocks     |  |                    | 4,972,813 |  |         |  | 5,949,533 | 
|Preferred stocks  |  |                    | 2,063,117 |  |         |  | 1,898,072 | 
|Funds             |  |                    | 591,181   |  |         |  | 451,362   | 
|Convertible bonds |  |                    | 24,753    |  |         |  |          | 
|                  |  |                    |           |  |         |  |           | 
|Total             |  |                    | 7,651,864 |  |         |  | 8,298,967 | 
|                  |  |                    |           |  |         |  |           | 

The Company acquired 4.6 million shares of FIRST INTERNATIONAL TELECOM CORP. (FIRST INTERNATIONAL
TELECOM) through private placement in March 2008, 4 million shares of E-ONE MOLI ENERGY CORP. (E-ONE) through private placement in June 2009 and 2 million shares of A-DATA TECHNOLOGY CO., LTD. (A-DATA) through private placement in
September 2009. In addition, 500 units of convertible bonds acquired through private placement in September, 2009 were converted to 2.4 million common shares of TOPOINT TECHNOLOGY CO., LTD. (TOPOINT) in September, 2010. The exchange of these
securities listed above is restricted by Article 43 paragraph 8 of the Securities and Exchange Law. The above-mentioned restriction of FIRST INTERNATIONAL TELECOM, E-ONE, A-DATA and TOPOINT will be removed on April 25,
2011, August 31, 2012, September 30, 2012 and September 23, 2012, respectively.



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UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|10. | LONG-TERM INVESTMENTS ACCOUNTED FOR UNDER THE EQUITY METHOD
|--- | -----------------------------------------------------------



| | a. | Details of long-term investments accounted for under the equity method are as follows:
| | -- | --------------------------------------------------------------------------------------



|                                                                                     |  |                    |         |  |                                        |  |       |         |  |  |                                        |  |  |  |       | 
|------------------------------------------------------------------------------------ |  | ------------------ | ------- |  | -------------------------------------- |  | ----- | ------- |  |  | -------------------------------------- |  |  |  | ----- | 
|                                                                                     |  | As of December 31, |        
|                                                                                     |  | 2010               |         |  | 2011                                   | 
|Investee Companies                                                                   |  | Amount             |         |  | Percentage ofOwnership orVoting Rights |  |       | Amount  |  |  | Percentage ofOwnership orVoting Rights | 
|                                                                                     |  | NT$000            |         |  | %                                      |  |       | NT$000 |  |  | %                                      | 
|Listed companies                                                                     |  |                    |         |  |                                        |  |       |         |  |  |                                        |  |  |  |       | 
|CRYSTALWISE TECHNOLOGY INC. (CRYSTALWISE) (Note D)                                   |  |                    |        |  |                                        |  |      |         |  |  | 87,501                                 |  |  |  | 4.25  | 
|                                                                                     |  |                    |         |  |                                        |  |       |         |  |  |                                        |  |  |  |       | 
|Unlisted companies                                                                   |  |                    |         |  |                                        |  |       |         |  |  |                                        |  |  |  |       | 
|MOS ART PACK CORP. (MAP) (Note A)                                                    |  |                    |        |  |                                        |  |      |         |  |  | 238,373                                |  |  |  | 72.98 | 
|WINAICO SOLAR PROJEKT 1 GMBH (Note B)                                                |  |                    |        |  |                                        |  |      |         |  |  | 45,573                                 |  |  |  | 50.00 | 
|SHANDONG HUAHONG ENERGY INVEST CO., INC. (SHANDONG HUAHONG) (Note B)                 |  |                    | 314,338 |  |                                        |  | 24.30 |         |  |  | 725,381                                |  |  |  | 50.00 | 
|LIST EARN ENTERPRISE INC.                                                            |  |                    | 9,177   |  |                                        |  | 49.00 |         |  |  | 9,688                                  |  |  |  | 49.00 | 
|SHENYANG PIONEER U-LIGHTING OPTO-ELECTRONIC CO., LTD. (SHENYANG U-LIGHTING) (Note B) |  |                    | 3,022   |  |                                        |  | 49.00 |         |  |  | 4,080                                  |  |  |  | 49.00 | 
|ALLIANCE OPTOTEK CORP.                                                               |  |                    | 165,759 |  |                                        |  | 48.43 |         |  |  | 77,545                                 |  |  |  | 47.99 | 
|MTIC HOLDINGS PTE. LTD.                                                              |  |                    | 234,732 |  |                                        |  | 46.49 |         |  |  | 214,918                                |  |  |  | 46.49 | 
|YUNG LI INVESTMENTS, INC.                                                            |  |                    | 221,710 |  |                                        |  | 45.16 |         |  |  | 213,558                                |  |  |  | 45.16 | 
|UNITED LED CORPORATION HONG KONG LIMITED                                             |  |                    | 208,260 |  |                                        |  | 50.00 |         |  |  | 593,479                                |  |  |  | 45.00 | 



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UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                        |  |                    |           |  |                                        |  |        |         |  |  |                                        |  |  |  |       | 
|------------------------------------------------------- |  | ------------------ | --------- |  | -------------------------------------- |  | ------ | ------- |  |  | -------------------------------------- |  |  |  | ----- | 
|                                                        |  | As of December 31, |          
|                                                        |  | 2010               |           |  | 2011                                   | 
|Investee Companies                                      |  | Amount             |           |  | Percentage ofOwnership orVoting Rights |  |        | Amount  |  |  | Percentage ofOwnership orVoting Rights | 
|                                                        |  | NT$000            |           |  | %                                      |  |        | NT$000 |  |  | %                                      | 
|MEGA MISSION LIMITED PARTNERSHIP                        |  |                    | 2,115,285 |  |                                        |  | 45.00  |         |  |  | 1,298,748                              |  |  |  | 45.00 | 
|ACHIEVE MADE INTERNATIONAL LTD.                         |  |                    | 43,267    |  |                                        |  | 48.54  |         |  |  | 42,909                                 |  |  |  | 44.06 | 
|UNITECH CAPITAL INC.                                    |  |                    | 801,039   |  |                                        |  | 42.00  |         |  |  | 700,433                                |  |  |  | 42.00 | 
|LTI REENERGY CO., LTD. (LTI) (Note B)                   |  |                    |          |  |                                        |  |       |         |  |  | 2,918                                  |  |  |  | 40.00 | 
|HSUN CHIEH INVESTMENT CO., LTD.                         |  |                    | 3,613,285 |  |                                        |  | 36.49  |         |  |  | 2,749,884                              |  |  |  | 36.49 | 
|UC FUND II                                              |  |                    | 76,967    |  |                                        |  | 35.45  |         |  |  | 36,584                                 |  |  |  | 35.45 | 
|BEST ELITE INTERNATIONAL LIMITED (Note H, I)            |  |                    |          |  |                                        |  |       |         |  |  | 3,141,108                              |  |  |  | 34.90 | 
|EXOJET TECHNOLOGY CORP.                                 |  |                    | 68,311    |  |                                        |  | 37.52  |         |  |  | 104,138                                |  |  |  | 33.40 | 
|SOLAR GATE TECHNOLOGY CO., LTD.                         |  |                    | 59,653    |  |                                        |  | 25.00  |         |  |  | 39,417                                 |  |  |  | 32.73 | 
|CTC CAPITAL PARTNERS I, L. P.                           |  |                    | 122,277   |  |                                        |  | 31.40  |         |  |  | 127,784                                |  |  |  | 31.40 | 
|UNIMICRON HOLDING LIMITED                               |  |                    | 536,709   |  |                                        |  | 21.93  |         |  |  | 626,242                                |  |  |  | 21.93 | 
|HIGH POWER LIGHTING CORP.                               |  |                    | 37,012    |  |                                        |  | 22.29  |         |  |  | 15,552                                 |  |  |  | 20.24 | 
|DAIWA QUANTUM CAPITAL PARTNERS I, L. P. (DAIWA)(Note C) |  |                    | 57,644    |  |                                        |  | 12.50  |         |  |  | 59,984                                 |  |  |  | 12.50 | 
|TRANSLINK CAPITAL PARTNERS I L. P. (TRANSLINK)(Note C)  |  |                    | 77,255    |  |                                        |  | 10.55  |         |  |  | 120,097                                |  |  |  | 10.38 | 
|UMCI LTD. (UMCI) (Note E)                               |  |                    |          |  |                                        |  | 100.00 |         |  |  |                                       |  |  |  |      | 
|UNITED MICRODISPLAY OPTRONICS CORP. (UMO) (Note F)      |  |                    | 35,237    |  |                                        |  | 89.99  |         |  |  |                                       |  |  |  |      | 
|AEVOE INTERNATIONAL LTD.                                |  |                    | 88,029    |  |                                        |  | 43.77  |         |  |  |                                       |  |  |  |      | 
|WALTOP INTERNATIONAL CORP.                              |  |                    | 219,428   |  |                                        |  | 42.59  |         |  |  |                                       |  |  |  |      | 
|POWER LIGHT TECH CO., LTD. (PLT) (Note G)               |  |                    | 41,581    |  |                                        |  | 42.33  |         |  |  |                                       |  |  |  |      | 
|CRYSTAL MEDIA INC.                                      |  |                    | 31,761    |  |                                        |  | 31.80  |         |  |  |                                       |  |  |  |      | 
|ANOTO TAIWAN CORP.                                      |  |                    | 3,878     |  |                                        |  | 24.12  |         |  |  |                                       |  |  |  |      | 
|TRANSLINK CAPITAL PARTNERS II L. P. (TRANSLINK)(Note C) |  |                    | 7,623     |  |                                        |  | 9.76   |         |  |  |                                       |  |  |  |      | 
|                                                        |  |                    |           |  |                                        |  |        |         |  |  |                                        |  |  |  |       | 
|Subtotal                                                |  |                    | 9,193,239 |  |                                        |  |        |         |  |  | 11,188,393                             |  |  |  |       | 
|                                                        |  |                    |           |  |                                        |  |        |         |  |  |                                        |  |  |  |       | 
|Total                                                   |  |                    | 9,193,239 |  |                                        |  |        |         |  |  | 11,275,894                             |  |  |  |       | 
|                                                        |  |                    |           |  |                                        |  |        |         |  |  |                                        |  |  |  |       | 



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UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



| | Note A: | On March 10, 2011, MAP has filed for liquidation through a decision at its stockholders meeting. The liquidation has not been completed as of
December 31, 2011.
| | ------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Note B: | The Company uses the equity method to account for its investment in WINAICO SOLAR PROJEKT 1 GMBH, SHANDONG HUAHONG, SHENYANG U-LIGHTING and LTI, which are jointly
controlled entities.
| | ------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Note C: | The Company follows international accounting practices in equity accounting for limited partnerships because no equivalent type of business exists in R.O.C., and
therefore, the Company uses the equity method to account for these investees.
| | ------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Note D: | The Company acquired 2.7 million shares of CRYSTALWISE through private placement in August 2010. The exchange of these securities listed above is restricted by
Article 43 paragraph 8 of the Securities and Exchange Law. The above-mentioned restriction of CRYSTALWISE will be removed on September 23, 2013. The Company determined it should apply the equity method to CRYSTALWISE because it was considered
to have the significant influence according to Statements of Financial Accounting Standards through common Chairman of the Board.
| | ------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Note E: | On July 30, 2010, UMCI has filed for liquidation through a decision at its stockholders meeting. The liquidation was completed on May 10, 2011.
| | ------- | ------------------------------------------------------------------------------------------------------------------------------------------------



| | Note F: | On June 26, 2009, UMO has filed for liquidation through a decision at its stockholders meeting. The liquidation was completed on June 23, 2011.
| | ------- | ------------------------------------------------------------------------------------------------------------------------------------------------



| | Note G: | On April 1, 2011, UNITED LIGHTING OPTO-ELECTRONIC INC. was merged with PLT. PLT is the surviving company and was renamed to UNITED LIGHTING OPTO-ELECTRONIC INC.
(UNITED LIGHTING). After the business combination, UNITED LIGHTING is included as a consolidated subsidiary.
| | ------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Note H: | Not until March 2005 did the Company receive an offer of approximately 106 million ordinary shares from Best Elite International Limited (Best Elite), the holding
company of HeJian Technology Corp. (HeJian). The offered shares represented approximately 50% of Best Elites outstanding ordinary shares and approximately 15% of the total outstanding shares of Best Elite. The Company filed an inquiry with the
Investment Commission of the Ministry of Economic Affairs on March 18, 2005 (Ref. No. 94-Lian-Tung-Tzu-0222), for their executive guidance with respect to the offer. Subsequent to Best Elite Board approval, the offered ordinary shares were
placed in a trust while the Company awaited the Investment Commissions guidance. While in trust, the Company could not receive ownership (nor any potential stock dividend or cash dividend distributed) and is not the beneficiary thereof unless
Company received approval from the Investment Commission. In the event that any stock dividend or cash dividend was distributed, the Companys potential stake in Best Elite would have accumulated accordingly. No response from the Investment
Commission of the Ministry of Economic Affairs was received on the Companys inquiry for many years. In June 2011, the Company filed an application for the acquisition of the aforementioned donated Best Elite shares as well as for an additional
purchase of Series B and B-1 preferred shares (Note I). Thereafter, on November 1, 2011, the Company received the approval letter from the Investment Commission of the Ministry of Economic Affairs (Ref. No. Jing-Shen-Er-Zi-10000274530). With
such an approval, the Company was able to formally accept the ordinary shares, which have been held in trust since 2006. Based on the approval letter from the Investment Commission of the Ministry of Economic Affairs, which designated the ordinary
shares offered by Best Elite as a donation, the Company recognized the said shares at their fair value of USD 22,898 thousand on the day it legally received the ordinary shares from the trust, December 12, 2011, as a long term investment
accounted for under the equity method with a corresponding gain recorded in other income.
| | ------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Note I: | On March 16, 2011, in order to achieve its global market objectives, the Companys Board of Directors approved an offer to the stockholders of Best Elite to
purchase up to 30% of the preferred shares of Best Elite. In June 2011, the Company filed an application on the 15.337% donated shares (in trust as described above) as well as 20.406% of the preferred shares of Best Elite based on the said
shareholders offering.
| | ------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Such purchase of 20.406% of the preferred shares of Best Elite was approved on November 1, 2011 in the same letter from the Investment Commission of the Ministry
of Economic Affairs (Ref. No. Jing-Shen-Er-Zi-10000274530) granting approval for the Companys ownership of Best Elite shares placed in escrow. Pursuant to such approval, the Company acquired by way of purchase at fair value Series B and B-1
preferred shares representing 19.56% of Best Elites total outstanding shares on December 12, 2011 and the Company thereby increased its cumulative ownership of the investee to 34.90%. The Company accounts for its investment as a long term
investment under the equity method in accordance with R.O.C. SFAS No. 5, Long-term Investments under Equity Method (R.O.C. SFAS 5).
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



| | b. | The change of investees equity was charged to the Companys equity. For the years ended December 31, 2010 and 2011, the changes charged to additional
paid-in capital were decreases of nil and NT$0.1 million, respectively, and the changes charged to retained earnings were decreases of NT$119 million and NT$273 million, respectively.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. | Total gains (losses) arising from investments accounted for under the equity method were NT$180 million, NT$115 million and NT$(312) million for the years ended
December 31, 2009, 2010 and 2011, respectively. Net investment income (loss) amounted to NT$(11) million, NT$310 million and NT$376 million for the years ended December 31, 2009, 2010 and 2011, respectively, and the related long-term
investment balances of NT$5,282 million and NT$4,396 million as of December 31, 2010 and 2011, respectively, were determined based on the investees financial statements audited by other independent auditors.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | d. | The long-term equity investments were not pledged.
| | -- | --------------------------------------------------



|11. | PROPERTY, PLANT AND EQUIPMENT
|--- | -----------------------------



|                                         |  |                         |             |  |                         |  |              |                       |  |  |            |   |  |  |             | 
|---------------------------------------- |  | ----------------------- | ----------- |  | ----------------------- |  | ------------ | --------------------- |  |  | ---------- | - |  |  | ----------- | 
|                                         |  | As of December 31, 2010 |            
|                                         |  | Cost                    |             |  | AccumulatedDepreciation |  |              | AccumulatedImpairment |  |  | Book Value |  
|                                         |  | NT$000                 |             |  | NT$000                 |  |              | NT$000               |  |  | NT$000    |  
|Land                                     |  |                         | 1,555,904   |  |                         |  |             |                       |  |  | (266,981   | ) |  |  | 1,288,923   | 
|Buildings                                |  |                         | 26,156,284  |  |                         |  | (10,364,578  | )                     |  |  | (978,742   | ) |  |  | 14,812,964  | 
|Machinery and equipment                  |  |                         | 498,122,888 |  |                         |  | (415,015,124 | )                     |  |  | (469,930   | ) |  |  | 82,637,834  | 
|Transportation equipment                 |  |                         | 72,938      |  |                         |  | (60,302      | )                     |  |  |           |   |  |  | 12,636      | 
|Furniture and fixtures                   |  |                         | 3,594,261   |  |                         |  | (2,979,520   | )                     |  |  | (9,619     | ) |  |  | 605,122     | 
|Leasehold improvement                    |  |                         | 728,030     |  |                         |  | (72,741      | )                     |  |  |           |   |  |  | 655,289     | 
|Construction in progress and prepayments |  |                         | 32,749,232  |  |                         |  |             |                       |  |  |           |   |  |  | 32,749,232  | 
|                                         |  |                         |             |  |                         |  |              |                       |  |  |            |   |  |  |             | 
|Total                                    |  |                         | 562,979,537 |  |                         |  | (428,492,265 | )                     |  |  | (1,725,272 | ) |  |  | 132,762,000 | 
|                                         |  |                         |             |  |                         |  |              |                       |  |  |            |   |  |  |             | 



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UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|                                         |  |                         |             |  |                         |  |              |                       |  |  |            |   |  |  |             | 
|---------------------------------------- |  | ----------------------- | ----------- |  | ----------------------- |  | ------------ | --------------------- |  |  | ---------- | - |  |  | ----------- | 
|                                         |  | As of December 31, 2011 |            
|                                         |  | Cost                    |             |  | AccumulatedDepreciation |  |              | AccumulatedImpairment |  |  | Book Value |  
|                                         |  | NT$000                 |             |  | NT$000                 |  |              | NT$000               |  |  | NT$000    |  
|Land                                     |  |                         | 2,065,194   |  |                         |  |             |                       |  |  | (291,757   | ) |  |  | 1,773,437   | 
|Buildings                                |  |                         | 26,631,417  |  |                         |  | (11,617,004  | )                     |  |  | (1,061,634 | ) |  |  | 13,952,779  | 
|Machinery and equipment                  |  |                         | 559,032,330 |  |                         |  | (448,545,567 | )                     |  |  | (1,748,713 | ) |  |  | 108,738,050 | 
|Transportation equipment                 |  |                         | 64,918      |  |                         |  | (51,854      | )                     |  |  |           |   |  |  | 13,064      | 
|Furniture and fixtures                   |  |                         | 4,378,308   |  |                         |  | (3,207,917   | )                     |  |  | (13,887    | ) |  |  | 1,156,504   | 
|Leasehold improvement                    |  |                         | 836,313     |  |                         |  | (200,498     | )                     |  |  |           |   |  |  | 635,815     | 
|Construction in progress and prepayments |  |                         | 23,054,651  |  |                         |  |             |                       |  |  |           |   |  |  | 23,054,651  | 
|                                         |  |                         |             |  |                         |  |              |                       |  |  |            |   |  |  |             | 
|Total                                    |  |                         | 616,063,131 |  |                         |  | (463,622,840 | )                     |  |  | (3,115,991 | ) |  |  | 149,324,300 | 
|                                         |  |                         |             |  |                         |  |              |                       |  |  |            |   |  |  |             | 



| | a. | Total interest expense before capitalization amounted to NT$180 million, NT$352 million and NT$554 million for the years ended December 31, 2009, 2010 and 2011,
respectively.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Details of capitalized interest are as follows:



|                           |  |                                  |             |  |         |  |             |         |  |  |             | 
|-------------------------- |  | -------------------------------- | ----------- |  | ------- |  | ----------- | ------- |  |  | ----------- | 
|                           |  | For the years ended December 31, |            
|                           |  | 2009                             |             |  | 2010    |  |             | 2011    | 
|                           |  | NT$000                          |             |  | NT$000 |  |             | NT$000 | 
|Land                       |  |                                  |            |  |         |  | 383         |         |  |  |            | 
|Buildings                  |  |                                  | 43,241      |  |         |  | 48,454      |         |  |  | 78          | 
|Machinery and equipment    |  |                                  | 78,092      |  |         |  | 284,605     |         |  |  | 245,844     | 
|Furniture and fixtures     |  |                                  | 55          |  |         |  | 1,557       |         |  |  | 1,661       | 
|Others                     |  |                                  | 85          |  |         |  | 29          |         |  |  | 100         | 
|                           |  |                                  |             |  |         |  |             |         |  |  |             | 
|Total interest capitalized |  |                                  | 121,473     |  |         |  | 335,028     |         |  |  | 247,683     | 
|                           |  |                                  |             |  |         |  |             |         |  |  |             | 
|Interest rates applied     |  |                                  | 1.07%~3.90% |  |         |  | 1.04%~3.51% |         |  |  | 1.02%~2.08% | 
|                           |  |                                  |             |  |         |  |             |         |  |  |             | 



| | b. | Please refer to Note 27 for property, plant and equipment pledged as collateral.
| | -- | --------------------------------------------------------------------------------



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UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|12. | OTHER ASSETS-OTHERS
|--- | -------------------



|                     |  |                    |           |  |         |  |           | 
|-------------------- |  | ------------------ | --------- |  | ------- |  | --------- | 
|                     |  | As of December 31, |          
|                     |  | 2010               |           |  | 2011    | 
|                     |  | NT$000            |           |  | NT$000 | 
|Leased assets        |  |                    | 1,089,990 |  |         |  | 1,011,383 | 
|Deposits-out         |  |                    | 946,414   |  |         |  | 1,349,528 | 
|Long-term prepayment |  |                    | 545,140   |  |         |  | 532,200   | 
|Others               |  |                    | 113,225   |  |         |  | 124,663   | 
|                     |  |                    |           |  |         |  |           | 
|Total                |  |                    | 2,694,769 |  |         |  | 3,017,774 | 
|                     |  |                    |           |  |         |  |           | 

Please refer to Note 27 for Deposits-out pledged as collateral.



|13. | IMPAIRMENT LOSS
|--- | ---------------



|                                                            |  |                                  |           |  |         |  |         |         |  |  |           | 
|----------------------------------------------------------- |  | -------------------------------- | --------- |  | ------- |  | ------- | ------- |  |  | --------- | 
|                                                            |  | For the years ended December 31, |          
|                                                            |  | 2009                             |           |  | 2010    |  |         | 2011    | 
|                                                            |  | NT$000                          |           |  | NT$000 |  |         | NT$000 | 
|Available-for-sale financial assets, noncurrent             |  |                                  |          |  |         |  |        |         |  |  | 34,560    | 
|Long-term investments accounted for under the equity method |  |                                  |          |  |         |  | 20,802  |         |  |  | 105,115   | 
|Financial assets measured at cost, noncurrent               |  |                                  | 494,091   |  |         |  | 93,077  |         |  |  | 570,725   | 
|Goodwill                                                    |  |                                  |          |  |         |  |        |         |  |  | 286,007   | 
|Property, plant and equipment                               |  |                                  | 3,331,557 |  |         |  |        |         |  |  | 1,238,877 | 
|Others assets-others                                        |  |                                  | 181,430   |  |         |  |        |         |  |  | 11,206    | 
|                                                            |  |                                  |           |  |         |  |         |         |  |  |           | 
|Total                                                       |  |                                  | 4,007,078 |  |         |  | 113,879 |         |  |  | 2,246,490 | 
|                                                            |  |                                  |           |  |         |  |         |         |  |  |           | 

After considering objective evidence and the result of the impairment loss testing, the Company
recognized impairment losses amounted to NT$494 million, NT$114 million and NT$710 million for its available-for-sale financial assets, noncurrent, long-term investments accounted for under the equity method and financial assets measured at cost,
noncurrent, respectively, for the years ended December 31, 2009, 2010 and 2011. As of December 31, 2009, the Company determined that certain fixed assets and other assets would not generate future cash flows. The Company determined the
recoverable amounts of these assets based on the fair values less costs to sell. The impairment test revealed that the total carrying amount of these assets was greater than their total recoverable amount, and the Company recognized an impairment
loss amounted to NT$122 million. According to the assessment report and as a result of the impairment loss testing, the Company recognized an impairment loss amounted to NT$3,391 million for its property, plant, equipment and other assets for the
year ended December 31, 2009. As of December 31, 2011, the Company identified indicators of impairment at subsidiaries due to their net operating profit being lower than expected. The Companys impairment loss testing determined that
the carrying amounts or future cash flow of goodwill, certain fixed assets and other assets-others exceeded their recoverable amounts. After considering the relevant objective evidence, the Company recorded an impairment loss of NT$1,536 million.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|14. | SHORT-TERM LOANS
|--- | ----------------



|                     |  |                                  |             |  |         |  |             | 
|-------------------- |  | -------------------------------- | ----------- |  | ------- |  | ----------- | 
|                     |  | As of December 31,               |            
|                     |  | 2010                             |             |  | 2011    | 
|                     |  | NT$000                          |             |  | NT$000 | 
|Unsecured bank loans |  |                                  | 4,124,115   |  |         |  | 9,411,877   | 
|                     |  |                                  |             |  |         |  |             | 
|                     | 
|                     |  | For the years ended December 31, |            
|                     |  | 2010                             |             |  | 2011    | 
|Interest rates       |  |                                  | 0.54%~2.37% |  |         |  | 0.54%~2.82% | 
|                     |  |                                  |             |  |         |  |             | 

The Companys unused short-term lines of credits amounted to NT$17,271 million and NT$19,609 million
as of December 31, 2010 and 2011, respectively .



|15. | FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS, CURRENT
|--- | -------------------------------------------------------------------



|                                           |  |                    |           |  |         |  |         | 
|------------------------------------------ |  | ------------------ | --------- |  | ------- |  | ------- | 
|                                           |  | As of December 31, |          
|                                           |  | 2010               |           |  | 2011    | 
|                                           |  | NT$000            |           |  | NT$000 | 
|Derivatives embedded in exchangeable bonds |  |                    | 2,248,384 |  |         |  | 741,531 | 
|Forward contracts                          |  |                    | 6,553     |  |         |  |        | 
|                                           |  |                    |           |  |         |  |         | 
|Total                                      |  |                    | 2,254,937 |  |         |  | 741,531 | 
|                                           |  |                    |           |  |         |  |         | 

During the years ended December 31, 2009, 2010 and 2011, net gains (losses) arising from financial
liabilities at fair value through profit or loss were NT$(815) million, NT$(546) million and NT$1,293 million, respectively.



|16. | BONDS PAYABLE
|--- | -------------



|                                     |  |                    |            |   |         |  |            |  
|------------------------------------ |  | ------------------ | ---------- | - | ------- |  | ---------- | -
|                                     |  | As of December 31, |           
|                                     |  | 2010               |            |   | 2011    | 
|                                     |  | NT$000            |            |   | NT$000 | 
|Unsecured exchangeable bonds payable |  |                    | 5,886,654  |   |         |  | 6,125,110  |  
|Unsecured convertible bonds payable  |  |                    |           |   |         |  | 12,420,903 |  
|Less: Discounts on bonds payable     |  |                    | (890,898   | ) |         |  | (1,141,225 | )
|                                     |  |                    |            |   |         |  |            |  
|Total                                |  |                    | 4,995,756  |   |         |  | 17,404,788 |  
|Less: Current portion                |  |                    | (4,995,756 | ) |         |  | (5,420,384 | )
|                                     |  |                    |            |   |         |  |            |  
|Net                                  |  |                    |           |   |         |  | 11,984,404 |  
|                                     |  |                    |            |   |         |  |            |  



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| | a. | On December 2, 2009, UMC issued SGX-ST listed zero coupon exchangeable bonds. The terms and conditions of the bonds are as follows:
| | -- | -----------------------------------------------------------------------------------------------------------------------------------



| | (a) | Issue Amount: US$127.2 million
| | --- | ------------------------------



| | (b) | Period: December 2, 2009 ~ December 2, 2014 (Maturity date)
| | --- | -----------------------------------------------------------



| | (c) | Redemption:
| | --- | -----------



| | i. | UMC may redeem the bonds, in whole or in part, after 12 months of the issuance and prior to the maturity date, at the principal amount of the bonds with an interest
calculated at the rate of -0.5% per annum (the Early Redemption Price) if the closing price of the common shares of Unimicron Technology Corporation (Unimicron) on the TSE, translated into US dollars at the prevailing exchange rate, for a
period of 20 consecutive trading days, the last of which occurs not more than 10 days prior to the date upon which notice of such redemption is published, is at least 130% of the exchange price then in effect translated into US dollars at the rate
of NTD 32.197=USD 1.00.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ii. | UMC may redeem the bonds, in whole, but not in part, at the Early Redemption Price if at least 90% in principal amount of the bonds has already been exchanged, redeemed
or purchased and cancelled.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | iii. | UMC may redeem all, but not part, of the bonds, at the Early Redemption Price at any time, in the event of certain changes in the R.O.C.s tax rules which would
require UMC to gross up for payments of principal, or to gross up for payments of interest or premium.
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | iv. | All, or any portion, of the bonds will be redeemable in US dollars at the option of bondholders on December 2, 2011 at 99% of the principal amount.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------



| | v. | Bondholders have the right to require UMC to redeem all or any portion of the bonds at the Early Redemption Price if the common shares of the exchanged securities are
officially delisted on the TSE for a period of five consecutive trading days.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | vi. | In the event that a change of control as defined in the indenture of the bonds occurs to UMC or Unimicron, the bondholders shall have the right to require UMC to redeem
the bonds, in whole or in part, at the Early Redemption Price.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | (d) | Terms of Exchange
| | --- | -----------------



| | i. | Underlying Securities: Common shares of Unimicron
| | -- | -------------------------------------------------



| | ii. | Exchange Period: The bonds are exchangeable at any time on or after January 1, 2010 and prior to November 22, 2014, into Unimicron common shares; provided,
however, that if the exercise date falls within 5 business days from the beginning of, and during, any closed period, the right of the exchanging holder of the bonds to vote with respect to the shares it receives will be subject to certain
restrictions.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | iii. | Exchange Price and Adjustment: The exchange price was originally NTD51.1875 per share, determined on the basis of a fixed exchange rate of NTD 32.197=USD 1.00. The
exchange price will be subject to adjustments upon the occurrence of certain events set out in the indenture. The exchange price is NTD47.1615 per share on December 31, 2011.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (e) | Redemption on the Maturity Date: On the maturity date, UMC will redeem the bonds at 97.53% of the principal amount unless, prior to such date:
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------



| | i. | UMC shall have redeemed the bonds at the option of UMC, or the bonds shall have been redeemed at option of the bondholder;
| | -- | --------------------------------------------------------------------------------------------------------------------------



| | ii. | The bondholders shall have exercised the exchange right before maturity; or
| | --- | ---------------------------------------------------------------------------



| | iii. | The bonds shall have been redeemed or purchased by UMC and cancelled.
| | ---- | ---------------------------------------------------------------------



| | b. | On December 2, 2009, UMC issued SGX-ST listed zero coupon exchangeable bonds. The terms and conditions of the bonds are as follows:
| | -- | -----------------------------------------------------------------------------------------------------------------------------------



| | (a) | Issue Amount: US$80 million
| | --- | ---------------------------



| | (b) | Period: December 2, 2009 ~ December 2, 2014 (Maturity date)
| | --- | -----------------------------------------------------------



| | (c) | Redemption:
| | --- | -----------



| | i. | UMC may redeem the bonds, in whole or in part, after 12 months of the issuance and prior to the maturity date, at the principal amount of the bonds with an interest
calculated at the rate of -0.5% per annum (the Early Redemption Price) if the closing price of the common shares of Novatek Microelectronics Corp., Ltd. (Novatek) on the TSE, translated into US dollars at the prevailing exchange rate, for a
period of 20 consecutive trading days, the last of which occurs not more than 10 days prior to the date upon which notice of such redemption is published, is at least 130% of the exchange price then in effect translated into US dollars at the rate
of NTD 32.197=USD 1.00.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | ii. | UMC may redeem the bonds, in whole, but not in part, at the Early Redemption Price if at least 90% in principal amount of the bonds has already been exchanged, redeemed
or purchased and cancelled.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | iii. | UMC may redeem all, but not part, of the bonds, at the Early Redemption Price at any time, in the event of certain changes in the R.O.C.s tax rules which would
require UMC to gross up for payments of principal, or to gross up for payments of interest or premium.
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | iv. | All, or any portion, of the bonds will be redeemable in US dollars at the option of bondholders on December 2, 2011 at 99% of the principal amount.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------



| | v. | Bondholders have the right to require UMC to redeem all or any portion of the bonds at the Early Redemption Price if the common shares of the exchanged securities are
officially delisted on the TSE for a period of five consecutive trading days.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | vi. | In the event that a change of control as defined in the indenture of the bonds occurs to UMC or Novatek, the bondholders shall have the right to require UMC to redeem
the bonds, in whole or in part, at the Early Redemption Price.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (d) | Terms of Exchange
| | --- | -----------------



| | i. | Underlying Securities: Common shares of Novatek
| | -- | -----------------------------------------------



| | ii. | Exchange Period: The bonds are exchangeable at any time on or after January 1, 2010 and prior to November 22, 2014, into Novatek common shares; provided,
however, that if the exercise date falls within 5 business days from the beginning of, and during, any closed period, the right of the exchanging holder of the bonds to vote with respect to the shares it receives will be subject to certain
restrictions.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | iii. | Exchange Price and Adjustment: The exchange price was originally NTD108.58 per share, determined on the basis of a fixed exchange rate of NTD 32.197=USD 1.00. The
exchange price will be subject to adjustments upon the occurrence of certain events set out in the indenture. The exchange price is NTD96.1487 per share on December 31, 2011.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



| | (e) | Redemption on the Maturity Date: On the maturity date, UMC will redeem the bonds at 97.53% of the principal amount unless, prior to such date:
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------



| | i. | UMC shall have redeemed the bonds at the option of UMC, or the bonds shall have been redeemed at option of the bondholder;
| | -- | --------------------------------------------------------------------------------------------------------------------------



| | ii. | The bondholders shall have exercised the exchange right before maturity; or
| | --- | ---------------------------------------------------------------------------



| | iii. | The bonds shall have been redeemed or purchased by UMC and cancelled.
| | ---- | ---------------------------------------------------------------------



| | c. | On May 24, 2011, UMC issued SGX-ST listed currency linked zero coupon convertible bonds. The terms and conditions of the bonds are as follows:
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------



| | (a) | Issue Amount: US$500 million
| | --- | ----------------------------



| | (b) | Period: May 24, 2011 ~ May 24, 2016 (Maturity date)
| | --- | ---------------------------------------------------



| | (c) | Redemption:
| | --- | -----------



| | i. | UMC may redeem the bonds, in whole or in part, after 3 years of the issuance and prior to the maturity date, at the principal amount of the bonds with an interest
calculated at the rate of -0.25% per annum (the Early Redemption Amount) if the closing price of UMCs ADS on the New York Stock Exchange, for a period of 20 out of 30 consecutive ADS trading days, the last of which occurs not more than 5
ADS trading days prior to the date upon which notice of such redemption is published, is at least 130% of the conversion price. The Early Redemption Price will be converted into NTD based on the Fixed Exchange Rate (NTD 28.846=USD 1.00), and this
fixed NTD amount will be converted using the prevailing rate at the time of redemption for payment in USD.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ii. | UMC may redeem the bonds, in whole, but not in part, at the Early Redemption Amount if at least 90% in principal amount of the bonds has already been converted,
redeemed or repurchased and cancelled.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | iii. | UMC may redeem all, but not part, of the bonds, at the Early Redemption Amount at any time, in the event of certain changes in the R.O.C.s tax rules which would
require UMC to gross up for payments of principal, or to gross up for payments of interest or premium.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | iv. | All or any portion of the bonds will be redeemable in at Early Redemption Amount at the option of bondholders on May 24, 2014 at 99.25% of the principal amount.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| | v. | Bondholders have the right to require UMC to redeem all of the bonds at the Early Redemption Amount if UMCs ADS cease to be listed or admitted for trading on the
New York Stock Exchange, or UMCs common shares cease to be listed on the Taiwan Stock Exchange.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



| | vi. | In the event that a change of control as defined in the indenture of the bonds occurs to UMC, the bondholders shall have the right to require UMC to redeem the bonds,
in whole but not in part, at the Early Redemption Amount.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (d) | Terms of Conversion
| | --- | -------------------



| | i. | Underlying Securities: ADS of UMC
| | -- | ---------------------------------



| | ii. | Conversion Period: The bonds are convertible at any time on or after July 4, 2011 and prior to May 14, 2016, into UMCs ADS; provided, however, that if
the exercise date falls within 8 business days from the beginning of, and during, any closed period, the right of the converting holder of the bonds to vote with respect to the ADS it receives will be subject to certain restrictions.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | iii. | Conversion Price and Adjustment: The conversion price was originally USD3.77 per ADS, determined on the basis of a Fixed Exchange Rate of NTD 28.846=USD 1.00. The
conversion price will be subject to adjustments upon the occurrence of certain events set out in the indenture. The conversion price is USD3.4713 per ADS on December 31, 2011.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (e) | Redemption on the Maturity Date: On the maturity date, UMC will redeem the bonds at 98.76% of the principal amount unless, prior to such date:
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------



| | i. | UMC shall have redeemed the bonds at the option of UMC, or the bonds shall have been redeemed at option of the bondholder;
| | -- | --------------------------------------------------------------------------------------------------------------------------



| | ii. | The bondholders shall have exercised the conversion right before maturity; or
| | --- | -----------------------------------------------------------------------------



| | iii. | The bonds shall have been redeemed or repurchased by UMC and cancelled.
| | ---- | -----------------------------------------------------------------------

In accordance with R.O.C. SFAS No. 36 Financial Instruments: Disclosure and Presentation, the value of the conversion right of the convertible bonds was determined at issuance and
recognized in additional paid-in capital  stock options amounting to NT$680 million, excluding issuance costs allocated to additional paid-in capital  stock options amounting to NT$3 million. The effective interest rate on the liability
component of the convertible bonds was determined to be 0.82%.



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| | d. | Repayments of the above-mentioned bonds in the future year are as follows:
| | -- | --------------------------------------------------------------------------



|                       |  |         |            | 
|---------------------- |  | ------- | ---------- | 
|Bonds repayable (Year) |  | Amount  |           
|                       |  | NT$000 |           
|2014                   |  |         | 6,125,110  | 
|2016                   |  |         | 12,420,903 | 
|                       |  |         |            | 
|Total                  |  |         | 18,546,013 | 
|                       |  |         |            | 



|17. | LONG-TERM LOANS
|--- | ---------------



| | a. | Details of long-term loans as of December 31, 2010 and 2011 are as follows:
| | -- | ---------------------------------------------------------------------------



|                                                                     |  |                        |           |  |            |                                                                                                 
|-------------------------------------------------------------------- |  | ---------------------- | --------- |  | ---------- | ------------------------------------------------------------------------------------------------
|Lender                                                               |  | As of December 31,2010 |           |  | Redemption
|                                                                     |  | NT$000                |           |  |           
|Secured Long-Term Loan from Bank ofTaiwan (1)                        |  |                        | 700,000   |  |            | Repayable quarterly from March 30, 2011 to December 30, 2013 and interest is paid monthly.      
|Secured Long-Term Loan from FirstCommercial Bank (1)                 |  |                        | 153,240   |  |            | Repayable semiannually from December 6, 2010 to November 14, 2015 and interest is paid monthly. 
|Secured Long-Term Loan from FirstCommercial Bank (2)                 |  |                        | 71,760    |  |            | Repayable semiannually from November 15, 2010 to November 14, 2015 and interest is paid monthly.
|Secured Long-Term Loan from FirstCommercial Bank (3)                 |  |                        | 620,000   |  |            | Repayable semiannually from June 30, 2012 to December 31, 2015 and interest is paid monthly.    
|Secured Syndicated Loans from Bank of Taiwan and 7 others            |  |                        | 4,060,000 |  |            | Repayable semiannually from February 10, 2012 to August 10, 2015 and interest is paid monthly.  
|Secured Syndicated Loans from Taiwan Cooperative Bank and 5 others   |  |                        | 1,350,000 |  |            | Repayable semiannually from October 25, 2010 to April 25, 2015 and interest is paid monthly.    
|Unsecured Long-Term Loan from Mega International Commercial Bank (1) |  |                        | 66,550    |  |            | Repayable quarterly from May 25, 2010 to May 25, 2012 and interest is paid monthly.             



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                                     |  |                                     |             |   |            |                                                                                              
|-------------------------------------------------------------------- |  | ----------------------------------- | ----------- | - | ---------- | ---------------------------------------------------------------------------------------------
|Lender                                                               |  | As of December 31,2010              |             |   | Redemption
|Unsecured Long-Term Loan from Mega International Commercial Bank (2) |  |                                     | 200,000     |   |            | Repayable quarterly from December 28, 2012 to December 28, 2015 and interest is paid monthly.
|Unsecured Long-Term Loan from First CommercialBank (1)               |  |                                     | 100,000     |   |            | Repayable quarterly from May 22, 2011 to February 22, 2013 and interest is paid monthly.     
|Unsecured Long-Term Loan from First CommercialBank (2)               |  |                                     | 200,000     |   |            | Repayable quarterly from September 30, 2011 to June 30, 2013 and interest is paid monthly.   
|                                                                     |  |                                     |             |   |            |                                                                                              
|Subtotal                                                             |  |                                     | 7,521,550   |   |            |                                                                                              
|Less: Administrative expense from syndicated loans                   |  |                                     | (11,727     | ) |            |                                                                                              
|Less: Current portion                                                |  |                                     | (710,433    | ) |            |                                                                                              
|                                                                     |  |                                     |             |   |            |                                                                                              
|Total                                                                |  |                                     | 6,799,390   |   |            |                                                                                              
|                                                                     |  |                                     |             |   |            |                                                                                              
|                                                                     |  |                                    
|                                                                     |  | For the year endedDecember 31, 2010 |             |   |           
|Interest Rates                                                       |  |                                     | 1.14%~2.49% |   |            |                                                                                              
|                                                                     |  |                                     |             |   |            |                                                                                              



|                                                     |  |                        |           |  |            |                                                                                             
|---------------------------------------------------- |  | ---------------------- | --------- |  | ---------- | --------------------------------------------------------------------------------------------
|Lender                                               |  | As of December 31,2011 |           |  | Redemption
|                                                     |  | NT$000                |           |  |           
|Secured Long-Term Loan from Bank of Taiwan (1)       |  |                        | 466,667   |  |            | Repayable quarterly from March 30, 2011 to December 30, 2013 and interest is paid monthly.  
|Secured Long-Term Loan from Bank of Taiwan (2)       |  |                        | 1,437,160 |  |            | Repayable quarterly from October 13, 2012 to July 13, 2016 and interest is paid monthly.    
|Secured Long-Term Loan from FirstCommercial Bank (1) |  |                        | 620,000   |  |            | Repayable semiannually from June 30, 2012 to December 31, 2015 and interest is paid monthly.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                                   |  |                        |           |  |            |                                                                                               
|------------------------------------------------------------------ |  | ---------------------- | --------- |  | ---------- | ----------------------------------------------------------------------------------------------
|Lender                                                             |  | As of December 31,2011 |           |  | Redemption
|                                                                   |  | NT$000                |           |  |           
|Secured Long-Term Loan from First Commercial Bank (2)              |  |                        | 200,000   |  |            | Repayable semiannually from December 24, 2012 to June 24, 2016 and interest is paid monthly.  
|Secured Long-Term Loan from First Commercial Bank (3)              |  |                        | 200,000   |  |            | Bullet repayment on May 16, 2014 and interest is paid monthly.                                
|Secured Long-Term Loan from First Commercial Bank (4)              |  |                        | 400,000   |  |            | Bullet repayment on June 27, 2014 and interest is paid monthly.                               
|Secured Long-Term Loan from Mega International Commercial Bank     |  |                        | 944,000   |  |            | Repayable quarterly from June 30, 2012 to June 30, 2016 and interest is paid monthly.         
|Secured Syndicated Loans from Bank of Taiwan and 7 others          |  |                        | 2,770,000 |  |            | Repayable semiannually from February 10, 2012 to August 10, 2013 and interest is paid monthly.
|Secured Syndicated Loans from Taiwan Cooperative Bank and 5 others |  |                        | 1,050,000 |  |            | Repayable semiannually from October 25, 2010 to April 25, 2015 and interest is paid monthly.  
|Unsecured Long-Term Loan from Mega International Commercial Bank   |  |                        | 1,000,000 |  |            | Repayable quarterly from December 28, 2012 to December 28, 2015 and interest is paid monthly. 
|Unsecured Long-Term Loan from First Commercial Bank (1)            |  |                        | 62,500    |  |            | Repayable quarterly from May 22, 2011 to February 22, 2013 and interest is paid monthly.      
|Unsecured Long-Term Loan from First Commercial Bank (2)            |  |                        | 150,000   |  |            | Repayable quarterly from September 30, 2011 to June 30, 2013 and interest is paid monthly.    
|Unsecured Revolving Loan from China Trust Commercial Bank (Note 1) |  |                        | 1,500,000 |  |            | Settlement due on August 30, 2016 and interest is paid monthly.                               



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                                 |  |                                     |             |   |            |                                                                  
|---------------------------------------------------------------- |  | ----------------------------------- | ----------- | - | ---------- | -----------------------------------------------------------------
|Lender                                                           |  | As of December 31,2011              |             |   | Redemption
|                                                                 |  | NT$000                             |             |   |           
|Unsecured Revolving Loan from Chang Hwa Commercial Bank (Note 2) |  |                                     | 500,000     |   |            | Settlement due on December 29, 2016 and interest is paid monthly.
|Unsecured Long- Term Loan from Taishin Bank                      |  |                                     | 400,000     |   |            | Bullet Repayment on August 25, 2013 and interest is paid monthly.
|                                                                 |  |                                     |             |   |            |                                                                  
|Subtotal                                                         |  |                                     | 11,700,327  |   |            |                                                                  
|Less: Administrative expenses from syndicated loans              |  |                                     | (7,678      | ) |            |                                                                  
|Less: Current portion                                            |  |                                     | (2,581,667  | ) |            |                                                                  
|                                                                 |  |                                     |             |   |            |                                                                  
|Total                                                            |  |                                     | 9,110,982   |   |            |                                                                  
|                                                                 |  |                                     |             |   |            |                                                                  
|                                                                 |  |                                    
|                                                                 |  | For the year endedDecember 31, 2011 |             |   |           
|Interest Rates                                                   |  |                                     | 1.14%~2.30% |   |            |                                                                  
|                                                                 |  |                                     |             |   |            |                                                                  



| | Note 1: | UMC entered into a 5-year loan agreement with China Trust Commercial Bank, effective August 30, 2011. The agreement offered UMC a revolving line of credit of
NT$2.5 billion starting from the first time use of the loan to the expiry date of the agreement, August 30, 2016. As of December 31, 2011, the unused line of credit was NT$1 billion.
| | ------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Note 2: | UMC entered into a 5-year loan agreement with Chang Hwa Commercial Bank, effective December 29, 2011. The agreement offered UMC a revolving line of credit of NT$3
billion starting from the first time use of the loan to the expiry date of the agreement, December 29, 2016. As of December 31, 2011, the unused line of credit was NT$2.5 billion.
| | ------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



| | b. | The long-term loans on December 31, 2011 will be repaid by installments with the last payment on December 29, 2016. Repayments in the coming years
respectively are as follows:
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                 |  |         |            | 
|-------------------------------- |  | ------- | ---------- | 
|Long-Term Loans repayable (Year) |  | Amount  |           
|                                 |  | NT$000 |           
|2012                             |  |         | 2,581,667  | 
|2013                             |  |         | 3,474,933  | 
|2014                             |  |         | 1,994,100  | 
|2015                             |  |         | 1,244,100  | 
|2016                             |  |         | 2,405,527  | 
|                                 |  |         |            | 
|Total                            |  |         | 11,700,327 | 
|                                 |  |         |            | 



| | c. | Please refer to Note 27 for property, plant and equipment pledged as collateral for long- term loans.
| | -- | -----------------------------------------------------------------------------------------------------



|18. | PENSION PLAN
|--- | ------------



| | a. | The Labor Pension Act of the R.O.C. (the Act), which adopts a defined contribution plan, became effective on July 1, 2005. Employees eligible for the Labor
Standards Law, a defined benefit plan, were offered the options to elect the pension calculation under the Act or continue to be subject to the pension calculation under the Labor Standards Law. Those employees that elected to be subject to the Act
will have their seniority achieved under the Labor Standards Law retained upon election of the Act, and the Company will make monthly contributions of no less than 6% of these employees monthly wages to the employees individual pension
accounts. The Company has made monthly contributions based on each individual employees salary or wage to employees pension accounts beginning July 1, 2005 and a total of NT$354 million, NT$422 million and NT$503 million were
contributed by the Company for the years ended December 31, 2009, 2010 and 2011, respectively. Pension benefits for employees of the Branch and subsidiaries overseas are provided in accordance with the local regulations, and during the years
ended December 31, 2009, 2010 and 2011, the Company made contributions of NT$162 million, NT$170 million and NT$165 million, respectively.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | The defined benefit plan under the Labor Standards Law is disbursed based on the units of service years and the average salary in the last month of the
service year. Two units per year are awarded for the first 15 years of services while one unit per year is awarded after the completion of the fifteenth year. The total units shall not exceed 45 units. In accordance to the plan, the Company
contributes an amount equivalent to 2% of the employees total salaries and wages on a monthly basis to the pension fund deposited at the Bank of Taiwan in the name of an administered pension fund committee. Government authority will collect
the fund as a Labor Retirement Fund and determine the allocation and investment policy of
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



| | the assets. The defined benefit plan assets and obligations are measured as of December 31. The unrecognized net asset or obligation at transition based on actuarial valuation is amortized
on a straight-line basis over 15 years.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. | Change in benefit obligation during the year:
| | -- | ---------------------------------------------



|                                                  |  |                                  |            |   |         |  |            |  
|------------------------------------------------- |  | -------------------------------- | ---------- | - | ------- |  | ---------- | -
|                                                  |  | For the years ended December 31, |           
|                                                  |  | 2010                             |            |   | 2011    | 
|                                                  |  | NT$000                          |            |   | NT$000 | 
|Projected benefit obligation at beginning of year |  |                                  | (5,189,112 | ) |         |  | (5,938,668 | )
|Service cost                                      |  |                                  | (103,864   | ) |         |  | (107,189   | )
|Interest cost                                     |  |                                  | (113,884   | ) |         |  | (107,813   | )
|Benefits paid                                     |  |                                  | 72,777     |   |         |  | 58,482     |  
|Gain (Loss) on projected benefit obligation       |  |                                  | (577,564   | ) |         |  | 94,765     |  
|Exchange loss                                     |  |                                  | (27,021    | ) |         |  | (82,221    | )
|                                                  |  |                                  |            |   |         |  |            |  
|Projected benefit obligation at end of year       |  |                                  | (5,938,668 | ) |         |  | (6,082,644 | )
|                                                  |  |                                  |            |   |         |  |            |  



| | d. | Change in pension assets during the year:
| | -- | -----------------------------------------



|                                               |  |                                  |           |   |         |  |           |  
|---------------------------------------------- |  | -------------------------------- | --------- | - | ------- |  | --------- | -
|                                               |  | For the years ended December 31, |          
|                                               |  | 2010                             |           |   | 2011    | 
|                                               |  | NT$000                          |           |   | NT$000 | 
|Fair value of plan assets at beginning of year |  |                                  | 1,995,970 |   |         |  | 2,118,193 |  
|Actual return on plan assets                   |  |                                  | 15,075    |   |         |  | (19,379   | )
|Contributions from employer                    |  |                                  | 159,049   |   |         |  | 167,837   |  
|Benefits paid                                  |  |                                  | (72,777   | ) |         |  | (58,482   | )
|Exchange gain and others                       |  |                                  | 20,876    |   |         |  | 68,714    |  
|                                               |  |                                  |           |   |         |  |           |  
|Fair value of plan assets at end of year       |  |                                  | 2,118,193 |   |         |  | 2,276,883 |  
|                                               |  |                                  |           |   |         |  |           |  



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| | e. | The funding status of the pension plan is as follows:
| | -- | -----------------------------------------------------



|                                                                         |  |                    |            |   |         |  |            |  
|------------------------------------------------------------------------ |  | ------------------ | ---------- | - | ------- |  | ---------- | -
|                                                                         |  | As of December 31, |           
|                                                                         |  | 2010               |            |   | 2011    | 
|                                                                         |  | NT$000            |            |   | NT$000 | 
|Benefit obligation                                                       |  |                    |            |   |         |  |            |  
|Vested benefit obligation                                                |  |                    | (874,090   | ) |         |  | (1,038,313 | )
|Non-vested benefit obligation                                            |  |                    | (2,392,090 | ) |         |  | (2,451,362 | )
|                                                                         |  |                    |            |   |         |  |            |  
|Accumulated benefit obligation                                           |  |                    | (3,266,180 | ) |         |  | (3,489,675 | )
|Effect from projected salary increase                                    |  |                    | (2,672,488 | ) |         |  | (2,592,969 | )
|                                                                         |  |                    |            |   |         |  |            |  
|Projected benefit obligation                                             |  |                    | (5,938,668 | ) |         |  | (6,082,644 | )
|Fair value of plan assets                                                |  |                    | 2,118,193  |   |         |  | 2,276,883  |  
|                                                                         |  |                    |            |   |         |  |            |  
|Funded status                                                            |  |                    | (3,820,475 | ) |         |  | (3,805,761 | )
|Unrecognized net transitional benefit obligation                         |  |                    | 1,368      |   |         |  | 1,243      |  
|Unrecognized loss                                                        |  |                    | 571,661    |   |         |  | 553,642    |  
|Prior service cost                                                       |  |                    | (51,970    | ) |         |  | (10,224    | )
|Adjustment required to recognize minimum liabilities                     |  |                    |           |   |         |  | (1         | )
|                                                                         |  |                    |            |   |         |  |            |  
|Accrued pension liabilities recognized on the consolidated balance sheet |  |                    | (3,299,416 | ) |         |  | (3,261,101 | )
|                                                                         |  |                    |            |   |         |  |            |  



| | f. | The components of the net periodic pension cost are as follows:
| | -- | ---------------------------------------------------------------



|                                                                 |  |                                  |         |   |         |  |         |         |  |  |         |  
|---------------------------------------------------------------- |  | -------------------------------- | ------- | - | ------- |  | ------- | ------- |  |  | ------- | -
|                                                                 |  | For the years ended December 31, |        
|                                                                 |  | 2009                             |         |   | 2010    |  |         | 2011    | 
|                                                                 |  | NT$000                          |         |   | NT$000 |  |         | NT$000 | 
|Service cost                                                     |  |                                  | 109,950 |   |         |  | 103,864 |         |  |  | 107,189 |  
|Interest cost                                                    |  |                                  | 117,538 |   |         |  | 113,884 |         |  |  | 107,813 |  
|Expected return on plan assets                                   |  |                                  | (44,831 | ) |         |  | (55,487 | )       |  |  | (50,128 | )
|Amortization of unrecognized transitional net benefit obligation |  |                                  | 28,291  |   |         |  | 28,293  |         |  |  | 124     |  
|Amortization of unrecognized pension loss (gain)                 |  |                                  | (21,123 | ) |         |  | 12,069  |         |  |  | 13,664  |  
|Amortization of prior service cost                               |  |                                  |        |   |         |  | (5,197  | )       |  |  | (46,513 | )
|Others                                                           |  |                                  | 906     |   |         |  | (48     | )       |  |  | (1,371  | )
|                                                                 |  |                                  |         |   |         |  |         |         |  |  |         |  
|Net periodic pension cost                                        |  |                                  | 190,731 |   |         |  | 197,378 |         |  |  | 130,778 |  
|                                                                 |  |                                  |         |   |         |  |         |         |  |  |         |  



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



The actuarial assumptions underlying are as follows:



|                               |  |                                      |      |   |         |  |      |           |  |  |      |  
|------------------------------ |  | ------------------------------------ | ---- | - | ------- |  | ---- | --------- |  |  | ---- | -
|                               |  | For the year ended December 31, 2009 |     
|                               |  | UMC                                  |      |   | FORTUNE |  |      | UMC JAPAN | 
|Discount rate                  |  |                                      | 2.25 | % |         |  | 2.25 | %         |  |  | 2.00 | %
|Rate of salary increase        |  |                                      | 4.00 | % |         |  | 3.00 | %         |  |  | 2.55 | %
|Expected return on plan assets |  |                                      | 2.25 | % |         |  | 2.25 | %         |  |  | 4.00 | %
|                               | 
|                               |  | For the year ended December 31, 2010 |     
|                               |  | UMC                                  |      |   | FORTUNE |  |      | UMC JAPAN | 
|Discount rate                  |  |                                      | 1.75 | % |         |  | 2.00 | %         |  |  | 2.00 | %
|Rate of salary increase        |  |                                      | 4.00 | % |         |  | 3.00 | %         |  |  | 2.55 | %
|Expected return on plan assets |  |                                      | 1.75 | % |         |  | 2.00 | %         |  |  | 3.65 | %
|                               | 
|                               |  | For the year ended December 31, 2011 |     
|                               |  | UMC                                  |      |   | FORTUNE |  |      | UMC JAPAN | 
|Discount rate                  |  |                                      | 1.90 | % |         |  | 2.00 | %         |  |  | 2.00 | %
|Rate of salary increase        |  |                                      | 4.00 | % |         |  | 3.00 | %         |  |  | 2.55 | %
|Expected return on plan assets |  |                                      | 1.90 | % |         |  | 2.00 | %         |  |  | 3.20 | %

Expected future benefit payments are as follows:



|          |  |         |           | 
|--------- |  | ------- | --------- | 
|Year      |  | Amount  |          
|          |  | NT$000 |          
|2012      |  |         | 113,344   | 
|2013      |  |         | 90,008    | 
|2014      |  |         | 117,228   | 
|2015      |  |         | 142,841   | 
|2016      |  |         | 163,774   | 
|2017-2021 |  |         | 1,119,654 | 

The Company expects to make pension fund contributions of NT$145 million in 2012.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|19. | CAPITAL STOCK
|--- | -------------



| | a. | UMC had 26,000 million common shares authorized to be issued, and 12,988 million shares were issued as of December 31, 2010, each at a par value of
NT$10.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. | UMC had issued a total of 230 million ADSs, which were traded on the NYSE as of December 31, 2010. The total number of common shares of UMC represented by all
issued ADSs was 1,148 million shares as of December 31, 2010. One ADS represents five common shares.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. | Among the employee stock options issued by UMC on December 13, 2007, 141 thousand shares were exercised during the year ended December 31, 2010. The
issuance process through the authority had been completed.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | d. | On December 31, 2010, UMC sold 64 million shares of treasury stock to employees, which were repurchased during the periods from January 7 to
February 16, 2009, for the purpose of transferring to employees.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | e. | UMC had 26,000 million common shares authorized to be issued, and 13,084 million shares were issued as of December 31, 2011, each at a par value of
NT$10.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| | f. | UMC had issued a total of 230 million ADSs, which were traded on the NYSE as of December 31, 2011. The total number of common shares of UMC represented by all
issued ADSs was 1,148 million shares as of December 31, 2011. One ADS represents five common shares.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | g. | Among the employee stock options issued by UMC on June 19, 2009, 96,544 thousand options were exercised during the year ended December 31, 2011. The
issuance process for 96,430 thousand shares was completed through the authority as of December 31, 2011. UMC recorded cash collected for the remaining 114 thousand shares still pending authorization as of December 31, 2011 under
Capital collected in advance.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|20. | EMPLOYEE STOCK OPTIONS
|--- | ----------------------

On
October 8, 2003, September 30, 2004, December 22, 2005, October 9, 2007 and May 12, 2009, the Company was authorized by the Securities and Futures Bureau of the Financial Supervisory Commission, Executive
Yuan, to issue employee stock options with a total number of 150 million, 150 million, 350 million, 500 million and 500 million units, respectively. Each unit entitles an optionee to subscribe to 1 share of the
Companys common stock. Settlement upon the exercise of the options will be made through the issuance of new shares by the Company. The exercise price of the options was set at the closing price of the Companys common stock on the date of
grant. The contractual life is 6 years and an optionee may exercise the options in accordance with certain schedules as prescribed by the plan after 2 years from the date of grant. Detailed information relevant to the employee stock options is
disclosed as follows:



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|                   |  |                                             |           |  |                                                 |  |         |                                                       |  |  |                          |  |  |   |       | 
|------------------ |  | ------------------------------------------- | --------- |  | ----------------------------------------------- |  | ------- | ----------------------------------------------------- |  |  | ------------------------ |  |  | - | ----- | 
|Date of grant      |  | Total numberof
optionsgranted(in thousands) |           |  | Total number ofoptionsoutstanding (inthousands) |  |         | Sharesavailable tooption 
holders(in thousands)(Note) |  |  | Exerciseprice(NTD)(Note) | 
|March 23, 2004     |  |                                             | 33,330    |  |                                                 |  |        |                                                       |  |  |                         |  |  | $ | 31.25 | 
|July 1, 2004       |  |                                             | 56,590    |  |                                                 |  |        |                                                       |  |  |                         |  |  | $ | 28.24 | 
|October 13, 2004   |  |                                             | 20,200    |  |                                                 |  |        |                                                       |  |  |                         |  |  | $ | 24.28 | 
|April 29, 2005     |  |                                             | 23,460    |  |                                                 |  |        |                                                       |  |  |                         |  |  | $ | 22.37 | 
|August 16, 2005    |  |                                             | 54,350    |  |                                                 |  |        |                                                       |  |  |                         |  |  | $ | 29.47 | 
|September 29, 2005 |  |                                             | 51,990    |  |                                                 |  |        |                                                       |  |  |                         |  |  | $ | 26.89 | 
|January 4, 2006    |  |                                             | 39,290    |  |                                                 |  | 12,680  |                                                       |  |  | 8,840                    |  |  | $ | 23.17 | 
|May 22, 2006       |  |                                             | 42,058    |  |                                                 |  | 19,057  |                                                       |  |  | 13,286                   |  |  | $ | 25.19 | 
|August 24, 2006    |  |                                             | 28,140    |  |                                                 |  | 10,535  |                                                       |  |  | 7,344                    |  |  | $ | 24.09 | 
|December 13, 2007  |  |                                             | 500,000   |  |                                                 |  | 354,917 |                                                       |  |  | 354,917                  |  |  | $ | 18.03 | 
|June 19, 2009      |  |                                             | 300,000   |  |                                                 |  | 163,337 |                                                       |  |  | 163,337                  |  |  | $ | 10.40 | 
|Total              |  |                                             | 1,149,408 |  |                                                 |  | 560,526 |                                                       |  |  | 547,724                  |  |  |   |       | 



| |  |       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  | ----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Note: |  | The employee stock options granted prior to August 7, 2007, the effective date of capital reduction, were adjusted in accordance with the capital reduction rate. Each option
unit entitles an optionee to subscribe for about 0.7 share of the Companys common stock. The exercise price of the options is also adjusted according to capital reduction rate. Each stock option unit granted after August 7, 2007 remains
to be subscribed for 1 share of the Companys common stock.

| | 
| | 



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



| | a. | A summary of the Companys stock option plan and related information for the years ended December 31, 2010 and 2011 is as follows:
| | -- | ----------------------------------------------------------------------------------------------------------------------------------



|                                   |  |                                  |         |   |                                                |  |         |                                             |  |   |                      |  |  |                                              |         |   |                                             |  |         |   |  |   |       | 
|---------------------------------- |  | -------------------------------- | ------- | - | ---------------------------------------------- |  | ------- | ------------------------------------------- |  | - | -------------------- |  |  | -------------------------------------------- | ------- | - | ------------------------------------------- |  | ------- | - |  | - | ----- | 
|                                   |  | For the years ended December 31, |        
|                                   |  | 2010                             |         |   | 2011                                           | 
|                                   |  | Options(inthousands)             |         |   | Sharesavailable tooption holders(in thousands) |  |         | Weighted-averageExercisePrice
pershare(NTD) |  |   | Options(inthousands) |  |  | Sharesavailable tooptionholders(inthousands) |         |   | Weighted-averageExercisePrice
pershare(NTD) | 
|Outstanding at beginning of period |  |                                  | 861,771 |   |                                                |  | 809,566 |                                             |  | $ | 16.59                |  |  |                                              | 752,700 |   |                                             |  | 718,876 |   |  | $ | 16.05 | 
|Exercised                          |  |                                  | (141    | ) |                                                |  | (141    | )                                           |  | $ | 18.03                |  |  |                                              | (96,544 | ) |                                             |  | (96,544 | ) |  | $ | 10.40 | 
|Forfeited                          |  |                                  | (61,477 | ) |                                                |  | (57,466 | )                                           |  | $ | 16.42                |  |  |                                              | (32,745 | ) |                                             |  | (30,767 | ) |  | $ | 17.04 | 
|Expired                            |  |                                  | (47,453 | ) |                                                |  | (33,083 | )                                           |  | $ | 28.56                |  |  |                                              | (62,885 | ) |                                             |  | (43,841 | ) |  | $ | 27.28 | 
|                                   |  |                                  |         |   |                                                |  |         |                                             |  |   |                      |  |  |                                              |         |   |                                             |  |         |   |  |   |       | 
|Outstanding at end of period       |  |                                  | 752,700 |   |                                                |  | 718,876 |                                             |  | $ | 16.05                |  |  |                                              | 560,526 |   |                                             |  | 547,724 |   |  | $ | 16.09 | 
|                                   |  |                                  |         |   |                                                |  |         |                                             |  |   |                      |  |  |                                              |         |   |                                             |  |         |   |  |   |       | 
|Exercisable at end of period       |  |                                  | 385,101 |   |                                                |  | 351,785 |                                             |  | $ | 19.78                |  |  |                                              | 422,148 |   |                                             |  | 409,652 |   |  | $ | 17.85 | 
|                                   |  |                                  |         |   |                                                |  |         |                                             |  |   |                      |  |  |                                              |         |   |                                             |  |         |   |  |   |       | 



| | b. | The information on the Companys outstanding stock options as of December 31, 2011, is as follows:
| | -- | --------------------------------------------------------------------------------------------------



|                   |  |                            |              |  |                           |  |         |                                                |  |  |                                        |  |  |                                             |      |  |                      |   |       |                                               |  |  |                                             |  |  |  |         |  |  |   |       | 
|------------------ |  | -------------------------- | ------------ |  | ------------------------- |  | ------- | ---------------------------------------------- |  |  | -------------------------------------- |  |  | ------------------------------------------- | ---- |  | -------------------- | - | ----- | --------------------------------------------- |  |  | ------------------------------------------- |  |  |  | ------- |  |  | - | ----- | 
|                   |  |                            |              |  | Outstanding Stock Options |  |         | Exercisable Stock Options                      | 
|Authorization Date |  | Range ofExercisePrice(NTD) |              |  | Options(inthousands)      |  |         | Sharesavailable tooption holders(in thousands) |  |  | Weighted-averageExpectedRemainingYears |  |  | Weighted-averageExercisePrice pershare(NTD) |      |  | Options(inthousands) |   |       | Sharesavailableto optionholders (inthousands) |  |  | Weighted-averageExercisePrice pershare(NTD) | 
|2005.12.22         |  | $                          | 23.17~$25.19 |  |                           |  | 42,272  |                                                |  |  | 29,470                                 |  |  |                                             | 0.34 |  |                      | $ | 24.31 |                                               |  |  | 41,262                                      |  |  |  | 28,766  |  |  | $ | 24.30 | 
|2007.10.09         |  | $                          | 18.03        |  |                           |  | 354,917 |                                                |  |  | 354,917                                |  |  |                                             | 1.95 |  |                      | $ | 18.03 |                                               |  |  | 347,822                                     |  |  |  | 347,822 |  |  | $ | 18.03 | 
|2009.05.12         |  | $                          | 10.40        |  |                           |  | 163,337 |                                                |  |  | 163,337                                |  |  |                                             | 3.46 |  |                      | $ | 10.40 |                                               |  |  | 33,064                                      |  |  |  | 33,064  |  |  | $ | 10.40 | 
|                   |  |                            |              |  |                           |  |         |                                                |  |  |                                        |  |  |                                             |      |  |                      |   |       |                                               |  |  |                                             |  |  |  |         |  |  |   |       | 
|                   |  |                            |              |  |                           |  | 560,526 |                                                |  |  | 547,724                                |  |  |                                             | 2.31 |  |                      | $ | 16.09 |                                               |  |  | 422,148                                     |  |  |  | 409,652 |  |  | $ | 17.85 | 
|                   |  |                            |              |  |                           |  |         |                                                |  |  |                                        |  |  |                                             |      |  |                      |   |       |                                               |  |  |                                             |  |  |  |         |  |  |   |       | 





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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



| | c. | The Company used the intrinsic value method to recognize compensation costs for its employee stock options issued between January 1, 2004 and December 31,
2007. Compensation costs for these options were nil for the years ended December 31, 2010 and 2011. For options granted on or after January 1, 2008, the Company recognized compensation cost of NT$254 million and NT$214 million using the
fair value method in accordance with R.O.C. SFAS 39 for the years ended December 31, 2010 and 2011, respectively.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Company granted options prior to adopting R.O.C. SFAS 39. Pro forma information on net income and earnings per share using the fair value method is as follows:



|                                   |  |                                      |            |  |                            |   |            | 
|---------------------------------- |  | ------------------------------------ | ---------- |  | -------------------------- | - | ---------- | 
|                                   |  | For the year ended December 31, 2009 |           
|                                   |  | Basic losses per share               |            |  | Diluted losses per share   |  
|                                   |  | NT$000                              |            |  | NT$000                    |  
|Net income                         |  |                                      | 3,874,028  |  |                            |   | 3,874,028  | 
|Earnings per share (NTD)           |  | $                                    | 0.31       |  |                            | $ | 0.30       | 
|Pro forma net income               |  |                                      | 3,064,107  |  |                            |   | 3,064,107  | 
|Pro forma earnings per share (NTD) |  | $                                    | 0.24       |  |                            | $ | 0.24       | 
|                                   | 
|                                   |  | For the year ended December 31, 2010 |           
|                                   |  | Basic earnings per share             |            |  | Diluted earnings per share |  
|                                   |  | NT$000                              |            |  | NT$000                    |  
|Net income                         |  |                                      | 23,898,905 |  |                            |   | 23,898,905 | 
|Earnings per share (NTD)           |  | $                                    | 1.91       |  |                            | $ | 1.87       | 
|Pro forma net income               |  |                                      | 23,538,509 |  |                            |   | 23,538,509 | 
|Pro forma earnings per share (NTD) |  | $                                    | 1.88       |  |                            | $ | 1.84       | 
|                                   | 
|                                   |  | For the year ended December 31, 2011 |           
|                                   |  | Basic earnings per share             |            |  | Diluted earnings per share |  
|                                   |  | NT$000                              |            |  | NT$000                    |  
|Net income                         |  |                                      | 10,609,695 |  |                            |   | 10,663,057 | 
|Earnings per share (NTD)           |  | $                                    | 0.84       |  |                            | $ | 0.81       | 
|Pro forma net income               |  |                                      | 10,537,737 |  |                            |   | 10,591,099 | 
|Pro forma earnings per share (NTD) |  | $                                    | 0.84       |  |                            | $ | 0.80       | 



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



The fair value of the options outstanding as of December 31, 2010 and 2011 were
estimated at the date of grant using the Black-Scholes options pricing model with the following weighted-average assumptions. The factors before and after the adoption of R.O.C. SFAS 39 to account for share-based payments were as follows:



|                                                                              |  |               |  |                
|----------------------------------------------------------------------------- |  | ------------- |  | ---------------
|Factors                                                                       |  | Before        |  | After          
|Expected dividend yields                                                      |  | 1.37%~1.71%   |  | 1.98%          
|Volatility factors of the expected market price of the Companys common stock |  | 36.29%~49.10% |  | 40.63%         
|Risk-free interest rate                                                       |  | 1.85%~2.85%   |  | 1.01%          
|Weighted-average expected life                                                |  | 4~5 years     |  | 3.16~5.03 years



|21. | TREASURY STOCK
|--- | --------------



| | a. | Changes in treasury stock during the years ended December 31, 2009, 2010 and 2011 are as follows:
| | -- | -------------------------------------------------------------------------------------------------

For the year ended December 31, 2009

(In thousands of shares)



|                          |  |                      |   |  |          |  |         |          |  |  |                        |  |  |  |         | 
|------------------------- |  | -------------------- | - |  | -------- |  | ------- | -------- |  |  | ---------------------- |  |  |  | ------- | 
|Purpose                   |  | As ofJanuary 1, 2009 |   |  | Increase |  |         | Decrease |  |  | As ofDecember 31, 2009 | 
|For transfer to employees |  |                      |  |  |          |  | 300,000 |          |  |  | 78,091                 |  |  |  | 221,909 | 
|                          |  |                      |   |  |          |  |         |          |  |  |                        |  |  |  |         | 

For the year ended December 31, 2010

(In thousands of shares)



|                          |  |                      |         |  |          |  |         |          |  |  |                        |  |  |  |         | 
|------------------------- |  | -------------------- | ------- |  | -------- |  | ------- | -------- |  |  | ---------------------- |  |  |  | ------- | 
|Purpose                   |  | As ofJanuary 1, 2010 |         |  | Increase |  |         | Decrease |  |  | As ofDecember 31, 2010 | 
|For transfer to employees |  |                      | 221,909 |  |          |  | 300,000 |          |  |  | 63,975                 |  |  |  | 457,934 | 
|                          |  |                      |         |  |          |  |         |          |  |  |                        |  |  |  |         | 

For the year ended December 31, 2011

(In thousands of shares)



|                          |  |                      |         |  |          |  |   |          |  |  |                        |  |  |  |         | 
|------------------------- |  | -------------------- | ------- |  | -------- |  | - | -------- |  |  | ---------------------- |  |  |  | ------- | 
|Purpose                   |  | As ofJanuary 1, 2011 |         |  | Increase |  |   | Decrease |  |  | As ofDecember 31, 2011 | 
|For transfer to employees |  |                      | 457,934 |  |          |  |  |          |  |  |                       |  |  |  | 457,934 | 
|                          |  |                      |         |  |          |  |   |          |  |  |                        |  |  |  |         | 



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



| | b. | According to the Securities and Exchange Law of the R.O.C., the total shares of treasury stock shall not exceed 10% of UMCs issued stock, and the total purchase
amount shall not exceed the sum of the retained earnings, additional paid-in capital  premiums and realized additional paid-in capital. As such, the maximum number of shares of treasury stock that UMC could hold as of December 31, 2010
and 2011, were 1,299 million shares and 1,308 million shares, while the ceiling amount were NT$72,540 million and NT$69,786 million, respectively.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. | In compliance with Securities and Exchange Law of the R.O.C., treasury stock should not be pledged, nor should it be entitled to voting rights or receiving dividends.
Stock held by subsidiaries is treated as treasury stock. These subsidiaries have the same rights as other stockholders except for subscription to new stock issuance and voting rights.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | d. | As of December 31, 2010, UMCs subsidiary, FORTUNE VENTURE CAPITAL CORP., held 16 million shares of UMCs stock, with a book value of NT$16.30 per
share. The closing price on December 31, 2010 was NT$16.30.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of December 31, 2011, UMCs
subsidiary, FORTUNE VENTURE CAPITAL CORP., held 16 million shares of UMCs stock, with a book value of NT$12.70 per share. The closing price on December 31, 2011 was NT$12.70.



|22. | RETAINED EARNINGS AND DIVIDEND POLICIES
|--- | ---------------------------------------

According to UMCs Articles of Incorporation, current years earnings, if any, shall be distributed in the following order:



| | a. | Payment of all taxes and dues;
| | -- | ------------------------------



| | b. | Offset prior years operation losses;
| | -- | -------------------------------------



| | c. | Set aside 10% of the remaining amount after deducting items (a) and (b) as a legal reserve;
| | -- | -------------------------------------------------------------------------------------------



| | d. | Special capital reserve or reversal in accordance with relevant laws or regulations or as requested by the authorities in charge; (Note)
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------



| | e. | Set aside 0.1% of the remaining amount after deducting items (a), (b), (c) and (d) as directors remuneration; and
| | -- | ------------------------------------------------------------------------------------------------------------------



| | f. | After deducting items (a), (b), (c) and (d) above from the current years earnings, no less than 5% of the remaining amount together with the prior
years unappropriated earnings is to be allocated as employee bonus, which will be settled through issuance of new shares of UMC, or cash. Employees of UMCs subsidiaries, meeting certain requirements determined by the board of directors,
are also eligible for the employee stock bonus.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | g. | The distribution of the remaining portion, if any, will be recommended by the board of directors and resolved in the stockholders meeting.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



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



| |  |       |  |                                                                                                                                                                                                                                                         
| |  | ----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Note: |  | In light of the amendment of the Corporate Governance Best-Practice Principles for TWSE/GTSM Listed Companies on March 31, 2011, UMCs Articles of Incorporation were
revised and revisions approved in the stockholders meeting held on June 15, 2011.

According to the regulation of Taiwan SFC, UMC is required to appropriate a special reserve in the amount
equal to the sum of debit elements under stockholders equity, such as unrealized loss on financial instruments and negative cumulative translation adjustment, at every year-end. Such special reserve is prohibited from distribution. However, if
any of the debit elements is reversed, the special reserve in the amount equal to the reversal may be released for earnings distribution or offsetting accumulated deficit.

During the years ended December 31, 2010 and 2011, the amounts of the employee bonus and remunerations to directors were estimated. The board of directors estimated the amount by taking into
consideration of UMCs Articles of Incorporation, government regulations and industry average. Estimated amount of employee bonus and remunerations paid to directors are charged to current income. If the board modified the estimates
significantly in the subsequent periods, UMC will recognize the change as an adjustment to current income. Moreover, if the amounts were modified by the stockholders meeting in the following year, the adjustment will be regarded as a change in
accounting estimate and will be reflected in the consolidated statement of income in the following year. Upon stockholders approval of the employee stock bonus, the distribution amount is determined by dividing the total approved bonus amount
with the closing market price of UMCs stock one day prior to the approved date. Information about appropriations of the bonus to employees and directors can be obtained from the Market Observation Post System on the website of the
TSE.

The appropriation and compensation of 2011 unappropriated retained earnings has not yet been approved by the
stockholders meeting as of the reporting date. Information on the board of directors recommendations and stockholders approval can be obtained from the Market Observation Post System on the website of the TSE.



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UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



The distributions of cash dividend, employee bonus and directors remuneration for
2010 and 2011 were approved through the stockholders meeting and the board of directors meeting held on June 15, 2011 and March 14, 2012, respectively. The details of distribution are as follows:



|                                          |  |      |                   |  |      |  |                   | 
|----------------------------------------- |  | ---- | ----------------- |  | ---- |  | ----------------- | 
|                                          |  | 2010 |                   |  | 2011 | 
|Cash Dividend                             |  |      | NT$1.12 per share |  |      |  | NT$0.50 per share | 
|Employee bonus  Cash (in thousand NTD)   |  |      | 2,476,611         |  |      |  | 1,618,217         | 
|Directors remuneration (in thousand NTD) |  |      | 21,402            |  |      |  | 9,303             | 

Employee bonus and directors remuneration for 2010 which were approved through the
stockholders meeting, were consistent with the resolutions of meeting of Board of Directors held on March 16, 2011.

The aforementioned cash dividend for 2010 was adjusted to NT$1.11164840 per share due to the increase in outstanding common stock as a
result of newly issued shares to settle employee stock options exercised. The distribution was approved through the Board of Directors meeting held on July 8, 2011.



|23. | OPERATING COSTS AND EXPENSES
|--- | ----------------------------

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



|                           |  |                                  |            |  |                   |  |           |         |  |  |                |  |  |                   |            |  |         |  |           |                |  |  |                   |  |  |         |            |  |  |  |           |  |  |  |            | 
|-------------------------- |  | -------------------------------- | ---------- |  | ----------------- |  | --------- | ------- |  |  | -------------- |  |  | ----------------- | ---------- |  | ------- |  | --------- | -------------- |  |  | ----------------- |  |  | ------- | ---------- |  |  |  | --------- |  |  |  | ---------- | 
|                           |  | For the years ended December 31, |           
|                           |  | 2009                             |            |  | 2010              |  |           | 2011    | 
|                           |  | Operatingcosts                   |            |  | Operatingexpenses |  |           | Total   |  |  | Operatingcosts |  |  | Operatingexpenses |            |  | Total   |  |           | Operatingcosts |  |  | Operatingexpenses |  |  | Total   |           
|                           |  | NT$000                          |            |  | NT$000           |  |           | NT$000 |  |  | NT$000        |  |  | NT$000           |            |  | NT$000 |  |           | NT$000        |  |  | NT$000           |  |  | NT$000 |           
|Personnel expenses         |  |                                  |            |  |                   |  |           |         |  |  |                |  |  |                   |            |  |         |  |           |                |  |  |                   |  |  |         |            |  |  |  |           |  |  |  |            | 
|Salaries                   |  |                                  | 9,838,712  |  |                   |  | 3,844,526 |         |  |  | 13,683,238     |  |  |                   | 13,201,139 |  |         |  | 5,135,151 |                |  |  | 18,336,290        |  |  |         | 12,265,469 |  |  |  | 4,764,634 |  |  |  | 17,030,103 | 
|Labor and health insurance |  |                                  | 518,137    |  |                   |  | 187,090   |         |  |  | 705,227        |  |  |                   | 624,384    |  |         |  | 205,606   |                |  |  | 829,990           |  |  |         | 764,487    |  |  |  | 244,986   |  |  |  | 1,009,473  | 
|Pension                    |  |                                  | 534,531    |  |                   |  | 176,309   |         |  |  | 710,840        |  |  |                   | 605,086    |  |         |  | 184,373   |                |  |  | 789,459           |  |  |         | 609,855    |  |  |  | 188,812   |  |  |  | 798,667    | 
|Other personnel expenses   |  |                                  | 93,581     |  |                   |  | 37,150    |         |  |  | 130,731        |  |  |                   | 145,400    |  |         |  | 59,881    |                |  |  | 205,281           |  |  |         | 142,316    |  |  |  | 72,735    |  |  |  | 215,051    | 
|Depreciation               |  |                                  | 31,199,053 |  |                   |  | 2,273,178 |         |  |  | 33,472,231     |  |  |                   | 27,941,023 |  |         |  | 1,972,982 |                |  |  | 29,914,005        |  |  |         | 29,775,956 |  |  |  | 2,103,701 |  |  |  | 31,879,657 | 
|Amortization               |  |                                  | 49,217     |  |                   |  | 650,324   |         |  |  | 699,541        |  |  |                   | 146,452    |  |         |  | 397,869   |                |  |  | 544,321           |  |  |         | 161,501    |  |  |  | 294,230   |  |  |  | 455,731    | 



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UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|24. | INCOME TAX
|--- | ----------



| | (1) | Income tax expense consisted of :
| | --- | ---------------------------------



|                   |  |                                 |         |   |         |  |           |         |  |  |         | 
|------------------ |  | ------------------------------- | ------- | - | ------- |  | --------- | ------- |  |  | ------- | 
|                   |  | For the years endedDecember 31, |        
|                   |  | 2009                            |         |   | 2010    |  |           | 2011    | 
|                   |  | NT$000                         |         |   | NT$000 |  |           | NT$000 | 
|Current            |  |                                 |         |   |         |  |           |         |  |  |         | 
|Domestic           |  |                                 | 135,626 |   |         |  | 1,432,898 |         |  |  | 442,326 | 
|Foreign            |  |                                 | 52,697  |   |         |  | 84,390    |         |  |  | 40,759  | 
|                   |  |                                 |         |   |         |  |           |         |  |  |         | 
|Subtotal           |  |                                 | 188,323 |   |         |  | 1,517,288 |         |  |  | 483,085 | 
|Deferred           |  |                                 |         |   |         |  |           |         |  |  |         | 
|Domestic           |  |                                 | 469,608 |   |         |  | 103,115   |         |  |  | 406,928 | 
|Foreign            |  |                                 | (6,863  | ) |         |  | (14,289   | )       |  |  | 23,422  | 
|                   |  |                                 |         |   |         |  |           |         |  |  |         | 
|Subtotal           |  |                                 | 462,745 |   |         |  | 88,826    |         |  |  | 430,350 | 
|                   |  |                                 |         |   |         |  |           |         |  |  |         | 
|Income tax expense |  |                                 | 651,068 |   |         |  | 1,606,114 |         |  |  | 913,435 | 
|                   |  |                                 |         |   |         |  |           |         |  |  |         | 



| | (2) | Reconciliation between the income tax expense and the income tax calculated on pre-tax financial statement income based on the statutory tax rate is as follows:
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                              |  |                                  |            |   |         |  |            |         |  |  |            |  
|----------------------------------------------------------------------------- |  | -------------------------------- | ---------- | - | ------- |  | ---------- | ------- |  |  | ---------- | -
|                                                                              |  | For the years ended December 31, |           
|                                                                              |  | 2009                             |            |   | 2010    |  |            | 2011    | 
|                                                                              |  | NT$000                          |            |   | NT$000 |  |            | NT$000 | 
|Income tax on pre-tax income from continuing operations at statutory tax rate |  |                                  | 418,250    |   |         |  | 4,315,216  |         |  |  | 1,594,660  |  
|Permanent and temporary differences                                           |  |                                  |            |   |         |  |            |         |  |  |            |  
|Investment loss                                                               |  |                                  | (947,692   | ) |         |  | (479,686   | )       |  |  | (987,163   | )
|Gain on disposal of investments                                               |  |                                  | (493,075   | ) |         |  | (289,103   | )       |  |  | (157,537   | )
|Others                                                                        |  |                                  | (18,835    | ) |         |  | (1,220,481 | )       |  |  | (459,843   | )
|                                                                              |  |                                  |            |   |         |  |            |         |  |  |            |  
|Subtotal                                                                      |  |                                  | (1,459,602 | ) |         |  | (1,989,270 | )       |  |  | (1,604,543 | )
|Change in investment tax credit                                               |  |                                  | 3,626,357  |   |         |  | 2,363,985  |         |  |  | 441,053    |  
|Change in loss carry-forward                                                  |  |                                  | (511,099   | ) |         |  | 2,136,325  |         |  |  | 99,141     |  
|Change in valuation allowance against deferred income tax assets              |  |                                  |            |   |         |  |            |         |  |  |            |  
|Investment tax credit                                                         |  |                                  | (2,996,460 | ) |         |  | (3,095,208 | )       |  |  | (720,397   | )
|Loss carry-forward                                                            |  |                                  | 511,099    |   |         |  | (2,136,325 | )       |  |  | (104,410   | )
|Others                                                                        |  |                                  | 624,690    |   |         |  | (295,209   | )       |  |  | 783,105    |  
|                                                                              |  |                                  |            |   |         |  |            |         |  |  |            |  
|Subtotal                                                                      |  |                                  | (1,860,671 | ) |         |  | (5,526,742 | )       |  |  | (41,702    | )
|Effect of higher tax rate of subsidiary                                       |  |                                  | 15,476     |   |         |  | 41,549     |         |  |  | 35,333     |  
|Change in tax rate                                                            |  |                                  | 322,857    |   |         |  | 202,628    |         |  |  |           |  
|Adjustment of prior years tax expense                                        |  |                                  | (79        | ) |         |  | 1,778      |         |  |  | (875       | )
|Income basic tax                                                              |  |                                  | 126,775    |   |         |  | 2,289      |         |  |  | 18,491     |  
|Others                                                                        |  |                                  | (27,196    | ) |         |  | 58,356     |         |  |  | 371,877    |  
|                                                                              |  |                                  |            |   |         |  |            |         |  |  |            |  
|Income tax expense                                                            |  |                                  | 651,068    |   |         |  | 1,606,114  |         |  |  | 913,435    |  
|                                                                              |  |                                  |            |   |         |  |            |         |  |  |            |  



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



| | (3) | Significant components of deferred income tax assets and liabilities are as follows:
| | --- | ------------------------------------------------------------------------------------



|                                                                              |  |                    |            |   |         |  |             |  
|----------------------------------------------------------------------------- |  | ------------------ | ---------- | - | ------- |  | ----------- | -
|                                                                              |  | As of December 31, |           
|                                                                              |  | 2010               |            |   | 2011    | 
|                                                                              |  | NT$000            |            |   | NT$000 | 
|Deferred income tax assets                                                    |  |                    |            |   |         |  |             |  
|Investment tax credit                                                         |  |                    | 7,022,761  |   |         |  | 6,298,868   |  
|Depreciation                                                                  |  |                    | 920,046    |   |         |  | 649,365     |  
|Loss carry-forward                                                            |  |                    | 4,507,561  |   |         |  | 7,307,779   |  
|Pension                                                                       |  |                    | 492,887    |   |         |  | 566,051     |  
|Allowance on sales returns and discounts                                      |  |                    | 45,130     |   |         |  | 38,448      |  
|                                                                              |  |                    |            |   |         |  |             |  
|Allowance for loss on decline in market value and obsolescence of inventories |  |                    | 233,151    |   |         |  | 457,013     |  
|Foreign investment gain or loss                                               |  |                    | 78,068     |   |         |  | 787,073     |  
|Others                                                                        |  |                    | 291,712    |   |         |  | 277,994     |  
|                                                                              |  |                    |            |   |         |  |             |  
|Total deferred income tax assets                                              |  |                    | 13,591,316 |   |         |  | 16,382,591  |  
|Valuation allowance                                                           |  |                    | (9,738,404 | ) |         |  | (12,803,735 | )
|                                                                              |  |                    |            |   |         |  |             |  
|Net deferred income tax assets                                                |  |                    | 3,852,912  |   |         |  | 3,578,856   |  
|                                                                              |  |                    |            |   |         |  |             |  
|                                                                              |  |                   
|Deferred income tax liabilities                                               |  |                    |            |   |         |  |             |  
|Unrealized exchange gain                                                      |  |                    | (108,200   | ) |         |  | (260,015    | )
|Depreciation                                                                  |  |                    |           |   |         |  | (15         | )
|Others                                                                        |  |                    | (52,466    | ) |         |  | (95,823     | )
|                                                                              |  |                    |            |   |         |  |             |  
|Total deferred income tax liabilities                                         |  |                    | (160,666   | ) |         |  | (355,853    | )
|                                                                              |  |                    |            |   |         |  |             |  
|Total net deferred income tax assets                                          |  |                    | 3,692,246  |   |         |  | 3,223,003   |  
|                                                                              |  |                    |            |   |         |  |             |  
|                                                                              |  |                   
|Deferred income tax assets  current                                          |  |                    | 2,581,472  |   |         |  | 2,656,817   |  
|Deferred income tax liabilities  current                                     |  |                    | (125,839   | ) |         |  | (305,925    | )
|Valuation allowance                                                           |  |                    | (1,632,482 | ) |         |  | (2,085,934  | )
|                                                                              |  |                    |            |   |         |  |             |  
|Net                                                                           |  |                    | 823,151    |   |         |  | 264,958     |  
|                                                                              |  |                    |            |   |         |  |             |  
|                                                                              |  |                   
|Deferred income tax assets  noncurrent                                       |  |                    | 11,009,844 |   |         |  | 13,725,774  |  
|Deferred income tax liabilities  noncurrent                                  |  |                    | (34,827    | ) |         |  | (49,928     | )
|Valuation allowance                                                           |  |                    | (8,105,922 | ) |         |  | (10,717,801 | )
|                                                                              |  |                    |            |   |         |  |             |  
|Net                                                                           |  |                    | 2,869,095  |   |         |  | 2,958,045   |  
|                                                                              |  |                    |            |   |         |  |             |  
|Total net deferred income tax assets                                          |  |                    | 3,692,246  |   |         |  | 3,223,003   |  
|                                                                              |  |                    |            |   |         |  |             |  



| | (4) | UMCs income tax returns for all the fiscal years up to 2009 have been assessed and approved by the R.O.C. Tax Authority.
| | --- | -------------------------------------------------------------------------------------------------------------------------



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



| | (5) | UMC was granted several four or five-year income tax exemption periods with respect to income derived from the expansion of operations. The income tax exemption periods
will expire on December 31, 2015.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (6) | The Company earns investment tax credits for the amount invested in production equipment, research and development, employee training, and investment in high technology
industry and venture capital.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of December 31, 2011, the Companys unused investment tax credits
were as follows:



|                |  |                               |           |  |                                          |  |           | 
|--------------- |  | ----------------------------- | --------- |  | ---------------------------------------- |  | --------- | 
|Expiration Year |  | Investment tax credits earned |           |  | Balance of unusedinvestment 
tax credits | 
|                |  | NT$000                       |           |  | NT$000                                  | 
|2012            |  |                               | 1,974,696 |  |                                          |  | 1,974,696 | 
|2013            |  |                               | 1,915,663 |  |                                          |  | 1,915,614 | 
|2014            |  |                               | 2,144,587 |  |                                          |  | 2,144,587 | 
|2015            |  |                               | 263,971   |  |                                          |  | 263,971   | 
|                |  |                               |           |  |                                          |  |           | 
|Total           |  |                               | 6,298,917 |  |                                          |  | 6,298,868 | 
|                |  |                               |           |  |                                          |  |           | 



| | (7) | As of December 31, 2011, the unutilized accumulated losses for the Company were as follows:
| | --- | -------------------------------------------------------------------------------------------



|                |  |                  |            |  |                             |  |            | 
|--------------- |  | ---------------- | ---------- |  | --------------------------- |  | ---------- | 
|Expiration Year |  | Accumulated loss |            |  | Unutilized accumulated loss | 
|                |  | NT$000          |            |  | NT$000                     | 
|2012            |  |                  | 4,857,839  |  |                             |  | 4,857,839  | 
|2013            |  |                  | 1,376,899  |  |                             |  | 1,376,899  | 
|2014            |  |                  | 275,708    |  |                             |  | 275,708    | 
|2015            |  |                  | 1,835,513  |  |                             |  | 1,835,513  | 
|2016            |  |                  | 2,367,031  |  |                             |  | 2,367,031  | 
|2017            |  |                  | 1,143,998  |  |                             |  | 1,143,998  | 
|2018            |  |                  | 1,816,248  |  |                             |  | 1,816,248  | 
|2019            |  |                  | 699,350    |  |                             |  | 699,350    | 
|2020            |  |                  | 928,998    |  |                             |  | 928,998    | 
|2021            |  |                  | 13,437,762 |  |                             |  | 13,437,762 | 
|                |  |                  |            |  |                             |  |            | 
|Total           |  |                  | 28,739,346 |  |                             |  | 28,739,346 | 
|                |  |                  |            |  |                             |  |            | 



| | (8) | The balance of UMCs imputation credit accounts as of December 31, 2010 and December 31, 2011 were NT$516 million and NT$929 million, respectively. The
actual creditable ratio for 2010 and the expected creditable ratio for 2011 was 6.71% and 4.41%, respectively.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



| | (9) | UMCs earnings generated in the year ended December 31, 1997 and prior years have been fully appropriated.
| | --- | ----------------------------------------------------------------------------------------------------------



| | (10) | According to R.O.C. Income Tax Act amended on May 27, 2009, effective January 1, 2010, the statutory tax rate of the Company was decreased from 25% to 20%,
which was further reduced to 17% in accordance with the amendment dated June 15, 2010.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|25. | EARNINGS PER SHARE
|--- | ------------------

For the year
ended December 31, 2011, there were unsecured convertible bonds outstanding and for the years ended December 31, 2010 and 2011, there were employee stock options outstanding and the Company calculated the effect of employee bonus in
accordance with the ARDF Interpretation No. 97-169. The Company is considered as a complex capital structure. Therefore, in consideration of such complex structure, the calculated basic and diluted earnings per share for the years ended
December 31, 2009, 2010 and 2011, are disclosed as follows:



|                                                                             |  |                                  |            |  |         |  |            |         |  |  |            | 
|---------------------------------------------------------------------------- |  | -------------------------------- | ---------- |  | ------- |  | ---------- | ------- |  |  | ---------- | 
|                                                                             |  | For the years ended December 31, |           
|(shares expressed in thousands)                                              |  | 2009                             |            |  | 2010    |  |            | 2011    | 
|                                                                             |  | NT$000                          |            |  | NT$000 |  |            | NT$000 | 
|Net income                                                                   |  |                                  | 3,874,028  |  |         |  | 23,898,905 |         |  |  | 10,609,695 | 
|Effect of dilution:                                                          |  |                                  |            |  |         |  |            |         |  |  |            | 
|Employee stock options                                                       |  |                                  |           |  |         |  |           |         |  |  |           | 
|Employee bonus                                                               |  |                                  |           |  |         |  |           |         |  |  |           | 
|Unsecured Convertible bonds                                                  |  |                                  |           |  |         |  |           |         |  |  | 53,362     | 
|                                                                             |  |                                  |            |  |         |  |            |         |  |  |            | 
|Adjusted net income assuming dilution                                        |  |                                  | 3,874,028  |  |         |  | 23,898,905 |         |  |  | 10,663,057 | 
|                                                                             |  |                                  |            |  |         |  |            |         |  |  |            | 
|Weighted average shares outstanding                                          |  |                                  | 12,699,072 |  |         |  | 12,496,485 |         |  |  | 12,561,249 | 
|Effect of dilution:                                                          |  |                                  |            |  |         |  |            |         |  |  |            | 
|Employee stock options                                                       |  |                                  | 31,271     |  |         |  | 88,117     |         |  |  | 50,765     | 
|Employee bonus                                                               |  |                                  | 56,105     |  |         |  | 182,988    |         |  |  | 209,508    | 
|Unsecured Convertible bonds                                                  |  |                                  |           |  |         |  |           |         |  |  | 420,158    | 
|                                                                             |  |                                  |            |  |         |  |            |         |  |  |            | 
|Adjusted weighted average shares outstanding assuming dilution               |  |                                  | 12,786,448 |  |         |  | 12,767,590 |         |  |  | 13,241,680 | 
|                                                                             |  |                                  |            |  |         |  |            |         |  |  |            | 
|Retroactively adjusted weighted average shares outstanding                   |  |                                  | 12,699,072 |  |         |  | 12,496,485 |         |  |  | 12,561,249 | 
|                                                                             |  |                                  |            |  |         |  |            |         |  |  |            | 
|Retroactively adjusted weighted average shares outstanding assuming dilution |  |                                  | 12,786,448 |  |         |  | 12,767,590 |         |  |  | 13,241,680 | 
|                                                                             |  |                                  |            |  |         |  |            |         |  |  |            | 
|Earnings per share-basic (in dollars)                                        |  |                                  | 0.31       |  |         |  | 1.91       |         |  |  | 0.84       | 
|                                                                             |  |                                  |            |  |         |  |            |         |  |  |            | 
|Earnings per share-diluted (in dollars)                                      |  |                                  | 0.30       |  |         |  | 1.87       |         |  |  | 0.81       | 
|                                                                             |  |                                  |            |  |         |  |            |         |  |  |            | 



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|26. | RELATED PARTY TRANSACTIONS
|--- | --------------------------



|(1) | Name and Relationship of Related Parties
|--- | ----------------------------------------



|                                        |  |                                                                                               
|--------------------------------------- |  | ----------------------------------------------------------------------------------------------
|Name of related parties                 |  | Relationship with the Company                                                                 
|UNITED MICROELECTRONICS CORP. (SAMOA)   |  | Equity Investee (liquidation completed on November 30, 2010)                                  
|                                        | 
|UMCI LTD.                               |  | Equity Investee (liquidation completed on May 10, 2011)                                       
|                                        | 
|UNITECH CAPITAL INC.                    |  | Equity Investee                                                                               
|                                        | 
|MEGA MISSION LIMITED PARTNERSHIP        |  | Equity Investee                                                                               
|                                        | 
|MTIC HOLDINGS PTE. LTD.                 |  | Equity Investee                                                                               
|                                        | 
|UNIMICRON HOLDING LIMITED               |  | Equity Investee                                                                               
|                                        | 
|HSUN CHIEH INVESTMENT CO., LTD.         |  | Equity Investee                                                                               
|                                        | 
|UNITED MICRODISPLAY OPTRONICS CORP.     |  | Equity Investee (liquidation completed on June 23, 2011)                                      
|                                        | 
|AMIC TECHNOLOGY CORP.                   |  | Equity Investee (ceased to be an equity investee since June 2010)                             
|                                        | 
|XGI TECHNOLOGY INC. (XGI)               |  | Equity Investee (ceased to be an equity investee since June 2010)                             
|                                        | 
|BEST ELITE INTERNATIONAL LIMITED        |  | Equity Investee (since December 2011)                                                         
|                                        | 
|SILICON INTEGRATED SYSTEMS CORP. (SIS)  |  | The Companys director                                                                        
|                                        | 
|POWER LIGHT TECH CO., LTD. (PLT) (NOTE) |  | Subsidiarys equity investee (NOTE)                                                           
|                                        | 
|ALLIANCE OPTOTEK CORP.                  |  | Subsidiarys equity investee                                                                  
|                                        | 
|MOS ART PACK CORP. (MAP)                |  | Subsidiarys equity investee (has filed for liquidation on March 10, 2011)                    
|                                        | 
|CRYSTAL MEDIA INC.                      |  | Subsidiarys equity investee (ceased to be an subsidiarys equity investee since April 2011)  
|                                        | 
|MOBILE DEVICES INC.                     |  | Subsidiarys equity investee (ceased to be an subsidiarys equity investee since July 2010)   
|                                        | 
|AEVOE INTERNATIONAL LTD.                |  | Subsidiarys equity investee (ceased to be an subsidiarys equity investee since October 2011)



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                        |  |                                                                                            
|------------------------------------------------------- |  | -------------------------------------------------------------------------------------------
|Name of related parties                                 |  | Relationship with the Company                                                              
|UNITED LED SHAN DONG CORPORATION                        |  | Subsidiarys equity investee (ceased to be an subsidiarys equity investee since June 2010)
|                                                        | 
|SHENYANG PIONEER U-LIGHTING OPTO-ELECTRONIC CO., LTD.   |  | Subsidiarys equity investee (since July 2010)                                             
|                                                        | 
|UNITED LED CORPORATION HONG KONG LIMITED                |  | Subsidiarys equity investee (since February 2010)                                         
|                                                        | 
|LTI REENERGY CO., LTD.                                  |  | Subsidiarys equity investee (since October 2011)                                          
|                                                        | 
|SOLAR GATE TECHNOLOGY CO., LTD.                         |  | Subsidiarys equity investee (since March 2010)                                            
|                                                        | 
|CRYSTALWISE TECHNOLOGY INC.                             |  | Subsidiarys equity investee                                                               
|                                                        | 
|UNIMICRON CORPORATION                                   |  | Subsidiarys director (since October 2010)                                                 
|                                                        | 
|JINING SUNRICH SOLARENERGY CORPORATION (JINING SUNRICH) |  | Same general manager with subsidiaries (since October 2010)                                
|                                                        | 
|SUBTRON TECHNOLOGY CO., LTD.                            |  | Subsidiarys supervisor (since October 2010)                                               
|                                                        | 
|All members of director, supervisors and key managers   |  | The Companys key management personnel                                                     



|      |  |                                                                                                                                                                                                                                                                              
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Note: |  | On April 1, 2011, UNITED LIGHTING OPTO-ELECTRONIC INC. was merged with PLT. PLT is the surviving company and was renamed to UNITED LIGHTING OPTO-ELECTRONIC INC. (UNITED
LIGHTING). After the business combination, UNITED LIGHTING is included as a consolidated subsidiary.



| | (2) | Significant Related Party Transactions
| | --- | --------------------------------------



| | a. | Operating revenues
| | -- | ------------------



|       |  |                                  |           |  |            |  |   |         |  |  |            |  |  |         |   |  |            |  |         |  |  |  |   | 
|------ |  | -------------------------------- | --------- |  | ---------- |  | - | ------- |  |  | ---------- |  |  | ------- | - |  | ---------- |  | ------- |  |  |  | - | 
|       |  | For the years ended December 31, |          
|       |  | 2009                             |           |  | 2010       |  |   | 2011    | 
|       |  | Amount                           |           |  | Percentage |  |   | Amount  |  |  | Percentage |  |  | Amount  |   |  | Percentage | 
|       |  | NT$000                          |           |  |            |  |   | NT$000 |  |  |            |  |  | NT$000 |   |  |            | 
|SIS    |  |                                  | 1,057,278 |  |            |  | 1 |         |  |  | 777,318    |  |  |         | 1 |  |            |  | 237,245 |  |  |  | 0 | 
|Others |  |                                  | 128,375   |  |            |  | 0 |         |  |  | 303,829    |  |  |         | 0 |  |            |  | 253,881 |  |  |  | 0 | 
|       |  |                                  |           |  |            |  |   |         |  |  |            |  |  |         |   |  |            |  |         |  |  |  |   | 
|Total  |  |                                  | 1,185,653 |  |            |  | 1 |         |  |  | 1,081,147  |  |  |         | 1 |  |            |  | 491,126 |  |  |  | 0 | 
|       |  |                                  |           |  |            |  |   |         |  |  |            |  |  |         |   |  |            |  |         |  |  |  |   | 

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



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| | b. | Accounts receivable, net
| | -- | ------------------------



|                                                |  |                    |         |   |            |  |   |         |  |  |            |   |  |  |   | 
|----------------------------------------------- |  | ------------------ | ------- | - | ---------- |  | - | ------- |  |  | ---------- | - |  |  | - | 
|                                                |  | As of December 31, |        
|                                                |  | 2010               |         |   | 2011       | 
|                                                |  | Amount             |         |   | Percentage |  |   | Amount  |  |  | Percentage |  
|                                                |  | NT$000            |         |   |            |  |   | NT$000 |  |  |            |  
|JINING SUNRICH                                  |  |                    | 613,330 |   |            |  | 3 |         |  |  | 124,851    |   |  |  | 1 | 
|SIS                                             |  |                    | 112,201 |   |            |  | 1 |         |  |  | 3,954      |   |  |  | 0 | 
|Others                                          |  |                    | 34,682  |   |            |  | 0 |         |  |  | 1,825      |   |  |  | 0 | 
|                                                |  |                    |         |   |            |  |   |         |  |  |            |   |  |  |   | 
|Total                                           |  |                    | 760,213 |   |            |  | 4 |         |  |  | 130,630    |   |  |  | 1 | 
|                                                |  |                    |         |   |            |  |   |         |  |  |            |   |  |  |   | 
|Less: Allowance for sales returns and discounts |  |                    | (569    | ) |            |  |   |         |  |  | (77        | ) |  |  |   | 
|                                                |  |                    |         |   |            |  |   |         |  |  |            |   |  |  |   | 
|Net                                             |  |                    | 759,644 |   |            |  |   |         |  |  | 130,553    |   |  |  |   | 
|                                                |  |                    |         |   |            |  |   |         |  |  |            |   |  |  |   | 



| | c. | Significant asset transactions
| | -- | ------------------------------



|    |  |                                      |  |               |   |  |                |   |        |              |  |   |        | 
|--- |  | ------------------------------------ |  | ------------- | - |  | -------------- | - | ------ | ------------ |  | - | ------ | 
|    |  | For the year ended December 31,
2010 | 
|    |  | Item                                 |  | Purchaseprice |   |  | Disposalamount |   |        | DisposalGain | 
|SIS |  | Disposal of XGI stock                |  | $             |  |  |                | $ | 38,030 |              |  | $ | 14,690 | 
|    |  |                                      |  |               |   |  |                |   |        |              |  |   |        | 



|    |  |                                      |  |               |         |  |                |   |   |              |  |   |   | 
|--- |  | ------------------------------------ |  | ------------- | ------- |  | -------------- | - | - | ------------ |  | - | - | 
|    |  | For the year ended December 31,
2011 | 
|    |  | Item                                 |  | Purchaseprice |         |  | Disposalamount |   |   | DisposalGain | 
|MAP |  | Purchase of fixed assets             |  | $             | 563,592 |  |                | $ |  |              |  | $ |  | 
|    |  |                                      |  |               |         |  |                |   |   |              |  |   |   | 



| | d. | Key management personnel compensation disclosure
| | -- | ------------------------------------------------



|                                                                             |  |                                 |         |  |         |  |         |         |  |  |         | 
|---------------------------------------------------------------------------- |  | ------------------------------- | ------- |  | ------- |  | ------- | ------- |  |  | ------- | 
|                                                                             |  | For the years endedDecember 31, |        
|Item                                                                         |  | 2009                            |         |  | 2010    |  |         | 2011    | 
|                                                                             |  | NT$000                         |         |  | NT$000 |  |         | NT$000 | 
|Salary, compensation, allowance, income from professional practice and bonus |  |                                 | 507,136 |  |         |  | 343,682 |         |  |  | 336,653 | 
|                                                                             |  |                                 |         |  |         |  |         |         |  |  |         | 



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|27. | ASSETS PLEDGED AS COLLATERAL
|--- | ----------------------------

As of December 31, 2010



|                                         |  |         |           |  |                                     |                                                                                                                                                         |                   |                                                            
|---------------------------------------- |  | ------- | --------- |  | ----------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------- | -----------------------------------------------------------
|                                         |  | Amount  |           |  | Party to which asset(s)
was pledged |                                                                                                                                                         | Purpose of pledge
|                                         |  | NT$000 |           |  |                                     |                                                                                                                                                         |                  
|Deposit-out (Time deposit)               |  |         | 645,841   |  |                                     | Customs                                                                                                                                                 |                   | Customs duty guarantee                                     
|Deposit-out (Time deposit)               |  |         | 99,859    |  |                                     | Science Park Administration                                                                                                                             |                   | Collateral for land lease and guarantee for investment plan
|Deposit-out (Time deposit)               |  |         | 43,800    |  |                                     | Liquefied Natural Gas Business Division, CPC Corporation, Taiwan                                                                                        |                   | Energy resources guarantee                                 
|Deposit-out (Time deposit)               |  |         | 26,624    |  |                                     | Securities and Futures Investors Protection Center                                                                                                      |                   | Negotiation guarantee                                      
|Deposit-out (Time deposit)               |  |         | 990       |  |                                     | Bureau of Energy, Ministry of Economic Affairs                                                                                                          |                   | Energy resources guarantee and construction guarantee      
|Machinery and equipment                  |  |         | 8,826,232 |  |                                     | Bank of Taiwan, First Commercial Bank, Syndicated Loans from Bank of Taiwan and 7 others and Syndicated Loans from Taiwan
Cooperative Bank and 5 others |                   | Collateral for long-term loans                             
|Construction in progress and prepayments |  |         | 46,036    |  |                                     | First Commercial Bank                                                                                                                                   |                   | Collateral for long-term loans                             
|                                         |  |         |           |  |                                     |                                                                                                                                                         |                   |                                                            
|Total                                    |  |         | 9,689,382 |  |                                     |                                                                                                                                                         |                   |                                                            
|                                         |  |         |           |  |                                     |                                                                                                                                                         |                   |                                                            



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



As of December 31, 2011



|                                         |  |         |            |  |                                     |                                                                                                                                                                                                                      |                   |                                
|---------------------------------------- |  | ------- | ---------- |  | ----------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------- | -------------------------------
|                                         |  | Amount  |            |  | Party to which asset(s)
was pledged |                                                                                                                                                                                                                      | Purpose of pledge
|                                         |  | NT$000 |            |  |                                     |                                                                                                                                                                                                                      |                  
|Deposit-out (Time deposit)               |  |         | 645,906    |  |                                     | Customs                                                                                                                                                                                                              |                   | Customs duty guarantee         
|Deposit-out (Time deposit)               |  |         | 122,728    |  |                                     | Science Park Administration                                                                                                                                                                                          |                   | Collateral for land lease      
|Deposit-out (Time deposit)               |  |         | 43,800     |  |                                     | Liquefied Natural Gas Business Division, CPC Corporation, Taiwan                                                                                                                                                     |                   | Energy resources guarantee     
|Deposit-out (Time deposit)               |  |         | 26,624     |  |                                     | Securities and Futures Investors Protection Center                                                                                                                                                                   |                   | Negotiation guarantee          
|                                         |  |         |           
|Deposit-out (Time deposit)               |  |         | 1,246      |  |                                     | Bureau of Energy, Ministry of Economic Affairs                                                                                                                                                                       |                   | Energy resources guarantee     
|Land                                     |  |         | 699,627    |  |                                     | First Commercial Bank                                                                                                                                                                                                |                   | Collateral for long- term loans
|Buildings                                |  |         | 2,007,176  |  |                                     | Syndicated Loans from Bank of Taiwan and 7 others and Syndicated Loans from Taiwan Cooperative Bank and 5 others                                                                                                     |                   | Collateral for long- term loans
|Machinery and equipment                  |  |         | 9,071,782  |  |                                     | Bank of Taiwan, Taiwan Cooperative Bank, First Commercial Bank ,Mega International Commercial Bank, Syndicated Loans from Bank of
Taiwan and 7 others and Syndicated Loans from Taiwan Cooperative Bank and 5 others |                   | Collateral for long- term loans
|Furniture and fixtures                   |  |         | 84,204     |  |                                     | Syndicated Loans from Bank of Taiwan and 7 others and Syndicated Loans from Taiwan Cooperative Bank and 5 others                                                                                                     |                   | Collateral for long- term loans
|Construction in progress and prepayments |  |         | 1,721,465  |  |                                     | Bank of Taiwan, First Commercial Bank and Mega International Commercial Bank                                                                                                                                         |                   | Collateral for long- term loans
|                                         |  |         |            |  |                                     |                                                                                                                                                                                                                      |                   |                                
|Total                                    |  |         | 14,424,558 |  |                                     |                                                                                                                                                                                                                      |                   |                                
|                                         |  |         |            |  |                                     |                                                                                                                                                                                                                      |                   |                                



|28. | COMMITMENT AND CONTINGENT LIABILITIES
|--- | -------------------------------------



| | (1) | The Company has entered into several patent license agreements and development contracts of intellectual property for a total contract amount of approximately NT$6.1
billion. Royalties and development fees payable in future years are NT$2.8 billion as of December 31, 2011.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | The Company signed several construction contracts for the expansion of its factory premises. As of December 31, 2011, these construction contracts amounted to
approximately NT$4.3 billion and the unpaid portion of the contracts, which was not accrued, was approximately NT$1.1 billion.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | (3) | The Company entered into several operating lease contracts for land and office. These renewable operating leases will expire in various years through 2049. Future
minimum lease payments under those leases are as follows:
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                 |  |         |           | 
|-------------------------------- |  | ------- | --------- | 
|For the years ended December 31, |  | Amount  |          
|                                 |  | NT$000 |          
|2012                             |  |         | 392,709   | 
|2013                             |  |         | 351,778   | 
|2014                             |  |         | 307,260   | 
|2015                             |  |         | 284,195   | 
|2016                             |  |         | 304,152   | 
|2017 and thereafter              |  |         | 1,415,358 | 
|                                 |  |         |           | 
|Total                            |  |         | 3,055,452 | 
|                                 |  |         |           | 

Rental expense for the years ended December 31, 2009, 2010 and 2011 was NT$328 million, NT$379
million and NT$399 million, respectively.



| | (4) | On February 15, 2006, the Company was fined in the amount of NT$5 million for unauthorized investment activities in Mainland China, implicating violation of
Article 35 of the Act Governing Relations Between Peoples of the Taiwan Area and the Mainland Area by the R.O.C. Ministry of Economic Affairs (MOEA). However, as the Company believes it was illegally and improperly fined, the Company had
filed an administrative appeal against MOEA to the Executive Yuan on March 16, 2006. On October 19, 2006, Executive Yuan denied the administrative appeal filed by the Company. The Company had filed an administrative litigation case against
MOEA on December 8, 2006. Taipei High Administrative Court announced and reversed MOEAs administrative sanction on July 19, 2007. MOEA filed an appeal against the Company on August 10, 2007. On December 10, 2009, the
Supreme Administrative Court reversed the Taipei High Administrative Courts decision and remanded the case for new trial. On July 21, 2010, Taipei High Administrative Court ruled against the Company, and the Company appealed the ruling on
August 23, 2010. After the Supreme Administrative Courts review and formal notice sent to UMC on December 19, 2011, UMCs appeal had been overruled and this case had been finally closed.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|29. | SIGNIFICANT DISASTER LOSS
|--- | -------------------------

None.



|30. | SIGNIFICANT SUBSEQUENT EVENT
|--- | ----------------------------

On
April 25, 2012, in order to achieve its global market objectives, the Companys Board of Directors approved an offer to the stockholders of Best Elite International Limited (Best Elite), the ultimate holding company of Hejian, to continue to
purchase up to 64.97% of the voting shares the Company does not already own. The consideration will be in cash, and the Company will determine the purchase price based on the latest book value, market conditions and acquisition of controlling
interest. The Company will file the offer with government authorities based on related regulations and make progress announcements accordingly.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|31. | RECLASSIFICATION
|--- | ----------------

Certain
comparative amounts have been reclassified to conform to the current years presentation.



|32. | FINANCIAL INSTRUMENTS
|--- | ---------------------



| | (1) | Financial risk management objectives and policies
| | --- | -------------------------------------------------

The Companys principal financial instruments, other than derivatives, are comprised of cash and cash equivalents, common stock, bonds, open-end funds, bank loans, and bonds payable. The main purpose
of these financial instruments is to manage financing for the Companys operations. The Company also holds various other financial assets and liabilities such as notes receivable, accounts receivable, notes payable and accounts payable, which
arise directly from its operations.

UMC also enters into derivative transactions, including interest rate swap agreements and
forward currency contracts. The purpose of these derivative transactions is to mitigate interest rate risk and foreign currency exchange risks arising from UMCs operations and financing activities.

The main risks arising from the Companys financial instruments include cash flow interest rate risk, foreign currency risk,
commodity price risk, credit risk, and liquidity risk.

Cash flow interest rate risk

UMC utilizes interest rate swap agreements to avoid its cash flow interest rate risk on the counter-floating rate of its unsecured
domestic bonds issued during the period from May 21 to June 24, 2003. The terms of the interest rate swap agreements are the same as those of the domestic bonds, which are five and seven years. The floating rate is reset annually.

The Companys bank loans bear floating interest rates. The fluctuation of market interest will result in changes in the
Companys future cash flows.

Foreign currency risk

The Company has foreign currency risk arising from purchases or sales. The Company utilizes spot or forward contracts to avoid foreign
currency risk. The notional amounts of the foreign currency contracts are the same as the amount of the hedged items. In principle, the Company does not carry out any forward contracts for uncertain commitments.



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Commodity price risk

The Companys exposure to commodity price risk is minimal.

Credit risk

The Company only trades with established and creditworthy
third parties. It is the Companys policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, notes and accounts receivable balances are monitored on an ongoing basis, which
consequently minimizes the Companys exposure to bad debts.

With respect to credit risk arising from the other financial
assets of the Company, it is comprised of cash and cash equivalents and certain derivative instruments, the Companys exposure to credit risk arising from the default of counter-parties is limited to the carrying amount of these instruments.

Although the Company only trades with established third parties, it will request collateral to be provided by third parties
with less favorable financial positions.

Liquidity risk

The Companys objective is to maintain a balance of funding continuity and flexibility through the use of financial instruments such
as cash and cash equivalents, bank loans and bonds.



| | (2) | Information of financial instruments
| | --- | ------------------------------------



| | a. | Fair value of financial instruments
| | -- | -----------------------------------



|                                                      |  |                    |            |  |            |  |            |            |  |  |            |  |  |  |            | 
|----------------------------------------------------- |  | ------------------ | ---------- |  | ---------- |  | ---------- | ---------- |  |  | ---------- |  |  |  | ---------- | 
|                                                      |  | As of December 31, |           
|                                                      |  | 2010               |            |  | 2011       | 
|Financial Assets                                      |  | Book Value         |            |  | Fair Value |  |            | Book Value |  |  | Fair Value | 
|                                                      |  | NT$000            |            |  | NT$000    |  |            | NT$000    |  |  | NT$000    | 
|Non-derivative                                        |  |                    |            |  |            |  |            |            |  |  |            |  |  |  |            | 
|Cash and cash equivalents                             |  |                    | 51,271,105 |  |            |  | 51,271,105 |            |  |  | 49,070,128 |  |  |  | 49,070,128 | 
|Financial assets at fair value through profit or loss |  |                    | 1,210,452  |  |            |  | 1,210,452  |            |  |  | 815,642    |  |  |  | 815,642    | 
|Receivables                                           |  |                    | 19,555,557 |  |            |  | 19,555,557 |            |  |  | 15,320,229 |  |  |  | 15,320,229 | 
|                                                      |  |                    |            | 
|Held-to-maturity financial assets                     |  |                    |           |  |            |  |           |            |  |  | 13,524     |  |  |  | 13,681     | 
|Restricted assets                                     |  |                    | 26,077     |  |            |  | 26,077     |            |  |  | 20,331     |  |  |  | 20,331     | 
|Available-for-sale financial assets                   |  |                    | 37,298,738 |  |            |  | 37,298,738 |            |  |  | 23,960,004 |  |  |  | 23,960,004 | 



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                            |  |                    |            |  |            |  |            |            |  |  |            |  |  |  |            | 
|----------------------------------------------------------- |  | ------------------ | ---------- |  | ---------- |  | ---------- | ---------- |  |  | ---------- |  |  |  | ---------- | 
|                                                            |  | As of December 31, |           
|                                                            |  | 2010               |            |  | 2011       | 
|Financial Assets                                            |  | Book Value         |            |  | Fair Value |  |            | Book Value |  |  | Fair Value | 
|                                                            |  | NT$000            |            |  | NT$000    |  |            | NT$000    |  |  | NT$000    | 
|Financial assets measured at cost                           |  |                    | 7,651,864  |  |            |  |           |            |  |  | 8,298,967  |  |  |  |           | 
|Long-term investments accounted for under the equity method |  |                    | 9,193,239  |  |            |  | 8,959,237  |            |  |  | 11,275,894 |  |  |  | 11,182,318 | 
|Prepayment for long-term investments                        |  |                    |           |  |            |  |           |            |  |  | 44,392     |  |  |  |           | 
|Deposits-out                                                |  |                    | 946,414    |  |            |  | 946,414    |            |  |  | 1,349,528  |  |  |  | 1,349,528  | 
|Derivative                                                  |  |                    |            |  |            |  |            |            |  |  |            |  |  |  |            | 
|Forward contracts                                           |  |                    | 9,411      |  |            |  | 9,411      |            |  |  |           |  |  |  |           | 
|                                                            |  |                    |            | 
|Financial Liabilities                                       |  |                    |            |  |            |  |            |            |  |  |            | 
|Non-derivative                                              |  |                    |            |  |            |  |            |            |  |  |            |  |  |  |            | 
|Short-term loans                                            |  |                    | 4,124,115  |  |            |  | 4,124,115  |            |  |  | 9,411,877  |  |  |  | 9,411,877  | 
|Payables                                                    |  |                    | 30,906,920 |  |            |  | 30,906,920 |            |  |  | 23,284,495 |  |  |  | 23,284,495 | 
|Capacity deposits due within one year                       |  |                    |           |  |            |  |           |            |  |  | 3,031      |  |  |  | 3,031      | 
|Bonds payable (current portion included)                    |  |                    | 4,995,756  |  |            |  | 5,157,977  |            |  |  | 17,404,788 |  |  |  | 15,458,061 | 
|Long-term loans (current portion included)                  |  |                    | 7,509,823  |  |            |  | 7,509,823  |            |  |  | 11,692,649 |  |  |  | 11,692,649 | 
|Derivative                                                  |  |                    |            |  |            |  |            |            |  |  |            |  |  |  |            | 
|Derivatives embedded in exchangeable bonds                  |  |                    | 2,248,384  |  |            |  | 2,248,384  |            |  |  | 741,531    |  |  |  | 741,531    | 
|Forward contracts                                           |  |                    | 6,553      |  |            |  | 6,553      |            |  |  |           |  |  |  |           | 



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



| | i. | The book values of short-term financial instruments approximate their fair value due to their short maturities. Short-term financial instruments include cash and cash
equivalents, receivables, restricted assets, short-term loans, payables and capacity deposits due within one year.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ii. | The fair value of financial assets at fair value through profit or loss and available-for-sale financial assets are based on the quoted market prices. If there are
restrictions on the sale or transfer of an available-for-sale financial asset, the fair value of the asset will be determined based on similar but unrestricted financial assets quoted market price with appropriate discounts for the
restrictions.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



| | iii. | The fair value of held-to-maturity financial assets and long-term investments accounted for under equity method are based on the quoted market prices. If market prices
are unavailable, the Company estimates the fair value based on the book values.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | iv. | The fair value of financial assets measured at cost and prepayment for long-term investments are unable to be estimated since there is no active market in trading those
unlisted investments.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | v. | Deposits-out is certificates of deposit collateralized at Customs or other institutions. The fair value of deposits-out is based on their carrying amount since the
deposit periods are primarily within one year and renewed upon maturity.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | vi. | The fair value of bonds payable is determined by the market price or other information.
| | --- | ---------------------------------------------------------------------------------------



| | vii. | The fair value of long-term loans is determined using discounted cash flow analysis, based on the Companys current incremental borrowing rates for borrowings with
similar types.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | viii. | The fair value of derivative financial instruments is based on the amount the Company expects to receive (positive) or to pay (negative) assuming that the contracts are
settled in advance at the balance sheet date or is determined by the market price or other information.
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



| | c. | The fair value of the Companys financial instruments is determined by the quoted prices in active markets, or if the market for a financial instrument is not
active, the Company establishes fair value by using a valuation technique:
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                            |  |                         |            |  |                     |  |            |         |  |  |           |  |  |  |            | 
|----------------------------------------------------------- |  | ----------------------- | ---------- |  | ------------------- |  | ---------- | ------- |  |  | --------- |  |  |  | ---------- | 
|                                                            |  | Active Market Quotation |            |  | Valuation Technique | 
|                                                            |  | As of December 31,      |           
|Non-derivative Financial Instruments                        |  | 2010                    |            |  | 2011                |  |            | 2010    |  |  | 2011      | 
|                                                            |  | NT$000                 |            |  | NT$000             |  |            | NT$000 |  |  | NT$000   | 
|Financial assets                                            |  |                         |            |  |                     |  |            |         |  |  |           |  |  |  |            | 
|Financial assets at fair value through profit or loss       |  |                         | 1,210,452  |  |                     |  | 815,642    |         |  |  |          |  |  |  |           | 
|Available-for-sale financial assets                         |  |                         | 37,298,738 |  |                     |  | 23,960,004 |         |  |  |          |  |  |  |           | 
|Held-to-maturity financial assets                           |  |                         |           |  |                     |  |           |         |  |  |          |  |  |  | 13,681     | 
|Long-term investments accounted for under the equity method |  |                         |           |  |                     |  | 77,930     |         |  |  | 8,959,237 |  |  |  | 11,104,388 | 
|Financial liabilities                                       |  |                         |            |  |                     |  |            |         |  |  |           |  |  |  |            | 
|Bonds payable (current portion included)                    |  |                         |           |  |                     |  |           |         |  |  | 5,157,977 |  |  |  | 15,458,061 | 
|Long-term loans (current portion included)                  |  |                         |           |  |                     |  |           |         |  |  | 7,509,823 |  |  |  | 11,692,649 | 
|                                                            |  |                         |            | 
|Derivative Financial Instruments                            |  |                         |            |  |                     |  |            |         |  |  |           |  |  |  |            | 
|Financial assets                                            |  |                         |            |  |                     |  |            |         |  |  |           |  |  |  |            | 
|Forward contracts                                           |  |                         |           |  |                     |  |           |         |  |  | 9,411     |  |  |  |           | 
|Financial liabilities                                       |  |                         |            |  |                     |  |            |         |  |  |           |  |  |  |            | 
|Derivatives embedded in exchangeable bonds                  |  |                         |           |  |                     |  |           |         |  |  | 2,248,384 |  |  |  | 741,531    | 
|Forward contracts                                           |  |                         |           |  |                     |  |           |         |  |  | 6,553     |  |  |  |           | 



| | d. | For the years ended December 31, 2009, 2010 and 2011, the total change in fair value estimated by using valuation techniques and recognized in the consolidated
statement of income were net gains (losses) of NT$(449) million, NT$(139) million and NT$1,363 million, respectively.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | e. | During the years ended December 31, 2009, 2010 and 2011, total interest revenues for financial assets or liabilities that are not at fair value through profit or
loss were NT$170 million, NT$143 million and NT$229 million, respectively, while interest expense for the years ended December 31, 2009, 2010 and 2011 were NT$180 million, NT$352 million and NT$554 million, respectively.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



| | (3) | UMC entered into interest rate swap agreements and forward contracts for hedging the interest rate risk arising from the counter-floating rate of its domestic bonds and
for hedging the exchange rate risk arising from the net assets or liabilities denominated in foreign currency. UMC entered into these derivative financial instruments in connection with its hedging strategy to reduce the market risk of the hedged
items, and these financial instruments were not held for trading purpose. The relevant information on the derivative financial instruments entered into by UMC is as follows:
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

a. UMC utilized interest rate swap agreements to hedge its interest rate risks on the counter-floating rate of its unsecured domestic
bonds issued during the period from May 21 to June 24, 2003. The terms of the interest rate swap agreements were the same as those of the domestic bonds, which were five and seven years. The floating rate was reset annually. The above
mentioned five-year and seven-year interest rate swap agreements matured on June 2008 and 2010, respectively.

b. The details
of forward contracts entered into by UMC are summarized as follows:

As of December 31, 2010



|                  |  |                     |  |                                      
|----------------- |  | ------------------- |  | -------------------------------------
|Type              |  | Notional Amount     |  | Contract Period                      
|Forward contracts |  | Sell USD 26 million |  | December 20, 2010 to January 27, 2011

c. Transaction risk



| | (a) | Credit risk
| | --- | -----------

There is no
significant credit risk exposure with respect to the above transactions as the counter-parties are reputable financial institutions with good global standing.



| | (b) | Liquidity and cash flow risk
| | --- | ----------------------------

The cash flow requirements on the interest rate swap agreements are limited to the net interest payables or receivables arising from the
differences in the swap rates. The cash flow requirements on forward contracts are limited to the forward contracts principal amount, which is the same as the underlying net assets or liabilities denominated in their foreign currencies at the
settlement day. Therefore, no significant cash flow risk is anticipated since the working capital is sufficient to meet the cash flow requirements.



| | (c) | Market risk
| | --- | -----------

Interest rate swap
agreements and forward contracts are intended for hedging purposes. Gains or losses arising from the fluctuations in interest rates and exchange rates are likely to be offset against the gains or losses from the hedged items. As a result, no
significant exposure to market risk is anticipated.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



| | d. | The presentation of derivative financial instruments in the financial statements is summarized as follows:
| | -- | ----------------------------------------------------------------------------------------------------------

As of December 31, 2010, UMCs interest rate swap agreements were classified as financial assets at fair value through profit
or loss amounted to nil. A related valuation gain (loss) of NT$(25) million, NT$0.2 million and nil were recorded under non-operating income for the year ended December 31, 2009, 2010 and 2011, respectively.

As of December 31, 2010 and 2011, the forward contracts were classified as financial assets at fair value through profit or loss
amounted to NT$9 million and nil, respectively, while the forward contracts were classified as financial liabilities at fair value through profit or loss amounted to NT$7 million and nil, respectively. And for the changes in valuation, gains
(losses) of NT$163 million, NT$194 million and NT$(143) million were recorded under non-operating expense and income for the years ended December 31, 2009, 2010 and 2011, respectively.



| | (4) | On June 7, 2010, UMC acquired 59 thousand shares of UMC JAPAN from minority stockholders for approximately JPY 735 million. In accordance with R.O.C. SFAS 25,
the fair value of the acquired identifiable net assets in excess of the purchase price was allocated proportionately to UMC JAPANs noncurrent assets. After those noncurrent assets acquired were reduced to zero, UMC recognized the remaining
excess as an extraordinary gain of NT$82 million.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (5) | The Company uses the equity method to account for its investments in UNITED LED CORPORATION HONG KONG LIMITED, SHENYANG PIONEER U-LIGHTING OPTO-ELECTRONIC CO., LTD.,
SHANDONG HUAHONG ENERGY INVEST CO., INC., LTI REENERGY CO., LTD. and WINAICO SOLAR PROJEKT 1 GMBH, jointly controlled entities, since June 1, 2010, July 6, 2010, January 7, 2011, September 28, 2011 and
December 7, 2011, respectively. Among them, UNITED LED CORPORATION HONG KONG LIMITED ceased to be a jointly controlled entity since October 17, 2011. The summarized financial information which the Company recognized is as follows:
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                      |  |                    |         |  |         |  |           | 
|--------------------- |  | ------------------ | ------- |  | ------- |  | --------- | 
|                      |  | As of December 31, |        
|Items                 |  | 2010               |         |  | 2011    | 
|                      |  | NT$000            |         |  | NT$000 | 
|Current assets        |  |                    | 207,895 |  |         |  | 193,908   | 
|Noncurrent assets     |  |                    | 473,221 |  |         |  | 1,316,824 | 
|Current liabilities   |  |                    | 216,250 |  |         |  | 3,910     | 
|Long-term liabilities |  |                    | 253,585 |  |         |  | 84        | 



|         |  |                                 |        |  |          |  |         | 
|-------- |  | ------------------------------- | ------ |  | -------- |  | ------- | 
|         |  | For the years endedDecember 31, |       
|Items    |  | 2010                            |        |  | 2011     | 
|         |  | NT$000                         |        |  | NT$0000 | 
|Revenues |  |                                 | 23,038 |  |          |  | 136,475 | 
|Expenses |  |                                 | 44,361 |  |          |  | 115,640 | 



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



| | (6) | The Company acquired controlling interests in MAP, TOPCELL and NEXPOWER through acquiring newly issued shares and UNITED LIGHTING OPTO-ELECTRONIC through business
combination in February 2010, March 2010, November 2010 and April 2011, respectively, and consolidated the income/earnings and expenses/losses of these three subsidiaries from the respective acquisition dates. Cash paid for acquisition and
cash balance of subsidiaries acquired were as follows:
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                               |  |                                 |            |   |         |  |         |  
|------------------------------------------------------------------------------ |  | ------------------------------- | ---------- | - | ------- |  | ------- | -
|                                                                               |  | For the years endedDecember 31, |           
|Items                                                                          |  | 2010                            |            |   | 2011    | 
|                                                                               |  | NT$000                         |            |   | NT$000 | 
|Cash paid for acquisition of subsidiaries                                      |  |                                 | 4,348,690  |   |         |  |        |  
|Add:Cash received from minority stockholders for acquiring newly issued shares |  |                                 | 1,396,310  |   |         |  |        |  
|Less: Prepayment for long-term investments                                     |  |                                 | (371,310   | ) |         |  |        |  
|Less: Cash balance of subsidiaries                                             |  |                                 | (7,232,876 | ) |         |  | (29,350 | )
|                                                                               |  |                                 |            |   |         |  |         |  
|Net cash received from acquisition of subsidiaries                             |  |                                 | (1,859,186 | ) |         |  | (29,350 | )
|                                                                               |  |                                 |            |   |         |  |         |  



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



| | (7) | The functional currency of UMC and some of its subsidiaries is New Taiwan Dollar, while other subsidiaries have functional currencies in US Dollar, Japanese Yen or
Chinese RMB. The exchange rates used to translate assets and liabilities denominated in foreign currencies are disclosed as follows:
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                            |  |                           |            |  |                         |  |        |               |  |   |                           |  |  |              |            |  |               |  |        |  |  |   |            | 
|----------------------------------------------------------- |  | ------------------------- | ---------- |  | ----------------------- |  | ------ | ------------- |  | - | ------------------------- |  |  | ------------ | ---------- |  | ------------- |  | ------ |  |  | - | ---------- | 
|                                                            |  | As of December 31, 2010   |            |  | As of December 31, 2011 | 
|                                                            |  | ForeignCurrency(thousand) |            |  | ExchangeRate            |  |        | NTD(thousand) |  |   | ForeignCurrency(thousand) |  |  | ExchangeRate |            |  | NTD(thousand) | 
|Financial Assets                                            |  |                           |            |  |                         |  |        |               |  |   |                           |  |  |              |            |  |               |  |        |  |  |   |            | 
|Monetary items                                              |  |                           |            |  |                         |  |        |               |  |   |                           |  |  |              |            |  |               |  |        |  |  |   |            | 
|USD                                                         |  | $                         | 1,019,599  |  |                         |  | 29.04  |               |  | $ | 29,610,971                |  |  | $            | 1,205,374  |  |               |  | 30.20  |  |  | $ | 36,401,034 | 
|JPY                                                         |  |                           | 23,849,754 |  |                         |  | 0.3558 |               |  |   | 8,484,568                 |  |  |              | 17,724,488 |  |               |  | 0.3887 |  |  |   | 6,888,793  | 
|EUR                                                         |  |                           | 32,220     |  |                         |  | 38.66  |               |  |   | 1,245,710                 |  |  |              | 11,088     |  |               |  | 39.07  |  |  |   | 433,230    | 
|SGD                                                         |  |                           | 48,602     |  |                         |  | 22.59  |               |  |   | 1,097,930                 |  |  |              | 36,370     |  |               |  | 23.22  |  |  |   | 844,517    | 
|CNY                                                         |  |                           | 64,473     |  |                         |  | 4.38   |               |  |   | 282,291                   |  |  |              | 47,833     |  |               |  | 4.79   |  |  |   | 229,150    | 
|                                                            |  |                           |            |  |                         | 
|Non-Monetary items                                          |  |                           |            |  |                         |  |        |               |  |   |                           |  |  |              |            |  |               |  |        |  |  |   |            | 
|USD                                                         |  |                           | 42,223     |  |                         |  | 29.03  |               |  |   | 1,225,740                 |  |  |              | 80,903     |  |               |  | 30.21  |  |  |   | 2,444,092  | 
|CHF                                                         |  |                           | 3,080      |  |                         |  | 31.01  |               |  |   | 95,511                    |  |  |              | 1,764      |  |               |  | 32.10  |  |  |   | 56,624     | 
|                                                            |  |                           |            |  |                         | 
|Long-term investments accounted for under the equity method |  |                           |            |  |                         |  |        |               |  |   |                           |  |  |              |            |  |               |  |        |  |  |   |            | 
|USD                                                         |  |                           | 135,689    |  |                         |  | 29.00  |               |  |   | 3,935,272                 |  |  |              | 223,950    |  |               |  | 30.17  |  |  |   | 6,757,058  | 
|SGD                                                         |  |                           | 10,409     |  |                         |  | 22.55  |               |  |   | 234,732                   |  |  |              | 9,313      |  |               |  | 23.08  |  |  |   | 214,918    | 
|CNY                                                         |  |                           | 72,663     |  |                         |  | 4.33   |               |  |   | 314,338                   |  |  |              |           |  |               |  |       |  |  |   |           | 
|                                                            |  |                           |            |  |                         | 
|Joint controlled entities                                   |  |                           |            |  |                         |  |        |               |  |   |                           |  |  |              |            |  |               |  |        |  |  |   |            | 
|USD                                                         |  |                           | 7,229      |  |                         |  | 28.81  |               |  |   | 208,260                   |  |  |              |           |  |               |  |       |  |  |   |           | 
|EUR                                                         |  |                           |           |  |                         |  |       |               |  |   |                          |  |  |              | 1,120      |  |               |  | 40.69  |  |  |   | 45,573     | 
|CNY                                                         |  |                           | 689        |  |                         |  | 4.39   |               |  |   | 3,022                     |  |  |              | 155,324    |  |               |  | 4.70   |  |  |   | 729,461    | 
|                                                            |  |                           |            |  |                         | 
|Financial Liabilities                                       |  |                           |            |  |                         |  |        |               |  |   |                           |  |  |              |            |  |               |  |        |  |  |   |            | 
|Monetary items                                              |  |                           |            |  |                         |  |        |               |  |   |                           |  |  |              |            |  |               |  |        |  |  |   |            | 
|USD                                                         |  |                           | 738,856    |  |                         |  | 29.13  |               |  |   | 21,523,131                |  |  |              | 687,961    |  |               |  | 30.31  |  |  |   | 20,851,703 | 
|JPY                                                         |  |                           | 9,976,591  |  |                         |  | 0.3593 |               |  |   | 3,584,958                 |  |  |              | 7,486,308  |  |               |  | 0.3924 |  |  |   | 2,937,409  | 
|EUR                                                         |  |                           | 22,471     |  |                         |  | 39.02  |               |  |   | 876,797                   |  |  |              | 7,230      |  |               |  | 39.36  |  |  |   | 284,563    | 
|SGD                                                         |  |                           | 25,127     |  |                         |  | 22.77  |               |  |   | 572,136                   |  |  |              | 25,851     |  |               |  | 23.40  |  |  |   | 604,925    | 
|CNY                                                         |  |                           | 5,534      |  |                         |  | 4.39   |               |  |   | 24,302                    |  |  |              | 21,482     |  |               |  | 4.81   |  |  |   | 103,337    | 



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|33. | PRE-DISCLOSURE FOR ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS
|--- | --------------------------------------------------------------------------



| | a. | In accordance with Financial Supervisory Commission, Executive Yuan, R.O.C., Announcement No. 0990004943, listed, over-the-counter and emerging stock companies
should adopt International Financial Reporting Standards (IFRSs) which is translated and published by ARDF, as the criteria for preparation of financial reports, effective starting 2013. As such, a major team was assembled and a project plan was
developed to adopt IFRSs. Chidong Liu, the Chief Financial Officer is responsible for the coordination of the project.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table summarizes the progress to date against the key activities and target dates of the conversion plan:



|                                                                                                                                 |  |                                             |  |                              
|-------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------- |  | -----------------------------
|Key Activity                                                                                                                     |  | Responsible Department                      |  | Progress to
December 31, 2011
|1.      Assessment phase: (From June 1, 2009 to December 31, 2011)                                                               |  |                                             |  |                              
|                                                                                                                                 |  |                                            
|    Development of the adoption plan and assembly of project team                                                               |  | Accounting Department                       |  | Completed                    
|                                                                                                                                 |  |                                            
|    Internal IFRSs trainings for employees - First stage                                                                        |  | Accounting Department                       |  | Completed                    
|                                                                                                                                 |  |                                            
|    Comparison and analysis of differences between R.O.C. SFAS and IFRSs accounting
policies                                    |  | Accounting Department                       |  | Completed                    
|                                                                                                                                 |  |                                            
|    Assessment on adjustments to current accounting policies                                                                    |  | Accounting Department                       |  | Completed                    
|                                                                                                                                 |  |                                            
|    Assessment on selection of IFRSs 1 First-time Adoption of International Financial Reporting
Standards optional exemptions |  | Accounting Department                       |  | Completed                    
|                                                                                                                                 |  |                                            
|    Assessment of changes required in the information systems and internal controls related to the
adoption of IFRSs            |  | Internal Audit Department and IT Department |  | Completed                    
|                                                                                                                                 |  |                                            
|2.      Preparation phase: (From January 1, 2011 to December 31, 2012)                                                           |  |                                             |  |                              
|                                                                                                                                 |  |                                            
|    Adjustments on existing accounting policies to conform with IFRSs                                                           |  | Accounting Department                       |  | Completed                    
|                                                                                                                                 |  |                                            
|    Selection of IFRS 1 First-time Adoption of International Financial Reporting
Standardsoptional exemptions                 |  | Accounting Department                       |  | Completed                    
|                                                                                                                                 |  |                                            
|    Modifications to information systems and internal control related to the adoption of
IFRSs                                  |  | Internal Audit Department and IT Department |  | In progress                  
|                                                                                                                                 |  |                                            
|    Internal IFRSs trainings for employees - Second stage                                                                       |  | Accounting Department                       |  | In progress                  
|                                                                                                                                 |  |                                            
|3.      Execution phase: (From January 1, 2012 to December 31, 2013)                                                             |  |                                             |  |                              
|    Implementation test of modified information system related to the adoption of IFRSs                                         |  | IT Department                               |  | In preparation               
|                                                                                                                                 |  |                                            
|    Preparation of IFRSs opening balance sheet and opening financial statements                                                 |  | Accounting Department                       |  | In preparation               
|                                                                                                                                 |  |                                            
|    Preparation of comparative IFRSs financial statements                                                                       |  | Accounting Department                       |  | In preparation               



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



| | b. | The major differences identified by the Company between accounting policies under R.O.C. SFAS and the IFRSs published by ARDF are summarized as below:
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------



|                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Accounting Issue          |  | Difference                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Employee benefits         |  | Under IFRSs, the Company elects as an accounting policy to recognize all actuarial gains and losses in the period in which they occur in other comprehensive income and then
recognized immediately in retained earnings. In accordance with R.O.C. SFAS, actuarial gains and losses from each defined benefit plan shall be applied the corridor method and assessed to determine if there was any excess amount which to be
recognized as current period gains or losses on each reporting date.                                                                                                                                                                                                                                                                                                                                                                                                          
|                          | 
|Investments in Associates |  | Under IFRSs, an investor shall discontinue the use of the equity method from the date when it ceases to have significant influence
over an associate and shall account for as financial instrument under relevant standards. On the loss of significant influence, the investor shall measure at fair value any investment the investor retains in the former associate. The investor shall
recognize in profit or loss any difference between: (a) the fair value of any retained investment and any proceeds from disposing of the part interest in the associate; and (b) the carrying amount of the investment at the date when significant
influence is lost. Moreover, an investor shall account for all additional paid-in capital and equity adjustment items related to the former associate in current profit and, and the cash dividend received thereafter shall be treated as dividend
revenue.
|                          | 
|                          |  | In accordance with R.O.C. SFAS, an investor shall cease to use the equity method from the date when it ceases to have significant
influence over an associate. The new investment cost should be the carrying amount of the former associate on the loss of significant influence. The additional paid-in capital and other equity adjustment items related to the former associate should
be proportionately transferred, and the difference between the carrying amount plus the equity adjustment items and the amount proceed from the disposal shall be recognized as the disposal gain or loss. Any cash dividends received after the loss of
significant influence, should be treated as the recovery of investment cost if the accumulated dividend amount was greater than the investors holding interest in the former associate.                                                                
|                          | 
|                          |  | Under R.O.C. SFAS, when the Company does not take up proportionately shares of its equity investees issuance of new shares, the
change in equity in net assets for the investment shall be adjusted in the additional paid-in capital and the long-term investments accounts. However, in accordance with IFRSs, the investor should recognize as a disposal gain or loss transferred
from other comprehensive income proportionately related to the investment to the decrease in holding interest as a deemed disposal. For increase in shareholding (deemed acquisition), any difference between the cost of the investment and the
investors share of the net fair value of the associates identifiable assets and liabilities is treated as goodwill and included in the carrying amount of the investment.                                                                                         



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|------------------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|Accounting Issue                                                         |  | Difference                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                         | 
|Business Combinations and Consolidated and Separate Financial Statements |  | In accordance with IFRSs, in a business combination achieved in stages, the acquirer shall remeasure its previously held equity
interest in the acquiree at its acquisition-date fair value and recognize the resulting gain or loss, if any, in profit or loss or other comprehensive income, as appropriate. The acquirer shall recognize goodwill or gain on bargain purchase as of
the acquisition date measured as the excess of (a) over (b) below:  (a) the
aggregate of:  (i) the consideration transferred which generally is the
fair value on acquisition date  (ii) the fair value of acquirees
non-controlling interest, and  (iii) in a business combination achieved in
stages, the acquisition-date fair value of the acquirers previously held equity interest in the acquiree.  (b) the fair value of identifiable assets acquired and the liabilities assumed on acquisition date
|                                                                         | 
|                                                                         |  | In accordance with R.O.C. SFAS, goodwill is measured separately on each acquisition, and it excludes goodwill in non-controlling interest. In a step acquisition, the acquirer
does not remeasure its previously held equity interest in the acquiree, therefore the acquisition would not result in gains or losses from remeasurements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                                         | 
|                                                                         |  | In accordance with IFRSs, changes in a parents ownership interest in a subsidiary which do not result in the loss of control is treated as an equity transaction. In
accordance with R.O.C. SFAS, acquiring part of or all shares from subsidiaries minority stockholders, shall be accounted for using acquisition method. When selling long-term investments accounted for under equity method, the differences
between selling price and carrying amount shall be recognized as gains or losses at disposal of long-term equity investment.                                                                                                                                                                                                                                                                                                                                                      
|                                                                         | 
|Financial Instruments                                                    |  | In accordance with IFRSs, an entity is precluded from measuring the financial asset at fair value if the range of reasonable fair value estimates is significant and the
probabilities of the various estimates cannot be reasonably assessed. Prior to adoption of IFRSs, in accordance with Criteria Governing the Preparation of Financial Reports by Securities Issuer, unlisted or emerging stock companies shall be
classified as financial assets measured at cost. After adoption of IFRSs, unlisted and emerging stock companies will be reassessed in accordance with IFRSs and reclassified into available-for-sale financial assets or financial assets at fair value
through profit or loss, or held for trading.                                                                                                                                                                        



| | c. | The major differences described above are determined in accordance with the IFRSs translated and published by Financial Supervisory Commission in 2010. As to the
additional IFRSs published by International Accounting Standards Board after 2011, adjustments will be included, following effective dates announced by the Financial Supervisory Commission, if any.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|34. | OPERATING SEGMENT INFORMATION
|--- | -----------------------------



| | (1) | Operations in different industries
| | --- | ----------------------------------

The Company determined its operating segments based on business activities with discrete financial information regularly reported through the Companys internal reporting protocols to the
Companys chief operating decision maker. The Company is organized into business units based on its products and services. As of December 31, 2011, only the wafer fabrication operating segment exceeded the quantitative threshold to become
a reportable segment. The primary service of the wafer fabrication segment is the manufacture of chips to the design specifications of our many customers by using our own proprietary processes and techniques. The company maintains a diversified
customer base across industries, including communication, consumer electronics, computer, memory and others, while continuing to focus on manufacturing for high growth, large volume applications, including networking, telecommunications, internet,
multimedia, PCs and graphics. The company also had other operating segments that did not exceed the quantitative threshold. These segments primarily engage in researching, developing, manufacturing, and providing solar energy and new generation
light-emitting diode (LED) sectors. Reportable segment information for the years ended December 31, 2010 and 2011 are as follows:



|                                                             |  |                                      |             |  |         |  |            |          |  |  |                          |   |  |              |            |   |  |  |             | 
|------------------------------------------------------------ |  | ------------------------------------ | ----------- |  | ------- |  | ---------- | -------- |  |  | ------------------------ | - |  | ------------ | ---------- | - |  |  | ----------- | 
|                                                             |  | For the year ended December 31, 2010 |            
|                                                             |  | Waferfabrication                     |             |  | Other   |  |            | Subtotal |  |  | Adjustmentandelimination |   |  | Consolidated |           
|                                                             |  | NT$000                              |             |  | NT$000 |  |            | NT$000  |  |  | NT$000                  |   |  | NT$000      |           
|Segment revenues                                             |  |                                      | 123,853,683 |  |         |  | 2,588,750  |          |  |  | 126,442,433              |   |  |              | (889       | ) |  |  | 126,441,544 | 
|Segment profit (loss)                                        |  |                                      | 23,839,544  |  |         |  | (150,125   | )        |  |  | 23,689,419               |   |  |              | 156,537    |   |  |  | 23,845,956  | 
|Segment assets                                               |  |                                      | 266,009,474 |  |         |  | 24,316,658 |          |  |  | 290,326,132              |   |  |              | (9,439,136 | ) |  |  | 280,886,996 | 
|                                                             |  |                                      |             |  |         |  |            |          |  |  |                          |   |  |              | (Note      | ) |  |  |             | 
|Segment liabilities                                          |  |                                      | 46,094,182  |  |         |  | 9,692,976  |          |  |  | 55,787,158               |   |  |              | (36,191    | ) |  |  | 55,750,967  | 
|Capital expenditure                                          |  |                                      | 58,816,365  |  |         |  | 2,506,454  |          |  |  | 61,322,819               |   |  |              |           |   |  |  | 61,322,819  | 
|Depreciation                                                 |  |                                      | 29,792,070  |  |         |  | 159,242    |          |  |  | 29,951,312               |   |  |              |           |   |  |  | 29,951,312  | 
|Investment gain (loss) accounted for under the equity method |  |                                      | 131,583     |  |         |  | (140,125   | )        |  |  | (8,542                   | ) |  |              | 123,150    |   |  |  | 114,608     | 
|Income tax expense                                           |  |                                      | 1,562,378   |  |         |  | 43,736     |          |  |  | 1,606,114                |   |  |              |           |   |  |  | 1,606,114   | 



|                                                             |  |                                      |             |   |         |  |            |          |  |  |                          |   |  |              |             |   |  |  |             |  
|------------------------------------------------------------ |  | ------------------------------------ | ----------- | - | ------- |  | ---------- | -------- |  |  | ------------------------ | - |  | ------------ | ----------- | - |  |  | ----------- | -
|                                                             |  | For the year ended December 31, 2011 |            
|                                                             |  | Waferfabrication                     |             |   | Other   |  |            | Subtotal |  |  | Adjustmentandelimination |   |  | Consolidated |            
|                                                             |  | NT$000                              |             |   | NT$000 |  |            | NT$000  |  |  | NT$000                  |   |  | NT$000      |            
|Segment revenues                                             |  |                                      | 108,637,136 |   |         |  | 8,068,373  |          |  |  | 116,705,509              |   |  |              | (2,786      | ) |  |  | 116,702,723 |  
|Segment profit (loss)                                        |  |                                      | 10,431,014  |   |         |  | (5,104,211 | )        |  |  | 5,326,803                |   |  |              | 3,140,113   |   |  |  | 8,466,916   |  
|Segment assets                                               |  |                                      | 260,337,674 |   |         |  | 29,505,139 |          |  |  | 289,842,813              |   |  |              | (10,011,067 | ) |  |  | 279,831,746 |  
|                                                             |  |                                      |             |   |         |  |            |          |  |  |                          |   |  |              | (Note       | ) |  |  |             |  
|Segment liabilities                                          |  |                                      | 52,090,012  |   |         |  | 15,651,907 |          |  |  | 67,741,919               |   |  |              | (35,136     | ) |  |  | 67,706,783  |  
|Capital expenditure                                          |  |                                      | 46,865,115  |   |         |  | 6,461,000  |          |  |  | 53,326,115               |   |  |              |            |   |  |  | 53,326,115  |  
|Depreciation                                                 |  |                                      | 30,239,235  |   |         |  | 1,675,833  |          |  |  | 31,915,068               |   |  |              |            |   |  |  | 31,915,068  |  
|Investment gain (loss) accounted for under the equity method |  |                                      | (3,158,287  | ) |         |  | (294,087   | )        |  |  | (3,452,374               | ) |  |              | 3,140,113   |   |  |  | (312,261    | )
|Income tax expense                                           |  |                                      | 868,431     |   |         |  | 45,004     |          |  |  | 913,435                  |   |  |              |            |   |  |  | 913,435     |  



| |  |       |  |                                                                                                                               
| |  | ----- |  | ------------------------------------------------------------------------------------------------------------------------------
| |  | Note: |  | The adjustment was primarily consisted of elimination entries for long-term investments accounted for under the equity method.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



| | (2) | Operations in different geographic areas
| | --- | ----------------------------------------

The geographic region to which revenue is assigned is based on the location of the external customers.



|                           |  |                                 |            |  |                  |  |            |                       |  |  |                  |  |  |                       |             |  |                  |  |             |  |  |  |             | 
|-------------------------- |  | ------------------------------- | ---------- |  | ---------------- |  | ---------- | --------------------- |  |  | ---------------- |  |  | --------------------- | ----------- |  | ---------------- |  | ----------- |  |  |  | ----------- | 
|                           |  | For the year ended December 31, |           
|                           |  | 2009                            |            |  | 2010             |  |            | 2011                  | 
|                           |  | Net operatingrevenues           |            |  | Long-livedassets |  |            | Net operatingrevenues |  |  | Long-livedassets |  |  | Net operatingrevenues |             |  | Long-livedassets | 
|                           |  | NT$000                         |            |  | NT$000          |  |            | NT$000               |  |  | NT$000          |  |  | NT$000               |             |  | NT$000          | 
|Taiwan                     |  |                                 | 32,699,247 |  |                  |  | 52,910,659 |                       |  |  | 42,496,346       |  |  |                       | 99,747,115  |  |                  |  | 38,668,443  |  |  |  | 119,881,448 | 
|Singapore                  |  |                                 | 22,161,718 |  |                  |  | 37,026,671 |                       |  |  | 36,464,132       |  |  |                       | 34,109,669  |  |                  |  | 28,960,294  |  |  |  | 29,992,937  | 
|China (includes Hong Kong) |  |                                 | 2,384,934  |  |                  |  | 745        |                       |  |  | 4,240,244        |  |  |                       | 3,204       |  |                  |  | 4,860,475   |  |  |  | 300,656     | 
|Japan                      |  |                                 | 2,349,461  |  |                  |  | 2,151,547  |                       |  |  | 2,619,626        |  |  |                       | 1,906,803   |  |                  |  | 2,249,313   |  |  |  | 2,307,902   | 
|America                    |  |                                 | 19,826,555 |  |                  |  | 40,850     |                       |  |  | 21,343,348       |  |  |                       | 29,092      |  |                  |  | 20,908,177  |  |  |  | 20,905      | 
|Others                     |  |                                 | 11,967,850 |  |                  |  | 4,784      |                       |  |  | 19,277,848       |  |  |                       | 1,684       |  |                  |  | 21,056,021  |  |  |  | 1,855       | 
|                           |  |                                 |            |  |                  |  |            |                       |  |  |                  |  |  |                       |             |  |                  |  |             |  |  |  |             | 
|                           |  |                                 | 91,389,765 |  |                  |  | 92,135,256 |                       |  |  | 126,441,544      |  |  |                       | 135,797,567 |  |                  |  | 116,702,723 |  |  |  | 152,505,703 | 
|                           |  |                                 |            |  |                  |  |            |                       |  |  |                  |  |  |                       |             |  |                  |  |             |  |  |  |             | 



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|35. | U.S. GAAP RECONCILIATION
|--- | ------------------------

The
accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the Republic of China (R.O.C. GAAP), which differ in certain material respects from generally accepted accounting
principles in the United States (U.S. GAAP). Such differences are disclosed below.

(1) Compensation

Employee bonus

Pursuant to the Companys Articles of Incorporation (AOI), certain employees of the Company are entitled to minimum bonus when certain objectively determinable financial criteria are met as at the
year-end. The Companys AOI specifies that employee bonus can be settled in the form of cash or common shares or a combination of both, subject to stockholders approval at the annual stockholders meeting in the subsequent year.
Under both R.O.C. and U.S. GAAP, employee bonus is charged to compensation expense and accrued based on managements estimate. The employee bonus is initially accrued as at the year-end based on managements estimate according to AOI with
adjustment in the subsequent year after stockholders approval. Compensation expense relating to stock bonus is determined based on the fair market value of the Companys common stock on the grant date. According to the R.O.C. ARDF
Interpretation 96-052, Accounting for Employee Bonus and Remunerations to Directors and Supervisors, compensation expense relating to stock bonus is determined based on the fair value of the Companys common stock at the date before
the stockholders meeting. Under U.S. GAAP, compensation expense relating to stock bonus is measured at the fair market value on the date of stock distribution.

Employee stock options

Under R.O.C. GAAP, for stock options granted prior
to January 1, 2008, the Company applied the intrinsic value method to recognize the difference between the market price of the stock at grant date and the exercise price of its employee stock options as compensation expense. For stock options
granted on or after January 1, 2008, the Company adopted R.O.C. SFAS 39 to recognize compensation cost using the fair value method which is consistent with U.S. GAAP. The Company amortized share-based compensation expense over the vesting
period based on the grant-date fair value. The fair value of liability awards is remeasured at each reporting date with fair value changes charged to compensation expenses accordingly. Compensation expense is recognized on a graded-vesting basis
over the requisite service period of the options.



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The Company uses Black-Scholes option-pricing model in estimating the fair value of
stock options. The main inputs and assumptions used in the model include the grant date stock price, exercise price of the option, volatility of the Companys stock, the expected option term, the risk-free rate and the Companys dividend
yield. The Company determines expected volatility based on historical stock price volatility over the time period equal to the expected term of the employee stock options because the Companys shares have been publicly traded for a long time
and determines the expected term based on historical stock option exercise data. The Company uses the average yield at grant date of Taiwan Government Bond with the remaining term similar to the expected option term as the risk-free interest rate.
In addition, the Company used the historical distribution of cash dividends and the historical average market price of the Companys common stock to estimate future dividend yields. The estimates of option fair value are not expected to foresee
future events or the values realized by employees who receive stock option. In addition, later events are not indicative of the rationality of the initial estimates of option fair value used by the Company.

The Company adjusts share-based compensation on an annual basis for changes in expected forfeitures based on the examination of latest
employee stock options forfeiture activity. The effect of adjusting the forfeiture rate used for expense amortization is recognized in the corresponding period that the expected forfeiture rate is changed.

A summary of employee stock options activities as of December 31, 2011 and changes during the year then ended is presented below:



|                                                   |  |                                      |         |   |                                               |  |         |                                                    |  |  |       |  |  |  |      | 
|-------------------------------------------------- |  | ------------------------------------ | ------- | - | --------------------------------------------- |  | ------- | -------------------------------------------------- |  |  | ----- |  |  |  | ---- | 
|                                                   |  | For the year ended December 31, 2011 |        
|                                                   |  | Number ofoptions                     |         |   | Availableshares(adjusted forcapitalreduction) |  |         | Weighted-averageExercise Priceper share asadjusted | 
|                                                   |  | (In thousands)                       |         |   | (In thousands)                                |  |         | NT$                                                |  |  | US$   | 
|Outstanding at beginning of period                 |  |                                      | 752,700 |   |                                               |  | 718,876 |                                                    |  |  | 16.05 |  |  |  | 0.53 | 
|Granted                                            |  |                                      |        |   |                                               |  |        |                                                    |  |  |      |  |  |  |     | 
|Exercised                                          |  |                                      | (96,544 | ) |                                               |  | (96,544 | )                                                  |  |  | 10.40 |  |  |  | 0.34 | 
|Forfeited                                          |  |                                      | (32,745 | ) |                                               |  | (30,767 | )                                                  |  |  | 17.04 |  |  |  | 0.56 | 
|Expired                                            |  |                                      | (62,885 | ) |                                               |  | (43,841 | )                                                  |  |  | 27.28 |  |  |  | 0.90 | 
|                                                   |  |                                      |         |   |                                               |  |         |                                                    |  |  |       |  |  |  |      | 
|Outstanding at end of period                       |  |                                      | 560,526 |   |                                               |  | 547,724 |                                                    |  |  | 16.09 |  |  |  | 0.53 | 
|                                                   |  |                                      |         |   |                                               |  |         |                                                    |  |  |       |  |  |  |      | 
|Fully vested and expected to vest at end of period |  |                                      | 545,776 |   |                                               |  | 532,974 |                                                    |  |  | 16.25 |  |  |  | 0.54 | 
|                                                   |  |                                      |         |   |                                               |  |         |                                                    |  |  |       |  |  |  |      | 
|Exercisable at end of period                       |  |                                      | 422,148 |   |                                               |  | 409,652 |                                                    |  |  | 17.85 |  |  |  | 0.59 | 
|                                                   |  |                                      |         |   |                                               |  |         |                                                    |  |  |       |  |  |  |      | 

As of December 31, 2011, the total number of option units outstanding was 561 million units and
exercise price ranged from NT$10.40 to NT$25.19 and the weighted-average remaining contractual life of outstanding options, fully vested and expected to vest options, and exercisable options was 2.31 years, 2.28 years and 1.96 years, respectively.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



There were no stock options granted in 2010 and 2011. The weighted-average grant-date
fair value of options granted in 2009 was NT$2.8 and no options was exercised in 2009. The total intrinsic value of the options exercised during 2010 and 2011 were nil and NT$222 million, respectively. The total fair value of options vested during
2009, 2010 and 2011 was NT$1,278 million, NT$574 million and NT$842 million, respectively. Aggregate intrinsic value of outstanding options, fully vested and expected to vest options, and exercisable options at December 31, 2011 are NT$376
million, NT$342 million, and NT$76 million, respectively. As of December 31, 2011, unrecognized compensation expenses related to nonvested options granted under the employee stock options plan totaled NT$89 million. The weighted-average period
of expense expected to be recognized is 1.47 years.

Under U.S. GAAP, the total share-based compensation effects in income and
capitalization as part of inventory relating to employee stock options and treasury stock purchased by employees are summarized as follows:



|                                        |      |                                 |          |      |         |  |            |         |  |  |          |  
|--------------------------------------- | ---- | ------------------------------- | -------- | ---- | ------- |  | ---------- | ------- |  |  | -------- | -
|                                        |      | For the year ended December 31, |         
|                                        | 2009 |                                 |          | 2010 |         |  | 2011       |        
|                                        |      | NT$000                         |          |      | NT$000 |  |            | NT$000 | 
|Net effects in income                   |      |                                 | (978,077 | )    |         |  | (1,006,152 | )       |  |  | (912,934 | )
|                                        |      |                                 |          |      |         |  |            |         |  |  |          |  
|Net effects on inventory capitalization |      |                                 | 64,415   |      |         |  | 64,177     |         |  |  | 30,649   |  
|                                        |      |                                 |          |      |         |  |            |         |  |  |          |  

The following tables reflect the above noted differences between U.S. GAAP and R.O.C. GAAP relating to
compensations:



|                                                                                                           |  |                                 |          |   |         |  |          |         |  |  |          |  
|---------------------------------------------------------------------------------------------------------- |  | ------------------------------- | -------- | - | ------- |  | -------- | ------- |  |  | -------- | -
|                                                                                                           |  | For the year ended December 31, |         
|                                                                                                           |  | 2009                            |          |   | 2010    |  |          | 2011    | 
|                                                                                                           |  | NT$000                         |          |   | NT$000 |  |          | NT$000 | 
|Net income impact of compensation adjustments:                                                             |  |                                 |          |   |         |  |          |         |  |  |          |  
|Employee stock options                                                                                     |  |                                 | (804,065 | ) |         |  | (363,953 | )       |  |  | (77,592  | )
|Allocation to inventories, net of prior period allocations to inventories which are sold in current period |  |                                 | 1,609    |   |         |  | (32,898  | )       |  |  | (27,950  | )
|                                                                                                           |  |                                 |          |   |         |  |          |         |  |  |          |  
|Total U.S. GAAP adjustment to net income relating to compensation                                          |  |                                 | (802,456 | ) |         |  | (396,851 | )       |  |  | (105,542 | )
|                                                                                                           |  |                                 |          |   |         |  |          |         |  |  |          |  



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|                                                                            |  |                    |        |  |         |  |       | 
|--------------------------------------------------------------------------- |  | ------------------ | ------ |  | ------- |  | ----- | 
|                                                                            |  | As of December 31, |       
|                                                                            |  | 2010               |        |  | 2011    | 
|                                                                            |  | NT$000            |        |  | NT$000 | 
|Stockholders equity impact of compensation adjustments:                    |  |                    |        |  |         |  |       | 
|Employee stock options                                                      |  |                    | 31,517 |  |         |  | 3,567 | 
|                                                                            |  |                    |        |  |         |  |       | 
|Total U.S. GAAP adjustment to stockholders equity relating to compensation |  |                    | 31,517 |  |         |  | 3,567 | 
|                                                                            |  |                    |        |  |         |  |       | 

(2) Equity Investees  Variance between U.S. GAAP and R.O.C. GAAP

The Companys proportionate share of the income (loss) and stockholders equity from an equity investee under R.O.C. GAAP may
differ from U.S. GAAP if the equity investees net income (loss) and stockholders equity are different under the two GAAPs. Those differences for the equity investees include accounting for compensation, income tax and investments in debt
and equity securities.



| | (3) | Investments in Debt and Equity Securities
| | --- | -----------------------------------------



| | (a) | Change in fair value of investments
| | --- | -----------------------------------

Unrealized gains (losses) on trading securities held at December 31, 2009, 2010 and 2011 were NT$91 million, NT$(590) million and NT$(104) million, respectively.

Investment in restricted stock, for which sale is restricted by governmental or contractual requirement is accounted for as an
available-for-sale security or a cost method investment under R.O.C. GAAP, and its fair value should be adjusted for the effect of restriction. Under U.S. GAAP, however, if the restricted investment does not meet the definition of an equity security
with readily determinable fair value, it is accounted for as a cost method investment. Before 2011, our restricted investments were classified as cost method investments both under R.O.C. GAAP and U.S. GAAP. In 2011, these restricted investments are
reclassified as available-for-sale securities under U.S. GAAP as the period of restriction terminates within one year from the reporting date. The Company recorded an adjustment to decrease other comprehensive income by NT$63 million as of
December 31, 2011.

When the Company loses its significant influence on an investment accounted for under the equity
method and reclassifies it as an available-for-sale security, the proportionate share of an investees equity adjustments for other comprehensive income should remain as a part of the carrying amount of the investment under R.O.C. GAAP and the
dividends received from the available-for-sale security which were declared from pre-acquisition profits are deducted from the cost of the security. However, under U.S. GAAP, all of the investees equity adjustments for other comprehensive
income should be offset against the carrying amount of the investment at the time significant influence is lost, and the dividends received from the available-for-sale security are accounted for as dividend income. Accordingly, the accumulated other
comprehensive income related to the unrealized gains on the same group of such available-for-sale securities for each of the years ended December 31, 2009, 2010 and 2011, were decreased by approximately NT$975 million. The difference in cost
basis resulted in an adjustment to increase (decrease) disposal gain of NT$(97) million, NT$(1) million and NT$0.1 million for the year ended December 31, 2009, 2010 and 2011, respectively, under U.S. GAAP for the disposal of these investments.



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Prior to 2006, certain available-for-sale investments under U.S. GAAP were accounted as
equity method investments under R.O.C. GAAP. The differences in the application of equity method led to different current cost basis under R.O.C. GAAP and U.S. GAAP and resulted in an adjustment to accumulated other comprehensive income related to
unrealized losses on available-for-sale securities of NT$2,090 million as of December 31, 2009, 2010 and 2011.

Information on sales of available-for-sale equity securities for the years ended December 31, 2009, 2010 and 2011 is as follows:



|                                     |  |                   |           |  |                    |  |           |                     |  |  |   | 
|------------------------------------ |  | ----------------- | --------- |  | ------------------ |  | --------- | ------------------- |  |  | - | 
|                                     |  | Proceedsfromsales |           |  | Grossrealizedgains |  |           | Grossrealizedlosses | 
|                                     |  | NT$000           |           |  | NT$000            |  |           | NT$000             | 
|For the year ended December 31, 2009 |  |                   | 2,793,590 |  |                    |  | 1,767,765 |                     |  |  |  | 
|For the year ended December 31, 2010 |  |                   | 3,694,372 |  |                    |  | 1,959,472 |                     |  |  |  | 
|For the year ended December 31, 2011 |  |                   | 3,254,897 |  |                    |  | 1,464,505 |                     |  |  |  | 

Information on available-for-sale equity securities, including depositary receipts and funds, still held
at each balance sheet date is as follows:



|                        |  |            |            |  |                      |  |            |                       |  |  |                    |  |  |              |            |  |  |  |            | 
|----------------------- |  | ---------- | ---------- |  | -------------------- |  | ---------- | --------------------- |  |  | ------------------ |  |  | ------------ | ---------- |  |  |  | ---------- | 
|                        |  | Fair Value |            |  | Totalunrealizedgains |  |            | Totalunrealizedlosses |  |  | Netunrealizedgains |  |  | AdjustedCost |           
|                        |  | NT$000    |            |  | NT$000              |  |            | NT$000               |  |  | NT$000            |  |  | NT$000      |           
|As of December 31, 2009 |  |            | 41,357,636 |  |                      |  | 26,801,606 |                       |  |  | 81,156             |  |  |              | 26,720,450 |  |  |  | 14,637,186 | 
|As of December 31, 2010 |  |            | 37,298,738 |  |                      |  | 23,853,204 |                       |  |  | 45,951             |  |  |              | 23,807,253 |  |  |  | 13,491,485 | 
|As of December 31, 2011 |  |            | 24,054,645 |  |                      |  | 12,141,186 |                       |  |  | 393,001            |  |  |              | 11,748,185 |  |  |  | 12,306,460 | 

The Company had investments with gross unrealized losses of NT$46 million and NT$393 million as of
December 31, 2010 and 2011, respectively, on available-for-sale equity securities with fair value of NT$190 million and NT$972 million as of December 31, 2010 and 2011, respectively. There were no significant investments that had been in a
continuous loss position for 12 months or more as of December 31, 2010 and 2011. For the years ended December 31, 2009, 2010 and 2011, NT$1,769 million, NT$1,959 million and NT$1,430 million, respectively, were reclassified from other
comprehensive income to the consolidated statements of income upon the disposal or impairment of available-for-sale securities. Such amounts were determined by average cost method. The Company did not transfer any available-for-sale securities to
trading securities for the years ended December 31, 2009, 2010 and 2011.



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(b) Impairment of investments in securities

The differences related to the accounting for impairment of investments in securities between R.O.C. GAAP and U.S. GAAP were insignificant
for each of the years ended December 31, 2009, 2010, and 2011.

(c) Adjustments due to change in ownership of equity
investees and subsidiaries

When an equity investee or a subsidiary issues additional shares and the Company subscribes for
these shares at a percentage higher or lower than its current ownership percentage in the equity investees or subsidiaries, when the employees of the Companys subsidiaries or equity investees exercise their stock options, or when the
convertible bondholders of the Companys subsidiaries or equity investees exercise their conversion rights, the Companys ownership interest in such subsidiary or equity investee may change. Under R.O.C. GAAP, the change in the
Companys proportionate share in the net assets of its equity investees or subsidiaries resulting from the issuance of additional shares of the investees stock, at the rate not proportionate to its existing equity ownership in such
investees, is recorded to the additional paid-in capital and long-term investments account for an equity method investee, or noncontrolling interest for a subsidiary. Under U.S. GAAP, pursuant to ASC 810-10-45, Noncontrolling Interests in a
Subsidiary, a change in the Companys ownership interest in a subsidiary that does not result in a change of control shall be accounted for as equity transactions. Nevertheless, a dilution of ownership interest in an equity-method investee
is recognized as a gain or loss, while an increase of ownership interest is accounted for as additional acquisition interest in an equity method investee,with the difference between the total cost of the additional investment and the proportionate
share of the fair value of net assets treated as equity method goodwill.

In December 2009 and June 2010, the Company acquired
additional ownership interests in one of its subsidiaries. Under R.O.C. GAAP, the acquisition was accounted for using the purchase method of accounting, and after reducing the book values of those non-current assets acquired of NT$1,752 million and
NT$226 million for the year ended December 31, 2009 and 2010, respectively, to zero, the Company recognized an extraordinary gain of NT$649 million and NT$68 million for the year ended December 31, 2009 and 2010, respectively, as the fair
value of the net assets acquired exceeds their cost. However, under U.S. GAAP, the acquisition was accounted for as an equity transaction. The difference between the fair value of the consideration paid and the book value of the noncontrolling
interests is adjusted against stockholders equity. As such, the Company reversed the extraordinary gain and the write-down of non-current assets recognized under R.O.C. GAAP, and recorded additional paid-in capital of NT$2,497 million and
NT$310 million as of December 31, 2009 and 2010, respectively, under U.S. GAAP.

In June 2010, a non-affiliated company
invested NT$259 million for newly issued shares of one of the Companys consolidated entities, which reduced the Companys ownership interest from 100% to 50%. Due to this transaction, the Company jointly controlled the entity and
accounted for the entity as a joint venture. Under R.O.C. GAAP, the reduction of equity interest is adjusted against additional paid-in capital. However, under U.S. GAAP, the Company accounted for the transaction as a deconsolidation of a subsidiary
and remeasured the remaining holding interests by recognizing a gain or loss in net income attributable to the Company. Accordingly, the Company recognized an additional NT$5 million net loss for the year ended December 31, 2010 under U.S.
GAAP.



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Under R.O.C. GAAP, when an investor company holds 20% or more of an investee
companys outstanding voting securities but without the controlling power, unless it is evidenced that the investor company does not have significant influence over the investee company, the investors investment in the investee
companys equity securities, including preferred shares, shall be accounted for using the equity method. When an investor company invests in preferred stock of an investee company, equity method accounting is necessary if the investor has the
ability to exercise its significant influence over the investee. Therefore, when determining the excess of cost of investment over underlying equity in net assets of the investee, and recognizing subsequent pick up of equity method gains or losses,
the Company takes its preferred shareholdings into consideration. In addition, excess of investment cost over the underlying net assets will be treated as equity-method goodwill as a component of the carrying value of the equity-method investment.
If, however, there is excess of underlying net assets over the investment cost, the investees non-current assets, as components of the equity-method investment balance, will be subject to pro rata reduction with the remaining unallocated
bargain purchase recognized immediately as an extraordinary gain.

Under U.S. GAAP, however, equity-method accounting only
applies to investments in common stock and in-substance common stock that give the investor the ability to exercise significant influence over operating and financial policies of an investee. Unless when the investment in common stock and
in-substance common stock is reduced to zero, at which time the Companys other forms of investments, including preferred shares, may be required to pick up losses. Pursuant to ASC 323-10-15-13, in-substance common stock is an investment in an
entity that has risk and reward characteristics that are substantially similar to that entitys common stock. An investor shall consider all of the characteristics of the securities: subordination, risk and rewards of ownership and obligation
to transfer value, when determining whether an investment in an entity is substantially similar to an investment in the entitys common stock.

In December 2011, after considering all the above mentioned characteristics, the Company concluded that its investment in Best Elite preferred shares is not in-substance common stock. Therefore, the
investment in the Best Elite preferred shares of NT$2,342 million was reclassified from long-term investment accounted for under the equity method to financial assets measured at cost. The Company also reversed the effects of the pro rata reduction
for the bargain purchase recognized and recognized an equity-method goodwill of NT$521 million, as a component of the equity-method investment balance for its investment in Best Elite common stock.



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(4) Fair Value Measurement

ASC 820-10, Fair Value Measurements and Disclosures, defines fair value, provides a framework for measuring fair value under
current standards in U.S. GAAP, and requires additional disclosure about fair value measurements. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the
lowest priority to unobservable inputs (Level 3). Each level of inputs used are described as following:

Level 1 inputs are
unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date;

Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted prices for similar assets or
liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and valuations with inputs which are observable for substantially the full term of the asset or liability. The Companys
derivative financial instruments - forward contracts are classified as assets and liabilities carried at fair value through profit or loss. The fair values are determined by using the market-based observable inputs including the expected interest
forward rate, expected volatility in interest rates, spot exchange rate and swap point. The fair values of the available-for-sale financial assets with restrictions on the sale or transfer are determined based on identical but unrestricted financial
assets quoted market price with discounts for the restrictions that are insignificant. On December 2, 2009, the Company issued exchangeable bonds which contain a compound derivative instrument, comprising of the exchange option with a
fixed foreign exchange rate feature and a call option. The compound derivative instrument is classified as liabilities carried at fair value through profit or loss. The derivatives are fair valued by using the option pricing model. The valuation
model uses the market-based observable inputs including share price, volatility, credit spread, and swap rates. Some of the Companys non-public instruments classified as financial assets measured at cost, noncurrent, and one of the
Companys non-public instruments classified as long-term investments accounted for under the equity method were considered to be impaired. The fair value was determined based on the transaction price of the newly issued shares, which the
Company considered to be quoted prices in a market that was not active .

Level 3 inputs are unobservable inputs that are
significant to the fair value of the asset or liability. In 2011, some of the Companys investments in non-public equity funds classified as financial assets measured at cost, noncurrent were considered to be impaired. The values of the
Companys holdings in these funds are determined based on the net asset value of the funds. Therefore, the fair value of the non-publicly traded funds was determined using the net asset value of the funds. Due to the absence of quoted market
price, the fair value measurement of some of the Companys long-term investment in the non-publicly traded equity instruments that are accounted for under equity method were determined to be impaired using the discounted cash flow model,
considering the investees current and future expected operating performance, industry trends, and competitive advantages. As for the property, plant and equipment impairment, the fair value of the machinery and equipment was determined based
on observable inputs by reference to comparable sales data and published market price with insignificant adjustment owing to their economic lives, equipment-related inflation indices and physical condition. Refer to Note 35(6) for goodwill
impairment.



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The following table summarizes the assets and liabilities measured at fair value on a
recurring basis at December 31, 2010 and 2011:



|                                                                    |  |            |            |  |                                                |  |            |         |  |  |           |  |  |  |   | 
|------------------------------------------------------------------- |  | ---------- | ---------- |  | ---------------------------------------------- |  | ---------- | ------- |  |  | --------- |  |  |  | - | 
|December 31, 2010                                                   |  |            |            |  | Fair value measurements at reportingdate using | 
|Items                                                               |  | Fair Value |            |  | Level 1                                        |  |            | Level 2 |  |  | Level 3   | 
|                                                                    |  | NT$000    |            |  | NT$000                                        |  |            | NT$000 |  |  | NT$000   | 
|Financial assets at fair value through profit or loss, current      |  |            | 1,139,943  |  |                                                |  | 1,130,532  |         |  |  | 9,411     |  |  |  |  | 
|Financial assets at fair value through profit or loss, noncurrent   |  |            | 79,920     |  |                                                |  | 79,920     |         |  |  |          |  |  |  |  | 
|Available-for-sale financial assets, current                        |  |            | 7,044,673  |  |                                                |  | 7,044,673  |         |  |  |          |  |  |  |  | 
|Available-for-sale financial assets, noncurrent                     |  |            | 30,254,065 |  |                                                |  | 30,254,065 |         |  |  |          |  |  |  |  | 
|Financial liabilities at fair value through profit or loss, current |  |            | 2,254,937  |  |                                                |  |           |         |  |  | 2,254,937 |  |  |  |  | 
|                                                                    |  |           
|December 31, 2011                                                   |  |            |            |  | Fair value measurements at reportingdate using | 
|Items                                                               |  | Fair Value |            |  | Level 1                                        |  |            | Level 2 |  |  | Level 3   | 
|                                                                    |  | NT$000    |            |  | NT$000                                        |  |            | NT$000 |  |  | NT$000   | 
|Financial assets at fair value through profit or loss, current      |  |            | 695,931    |  |                                                |  | 695,931    |         |  |  |          |  |  |  |  | 
|Financial assets at fair value through profit or loss, noncurrent   |  |            | 119,711    |  |                                                |  | 119,711    |         |  |  |          |  |  |  |  | 
|Available-for-sale financial assets, current                        |  |            | 5,124,780  |  |                                                |  | 5,124,780  |         |  |  |          |  |  |  |  | 
|Available-for-sale financial assets, noncurrent                     |  |            | 18,929,865 |  |                                                |  | 18,835,224 |         |  |  | 94,641    |  |  |  |  | 
|Financial liabilities at fair value through profit or loss, current |  |            | 741,531    |  |                                                |  |           |         |  |  | 741,531   |  |  |  |  | 

The following table summarizes the assets measured at fair value on a nonrecurring basis for the year
ended December 31, 2010 and 2011:



|                                                            |  |            |        |  |                                                      |  |   |         |  |  |         |  |  |              |        |  |  |  |         |  
|----------------------------------------------------------- |  | ---------- | ------ |  | ---------------------------------------------------- |  | - | ------- |  |  | ------- |  |  | ------------ | ------ |  |  |  | ------- | -
|December 31, 2010                                           |  |            |        |  | Fair value measurements duringreporting period using |  |   |         | 
|Items                                                       |  | Fair Value |        |  | Level 1                                              |  |   | Level 2 |  |  | Level 3 |  |  | Total Losses |       
|                                                            |  | NT$000    |        |  | NT$000                                              |  |   | NT$000 |  |  | NT$000 |  |  | NT$000      |       
|Financial assets measured at cost, noncurrent               |  |            | 67,695 |  |                                                      |  |  |         |  |  | 67,695  |  |  |              |       |  |  |  | (93,077 | )
|Long-term investments accounted for under the equity method |  |            | 41,581 |  |                                                      |  |  |         |  |  |        |  |  |              | 41,581 |  |  |  | (39,846 | )



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Financial assets measured at cost and long-term investments accounted for under the
equity method with a total carrying amount of NT$242 million were written down to their fair value, in total of NT$109 million, resulting in an NT$133 million impairment charges in total, included in earnings for the year ended December 31,
2010.



|                                                            |  |            |           |  |                                                      |  |   |         |  |  |         |  |  |              |           |  |  |  |            |  
|----------------------------------------------------------- |  | ---------- | --------- |  | ---------------------------------------------------- |  | - | ------- |  |  | ------- |  |  | ------------ | --------- |  |  |  | ---------- | -
|December 31, 2011                                           |  |            |           |  | Fair value measurements duringreporting period using |  |   |         | 
|Items                                                       |  | Fair Value |           |  | Level 1                                              |  |   | Level 2 |  |  | Level 3 |  |  | Total Losses |          
|                                                            |  | NT$000    |           |  | NT$000                                              |  |   | NT$000 |  |  | NT$000 |  |  | NT$000      |          
|Financial assets measured at cost, noncurrent               |  |            | 225,938   |  |                                                      |  |  |         |  |  | 32,447  |  |  |              | 193,491   |  |  |  | (570,725   | )
|Long-term investments accounted for under the equity method |  |            | 374,690   |  |                                                      |  |  |         |  |  | 81,348  |  |  |              | 293,342   |  |  |  | (114,463   | )
|Property, plant and equipment, net                          |  |            | 7,532,528 |  |                                                      |  |  |         |  |  |        |  |  |              | 7,532,528 |  |  |  | (1,238,877 | )
|Other assets                                                |  |            |          |  |                                                      |  |  |         |  |  |        |  |  |              |          |  |  |  | (11,206    | )
|Goodwill                                                    |  |            |          |  |                                                      |  |  |         |  |  |        |  |  |              |          |  |  |  | (1,500,344 | )

Financial assets measured at cost, long-term investments accounted for under the equity method, property,
plant and equipment, net, other assets and goodwill with a total carrying amount of NT$11,569 million were written down to their fair values in total of NT$8,133 million, resulting in an NT$3,436 million impairment charges in total, included in
earnings for the year ended December 31, 2011.



|(5) | Convertible Bond Liabilities
|--- | ----------------------------

The Company issued convertible bonds in May 2011. Under R.O.C. GAAP, the bonds contain both a liability component and an equity component. The conversion right is classified in stockholders equity
at its fair value at issuance. Under U.S. GAAP, the conversion right was determined to be a contract indexed to the Companys own stock and, if it existed on a freestanding basis, would be classified in stockholders equity, meeting the
scope exception described in ASC 815-10-15-74. As such, the conversion right is not considered to be a derivative instrument that is required to be bifurcated from the host contract.

In addition, under R.O.C. GAAP, the issuance costs are allocated proportionally to the equity and liability components. The amount
allocated to the equity components is accounted for as a reduction of equity as well as the amount allocated to the liability component is accounted for as a bond discount. The issuance costs allocated to the liability component are amortized over
the contractual life of the bonds using the effective interest rate method. Under U.S. GAAP, however, the entire issuance costs are reported as deferred charges and amortized over the contractual life of the bonds using the effective interest rate
method. As of December 31, 2011, the balance of deferred charges was NT$52 million under U.S. GAAP.



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Based on the above differences, the Company reclassified the equity component under
R.O.C. GAAP to bonds payable under U.S. GAAP, and reclassified the issuance costs which are allocated to the liability and equity component under R.O.C. GAAP to deferred charges under U.S. GAAP. The Company also adjusted the differences resulting
from the subsequent amortization of the bond discount and deferred charges as well as the subsequent redemption of the bonds. As of December 31, 2011, the Company redeemed NT$1,823 million convertible bond. The difference in cost basis resulted
in an adjustment to decrease redemption gain and interest expense of NT$57 million and NT$77 million for the year ended December 31, 2011, respectively.



|(6) | Goodwill and Business Combinations
|--- | ----------------------------------

In accordance with R.O.C. GAAP, goodwill is measured separately on each acquisition, and it excludes goodwill in non-controlling interest. In a step acquisition, the acquirer does not re-measure its
previously held equity interest in the acquiree, therefore, the acquisition does not result in gains or losses from re-measurements. Goodwill is not amortized and is subject to annual impairment tests or whenever events and circumstances change
indicating goodwill may be impaired. The assessment of impairment includes identifying the goodwill-allocated cash generating unit (CGU), determining the recoverable amount of CGU by using a discounted cash flow analysis, and ultimately comparing
the recoverable amount with the carrying amount of CGU including goodwill. If the CGUs carrying amount is greater than its recoverable amount, an impairment loss is recognized. The impairment of goodwill cannot be reversed. When the fair value
of identifiable net assets acquired exceeds the cost, the difference should be assigned to non-current assets acquired (except for financial assets not under equity method, assets to be disposed, deferred tax assets, prepaid pension or other
retirement benefits cost) proportionate to their respective fair values. If these assets are all reduced to zero value, the remaining excess should be recognized as extraordinary gain.

Under U.S. GAAP, in a business combination achieved in stages, the acquirer shall re-measure its previously held equity interest in the
acquiree at its acquisition-date fair value and recognize the resulting gain or loss. The acquirer shall recognize goodwill, or gain on bargain purchase, as of the acquisition date measured as the excess of the aggregate of: (i) the
consideration transferred, (ii) the fair value of any non-controlling interest in the acquiree, and (iii) the fair value of any previously held equity interest in the acquiree; over the fair value of identifiable assets acquired and the
liabilities assumed on the acquisition date. Goodwill is not amortized and is subject to an annual impairment test or more frequently when events and circumstances indicate a possible impairment may exist. The first step of the impairment test is to
compare the fair value of the reporting unit with its carrying value, including goodwill. If the carrying value of the reporting unit exceeds its fair value, the second step of the impairment test compares the implied fair value of the reporting
unit goodwill with its carrying value. If the carrying amount of goodwill exceeds its fair value, and impairment loss is recognized on the consolidated statements of income equal to the excess. Impairment of goodwill cannot be subsequently reversed.
Any bargain purchase gain is immediately recognized in earnings.



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On November 30, 2010, the Company acquired additional stocks issued by NEXPOWER,
which increased the Companys ownership interest from 45.79% to 57.67%. Prior to the acquisition date, the Company accounted for its 45.79% interest in NEXPOWER as an equity-method investment. As a result of the acquisition, the Company
obtained control over NEXPOWER and the results of NEXPOWERs operations have been included in the consolidated financial statements since that date. The Company expects to achieve the integration of the Companys overall resources.

Under R.O.C. GAAP, a change in the Companys proportionate share in the net assets of an equity investee resulting from
its acquisition of additional stock issued by the equity investee at a rate not proportionate to its existing equity ownership is charged to the additional paid-in capital and long-term investments accounts. However, the acquisition of a controlling
interest in NEXPOWER was regarded as a business combination under U.S. GAAP. The sum of the fair value of the consideration transferred, non-controlling interests and equity interest previously held by the acquirer exceeding the fair value of
identifiable net assets is recorded as goodwill.

The fair value of consideration transferred, non-controlling interests and
equity interest previously held by the acquirer were determined based on the price of newly issued shares, which was supported by valuation analysis using the market approach. The fair value of consideration transferred was NT$3,500 million, paid in
cash, and the fair value of noncontrolling interests was NT$5,128 million. The acquisition-date fair value of the previous equity interest was NT$3,487 million and the Company recognized a gain of NT$443 million as a result of remeasuring its equity
interest previously held in NEXPOWER before the business combination.

The following table summarizes the estimated fair values
of the assets acquired and liabilities assumed at the acquisition date.



|                                   |  |             |        | 
|---------------------------------- |  | ----------- | ------ | 
|As of November 30, 2010            |  | NT$ million |       
|Cash                               |  |             | 5,853  | 
|Receivables                        |  |             | 938    | 
|Inventories                        |  |             | 1,133  | 
|Property, plant and equipment      |  |             | 9,403  | 
|Other assets                       |  |             | 144    | 
|                                   |  |             |        | 
|Total identifiable assets acquired |  |             | 17,471 | 
|                                   | 
|Current liabilities                |  |             | 1,433  | 
|Non-current liabilities            |  |             | 5,422  | 
|                                   |  |             |        | 
|Total liabilities assumed          |  |             | 6,855  | 
|                                   |  |             |        | 
|Net identifiable assets acquired   |  |             | 10,616 | 
|Goodwill                           |  |             | 1,499  | 
|                                   |  |             |        | 
|Net assets acquired                |  |             | 12,115 | 
|                                   |  |             |        | 



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The goodwill recognized is attributable primarily to expected consolidation synergies of
NEXPOWER, and none of the goodwill is expected to be deductible for income tax purposes. As of December 31, 2010, there were no changes in the recognized amounts of goodwill resulting from the acquisition of NEXPOWER.

The amounts of revenue and losses of NEXPOWER included in the Companys consolidated income statement from the acquisition date to
the period ending December 31 2010 were NT$590 million and NT$(75) million, respectively.

The following represents the
pro forma consolidated income statement as if NEXPOWER had been included in the consolidated results of the Company for the entire year ended December 31, 2009 and 2010:



|         |  |                                 |        |  |             |  |         | 
|-------- |  | ------------------------------- | ------ |  | ----------- |  | ------- | 
|         |  | For the year ended December 31, |       
|         |  | 2009                            |        |  | 2010        | 
|         |  | NT$ million                     |        |  | NT$ million | 
|Revenue  |  |                                 | 92,152 |  |             |  | 129,440 | 
|Earnings |  |                                 | 2,478  |  |             |  | 23,550  | 

In September 2011, due to operating profits and cash flows were lower than expected since November 2010
given sharp deterioration in market condition, NEXTPOWER revised its earnings forecast for the next five years and determined that some of its long lived assets were impaired pursuant to ASC350. The impairment loss also served as an indicator that
goodwill might also be impaired. Accordingly, the Company conducted a two-step process to identify and measure the amount of impairment loss, if any.

As the carrying amount of NEXPOWER exceeded its fair value which was estimated by using the discounted cash flow based on earnings forecasts, its goodwill was considered to be impaired. To calculate the
implied fair value of goodwill, the Company allocated the fair value to each asset and liability account. As most of the value in the reporting unit is in its long lived assets, the fair value of the machinery and equipment was determined and
impaired as described in Note 35(4). The fair value of assets and liabilities other than long lived assets were determined to approximate their book values given their short-term nature. The Company did not identify any value to be ascribed to
intangible assets not previously identified. The excess of the reporting units fair value over the total amounts allocated to each asset (except goodwill) and liability account would be the implied fair value of goodwill. As the carrying
amount exceeded the implied fair value of NEXPOWERs goodwill, the Company recognized a goodwill impairment loss of NT$1,499 million in 2011 under U.S. GAAP, within the Other segment. While the impairment assessment resulted in a full writedown
of goodwill under both R.O.C. GAAP and U.S. GAAP, the amount of the charge was different due to the difference in carrying values of goodwill under each GAAP.



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|(7) | Earnings per Share (EPS)
|--- | ------------------------

Under R.O.C. GAAP, basic earnings per share are calculated by dividing net income attributable to common stockholders by the weighted
average number of shares outstanding during the year. Diluted earnings per share are 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. Net income was also adjusted for the interest and other income or expenses derived from any underlying dilutive share equivalents, such as convertible bonds. The weighted average shares outstanding are adjusted retroactively for
stock dividends issued and capitalization of additional paid-in capital. Anti-dilutive effects are not included in the dilutive EPS calculation. The shares distributed for employee bonus are treated as outstanding as of their grant date in the
calculation of basic earnings per share. For employee bonus that may be distributed in shares, the number of shares to be distributed is taken into consideration assuming the distribution will be made entirely in shares when calculating diluted
earnings per share.

Under U.S. GAAP, basic earnings per share are calculated by dividing net income attributable to common
stockholders by the weighted average number of shares outstanding during the year. The shares distributed for employee bonus are included in the computation of basic earnings per share from the grant date. The reciprocal shareholdings held by equity
investees are also deducted from the computation of weighted-average number of shares outstanding. Diluted earnings per share are 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 attributable to common stockholders would also be adjusted for the interest and other income or expenses derived from any underlying dilutive share equivalents as under
R.O.C. GAAP. For employee bonus that may be distributed in shares, the number of shares to be distributed is not taken into consideration until they are granted or the stockholders approval is obtained. Additionally, the dilutive effect of
outstanding employee options generally should be reflected in diluted EPS by application of treasury stock method. The assumed proceeds include the exercise price of the options, any tax benefits that will be credited on exercise to
additional paid-in capital, and the average measured but unrecognized compensation expense during the period. Accordingly, the Company reversed the dilutive adjustment under R.O.C. GAAP and calculated the dilutive effect of outstanding employee
options by applying treasury stock method under U.S. GAAP.



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The reconciliation of the numerators and denominators used in computing the basic and
diluted earnings per share under U.S. GAAP are as below:



|                                                                         |  |                                      |           |   |                     |  |            |                 |  |  |       |  
|------------------------------------------------------------------------ |  | ------------------------------------ | --------- | - | ------------------- |  | ---------- | --------------- |  |  | ----- | -
|                                                                         |  | For the year Ended December 31, 2011 |          
|                                                                         |  | Income(Numerator)                    |           |   | Shares(Denominator) |  |            | Per-ShareAmount | 
|                                                                         |  | In thousands                         |           |   | In thousands        |  |            | In dollar NT$   | 
|Net Income attributable to the Company                                   |  |                                      | 8,745,675 |   |                     |  |           |                 |  |  |      |  
|                                                                         |  |                                      |          
|Basic EPS                                                                |  |                                      |           |   |                     |  |            |                 |  |  |       |  
|Income available to common stockholders                                  |  |                                      | 8,745,675 |   |                     |  | 12,400,193 |                 |  |  | 0.71  |  
|                                                                         |  |                                      |          
|Effect of dilutive securities                                            |  |                                      |           |   |                     |  |            |                 |  |  |       |  
|Employee stock options                                                   |  |                                      |          |   |                     |  | 38,534     |                 |  |  |      |  
|Unsecured convertible bonds                                              |  |                                      | (10,699   | ) |                     |  | 420,158    |                 |  |  | (0.03 | )
|                                                                         |  |                                      |          
|Diluted EPS                                                              |  |                                      |           |   |                     |  |            |                 |  |  |       |  
|Income attributable to common stockholders including assumed conversions |  |                                      | 8,734,976 |   |                     |  | 12,858,885 |                 |  |  | 0.68  |  

As of December 31, 2011, there were 397,189 thousand issued and outstanding stock options which
were not included in the computation of diluted earnings per share due to their antidilutive effect.



|                                                                         |  |                                      |            |  |                     |  |            |                 |  |  |      | 
|------------------------------------------------------------------------ |  | ------------------------------------ | ---------- |  | ------------------- |  | ---------- | --------------- |  |  | ---- | 
|                                                                         |  | For the year Ended December 31, 2010 |           
|                                                                         |  | Income(Numerator)                    |            |  | Shares(Denominator) |  |            | Per-ShareAmount | 
|                                                                         |  | In thousands                         |            |  | In thousands        |  |            | In dollar NT$   | 
|Net Income attributable to the Company                                   |  |                                      | 23,616,120 |  |                     |  |           |                 |  |  |     | 
|                                                                         |  |                                      |           
|Basic EPS                                                                |  |                                      |            |  |                     |  |            |                 |  |  |      | 
|Income available to common stockholders                                  |  |                                      | 23,616,120 |  |                     |  | 12,335,428 |                 |  |  | 1.91 | 
|                                                                         |  |                                      |           
|Effect of dilutive securities                                            |  |                                      |            |  |                     |  |            |                 |  |  |      | 
|Employee stock options                                                   |  |                                      |           |  |                     |  | 63,658     |                 |  |  |     | 
|                                                                         |  |                                      |           
|Diluted EPS                                                              |  |                                      |            |  |                     |  |            |                 |  |  |      | 
|Income attributable to common stockholders including assumed conversions |  |                                      | 23,616,120 |  |                     |  | 12,399,086 |                 |  |  | 1.90 | 

As of December 31, 2010, there were 484,340 thousand issued and outstanding stock options which
were not included in the computation of diluted earnings per share due to their antidilutive effect.



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|                                                                         |  |                                      |           |  |                     |  |            |                 |  |  |      | 
|------------------------------------------------------------------------ |  | ------------------------------------ | --------- |  | ------------------- |  | ---------- | --------------- |  |  | ---- | 
|                                                                         |  | For the year Ended December 31, 2009 |          
|                                                                         |  | Income(Numerator)                    |           |  | Shares(Denominator) |  |            | Per-ShareAmount | 
|                                                                         |  | In thousands                         |           |  | In thousands        |  |            | In dollar NT$   | 
|Net Income attributable to the Company                                   |  |                                      | 2,571,988 |  |                     |  |           |                 |  |  |     | 
|                                                                         |  |                                      |          
|Basic EPS                                                                |  |                                      |           |  |                     |  |            |                 |  |  |      | 
|Income available to common stockholders                                  |  |                                      | 2,571,988 |  |                     |  | 12,538,016 |                 |  |  | 0.21 | 
|                                                                         |  |                                      |          
|Effect of dilutive securities                                            |  |                                      |           |  |                     |  |            |                 |  |  |      | 
|Employee stock options                                                   |  |                                      |          |  |                     |  | 21,812     |                 |  |  |     | 
|                                                                         |  |                                      |          
|Diluted EPS                                                              |  |                                      |           |  |                     |  |            |                 |  |  |      | 
|Income attributable to common stockholders including assumed conversions |  |                                      | 2,571,988 |  |                     |  | 12,559,828 |                 |  |  | 0.20 | 

As of December 31, 2009, there were 572,107 thousand issued and outstanding stock options which
were not included in the computation of diluted earnings per share due to their antidilutive effect.



|(8) | Treasury Stock and related Disposal
|--- | -----------------------------------

Some of the Companys subsidiaries and investees also hold the Companys stocks as investments. Under R.O.C. GAAP, reciprocal shareholdings held by subsidiaries, but not equity investees, are
recorded as treasury stocks on the Companys books. Under U.S. GAAP, however, reciprocal shareholdings, whether being held by subsidiaries or equity investees, are recorded as treasury stocks on the Companys books. Therefore, as of
December 31, 2010 and 2011, the Company recognized treasury stocks of NT$2,092 million for reciprocal shareholdings held by equity-method investees. The Company also reversed accumulated other comprehensive income related to unrealized gains of
NT$1,573 million, NT$1,428 million and NT$849 million for the years ended December 31, 2009, 2010 and 2011, respectively, and eliminated investment gains of nil, NT$81 million and NT$179 million for the years ended December 31, 2009, 2010
and 2011, respectively.



|(9) | Stock Dividends
|--- | ---------------

Under
R.O.C. GAAP, the stock dividends are recorded at par value and charged to retained earnings. Under U.S. GAAP, if the ratio of distribution is less than 25 percent of the same kind of outstanding shares, the fair value of the shares issued should be
charged to retained earnings. Since there were no stock dividends issued during 2010 and 2011, the adjustment of NT$291,285 million remains the same as of December 31, 2010 and 2011.



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|(10) | Pension
|---- | -------

Under R.O.C.
GAAP, R.O.C. SFAS 18 requires a minimum pension liability to be measured as the excess of accumulated benefit obligation over the fair value of the plan assets, and allows the unrecognized items, including prior service costs and credits, gains or
losses, and transition obligations or assets, to be reported in disclosure shown as a plans funded status.

Under U.S.
GAAP, ASC 715-30, Defined Benefit PlansPension, requires an employer to recognize an asset for a plans overfunded status or a liability for a plans underfunded status with an offsetting adjustment to accumulated other
comprehensive income (AOCI).

The amounts related to pensions recognized in AOCI, net of tax, excluding amounts related to
equity-method investees, are shown as below:



|                                                                                             |  |                         |          |   |                    |  |        |  
|-------------------------------------------------------------------------------------------- |  | ----------------------- | -------- | - | ------------------ |  | ------ | -
|                                                                                             |  | As of December 31, 2011 |         
|                                                                                             |  | Net gain/(loss)         |          |   | Prior service cost | 
|                                                                                             |  | NT$000                 |          |   | NT$000            | 
|The amounts arose during the period                                                          |  |                         | 23,222   |   |                    |  |       |  
|The amounts reclassified as components of net periodic benefit cost                          |  |                         | 12,894   |   |                    |  | (3,931 | )
|The amounts recognized in AOCI as of December 31, 2011                                       |  |                         | (536,366 | ) |                    |  | 47,995 |  
|The amounts expected to be recognized as components of net periodic benefit cost during 2012 |  |                         | (10,811  | ) |                    |  | 3,446  |  



|(11) | Tax Effect of U.S. GAAP Adjustments
|---- | -----------------------------------

Under U.S. GAAP, the income tax expense was NT$641 million, NT$1,624 million and NT$931 million for the years ended December 31, 2009, 2010 and 2011, respectively. Undistributed earnings generated
after 1997 are subject to a 10% tax in compliance with the Income Tax Law of the R.O.C. Under R.O.C. GAAP, the 10% tax on undistributed earnings is recorded as an expense at the time shareholders resolve that its earnings shall be retained. Under
U.S. GAAP, 10% income tax impact is provided in the period the income is earned, assuming that no earnings are distributed. Any reduction in the liability will be recognized when the income is distributed upon the stockholders approval in the
subsequent year. Tax on undistributed earnings may be offset by the Companys available tax credits carried forward, where applicable. As such, the incremental tax accrued on undistributed earnings may be offset by a corresponding reduction in
valuation allowance, where applicable. In 2009, 2010 and 2011, the Company accrued NT$307 million, NT$2,156 million and NT$877 million, respectively, for 10% tax on undistributed earnings in Taiwan under U.S. GAAP.



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The additional tax expense was offset by a corresponding reduction in the valuation allowance under U.S. GAAP. Further, in 2009, 2010 and 2011, certain subsidiaries incurred (reversed) NT$(14)
million, NT$10 million and NT$(34) million of tax on undistributed earnings in Taiwan, respectively.

As of December 31,
2011, the Company reported valuation allowance NT$11,927 million to reduce deferred tax assets to an amount that is more likely than not realizable, representing an increase of NT$4,426 million from the prior year. The majority of the R.O.C. GAAP to
U.S. GAAP reconciliation adjustments are permanent in nature and, therefore, resulted in no incremental impact on income taxes under U.S. GAAP.

Under U.S. GAAP, the Company adopted the provisions regarding uncertainty in income tax positions prescribed in ASC 740-10, Income Taxes. ASC 740-10 clarifies that tax position are measured based
on the maximum amount that is more likely than not to be realized. Tax positions that are not at least more likely than not to be sustained on their technical merits are not recognized. Unlike ASC 740-10, R.O.C. SFAS 22 contained no guidance on
uniform criteria for an enterprise to recognize and measure potential tax benefits associated with uncertain tax positions.

A
reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:



|                                                               |  |                                 |    |  |      |  |     |  
|-------------------------------------------------------------- |  | ------------------------------- | -- |  | ---- |  | --- | -
|                                                               |  | For the year ended December 31, |   
|                                                               |  | 2010                            |    |  | 2011 | 
|                                                               |  | NT$                             |    |  | NT$  | 
|                                                               |  | (In millions)                   |   
|Balance at January 1,                                          |  |                                 | 60 |  |      |  | 82  |  
|Additions based on tax positions taken during the current year |  |                                 |   |  |      |  | 69  |  
|Reductions related to settlements with taxing authorities      |  |                                 |   |  |      |  | (82 | )
|Additions for tax positions of prior years                     |  |                                 | 22 |  |      |  |    |  
|                                                               |  |                                 |    |  |      |  |     |  
|Balance at December 31,                                        |  |                                 | 82 |  |      |  | 69  |  
|                                                               |  |                                 |    |  |      |  |     |  

The aforementioned unrecognized tax benefits, if recognized, would affect the Companys effective tax
rate. In addition, settlement of the uncertain tax positions would require the use of cash. Further, the Company is unaware of any positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly
increase or decrease within the next twelve months.

The Company reports interest and penalties relating to unrecognized tax
benefits as interest expenses and other expenses, respectively. As of December 31, 2010 and 2011, no interest or penalties were accrued.

The Company is subject to taxation in Taiwan and other foreign jurisdictions. As of December 31, 2011, tax year of 2010 is open to Tax Authoritys examination in Taiwan, while in other foreign
jurisdictions, years 2006-2010 are open to relevant Tax Authoritys examination.



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|(12) | Gross Profit and Operating Income
|---- | ---------------------------------

Under R.O.C. GAAP, gains and losses from disposal of property, plant and equipment, gains and losses from foreign currency exchange, and impairment losses of goodwill and long-lived assets, are presented
as non-operating income or expenses in the consolidated statement of income. Under U.S. GAAP, these non-operating income or expenses would be reclassified to be included in the determination of operating income.



|(13) | Inventory
|---- | ---------

Under U.S.
GAAP, the allocation of fixed production overhead to inventory is based on the normal capacity of the production facilities. Unallocated overheads are recognized as an expense in the period in which they are incurred. Other items such as abnormal
freight, handling costs and amounts of wasted materials are treated as current period charges rather than as a portion of the inventory cost pursuant to ASC 330, Inventory. Before the adoption of R.O.C. SFAS No. 10,
Inventories (R.O.C. SFAS 10), on January 1, 2009, R.O.C. GAAP did not provide definite guidance for such abnormal items and the use of normal capacity was not mandatory. Accordingly, the Company recognized an adjustment to the cost
of goods sold of NT$362 million for the year ended December 31, 2008. As R.O.C. SFAS 10 and ASC 330 are essentially the same, the inventory difference from 2008 reversed in 2009 when the associated inventory was sold, and there would be no
further adjustments from January 1, 2010.

Under R.O.C. GAAP the write down of inventory for the lower of cost or net
realizable value may be reversed in subsequent periods if market conditions improve. Under U.S. GAAP, the write down to lower of cost or market creates a new cost basis that subsequently cannot be marked up. Upon the sale of the related inventory,
the difference between these two GAAPs is resolved. During the years ended December 31, 2009, 2010 and 2011, there was no material difference between cost of sales under R.O.C. GAAP and U.S. GAAP as a result of this GAAP difference.



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Reconciliation of Consolidated Net Income



|                                                                     |  |                                 |            |   |         |  |            |         |  |  |            |   |  |  |            |  
|-------------------------------------------------------------------- |  | ------------------------------- | ---------- | - | ------- |  | ---------- | ------- |  |  | ---------- | - |  |  | ---------- | -
|                                                                     |  | For the year ended December 31, |           
|                                                                     |  | 2009                            |            |   | 2010    |  |            | 2011    | 
|                                                                     |  | NT$000                         |            |   | NT$000 |  |            | NT$000 |  |  | US$000    |  
|Consolidated net income, R.O.C. GAAP                                 |  |                                 | 1,670,890  |   |         |  | 23,845,956 |         |  |  | 8,466,916  |   |  |  | 279,713    |  
|Compensation                                                         |  |                                 | (804,378   | ) |         |  | (396,851   | )       |  |  | (105,542   | ) |  |  | (3,487     | )
|Equity investees                                                     |  |                                 | (34,816    | ) |         |  | (42,404    | )       |  |  | (11,475    | ) |  |  | (379       | )
|Investments in debt and equity securities                            |  |                                 |            |   |         |  |            |         |  |  |            |   |  |  |            |  
|Change in fair value of investments in securities                    |  |                                 | (96,591    | ) |         |  | (786       | )       |  |  | 137        |   |  |  | 5          |  
|Adjustments due to change in ownership of investees                  |  |                                 | (732,643   | ) |         |  | (233,761   | )       |  |  | (210,262   | ) |  |  | (6,947     | )
|Convertible bond liabilities                                         |  |                                 |           |   |         |  |           |         |  |  | 20,580     |   |  |  | 680        |  
|Goodwill and Business Combinations                                   |  |                                 |           |   |         |  | 452,112    |         |  |  | (1,307,545 | ) |  |  | (43,196    | )
|Treasury stock and related disposal                                  |  |                                 |           |   |         |  | (80,524    | )       |  |  | (179,028   | ) |  |  | (5,914     | )
|Tax effect of U.S. GAAP adjustments                                  |  |                                 |            |   |         |  |            |         |  |  | (69,326    | ) |  |  | (2,290     | )
|Inventory                                                            |  |                                 | 361,897    |   |         |  |           |         |  |  |           |   |  |  |           |  
|                                                                     |  |                                 |            |   |         |  |            |         |  |  |            |   |  |  |            |  
|Consolidated net income, U.S. GAAP                                   |  |                                 | 364,359    |   |         |  | 23,543,742 |         |  |  | 6,604,455  |   |  |  | 218,185    |  
|                                                                     |  |                                 |            |   |         |  |            |         |  |  |            |   |  |  |            |  
|Net income attributable to the Company, U.S. GAAP                    |  |                                 | 2,571,988  |   |         |  | 23,616,120 |         |  |  | 8,745,675  |   |  |  | 288,922    |  
|Add: Net loss attributable to noncontrolling interests, U.S. GAAP    |  |                                 | (2,207,629 | ) |         |  | (72,378    | )       |  |  | (2,141,220 | ) |  |  | (70,737    | )
|                                                                     |  |                                 |            |   |         |  |            |         |  |  |            |   |  |  |            |  
|Consolidated net income , U.S. GAAP                                  |  |                                 | 364,359    |   |         |  | 23,543,742 |         |  |  | 6,604,455  |   |  |  | 218,185    |  
|                                                                     |  |                                 |            |   |         |  |            |         |  |  |            |   |  |  |            |  
|Basic earnings per share under U.S. GAAP (in dollars)                |  |                                 | 0.21       |   |         |  | 1.91       |         |  |  | 0.71       |   |  |  | 0.02       |  
|Diluted earnings per share under U.S. GAAP (in dollars)              |  |                                 | 0.20       |   |         |  | 1.90       |         |  |  | 0.68       |   |  |  | 0.02       |  
|                                                                     |  |                                 |            |   |         |  |            |         |  |  |            |   |  |  |            |  
|Weighted-average number of shares outstanding-basic (in thousands)   |  |                                 | 12,538,016 |   |         |  | 12,335,428 |         |  |  | 12,400,193 |   |  |  | 12,400,193 |  
|                                                                     |  |                                 |            |   |         |  |            |         |  |  |            |   |  |  |            |  
|Weighted-average number of shares outstanding-diluted (in thousands) |  |                                 | 12,559,828 |   |         |  | 12,399,086 |         |  |  | 12,858,885 |   |  |  | 12,858,885 |  
|                                                                     |  |                                 |            |   |         |  |            |         |  |  |            |   |  |  |            |  



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Statement of Comprehensive Income (Loss)



|                                                            |  |                                 |            |   |         |  |            |         |  |  |             |   |  |  |          |  
|----------------------------------------------------------- |  | ------------------------------- | ---------- | - | ------- |  | ---------- | ------- |  |  | ----------- | - |  |  | -------- | -
|                                                            |  | For the year ended December 31, |           
|                                                            |  | 2009                            |            |   | 2010    |  |            | 2011    | 
|                                                            |  | NT$000                         |            |   | NT$000 |  |            | NT$000 |  |  | US$000     |  
|Net income                                                  |  |                                 | 364,359    |   |         |  | 23,543,742 |         |  |  | 6,604,455   |   |  |  | 218,185  |  
|Attributable to:                                            |  |                                 |            |   |         |  |            |         |  |  |             |   |  |  |          |  
|the Company                                                 |  |                                 | 2,571,988  |   |         |  | 23,616,120 |         |  |  | 8,745,675   |   |  |  | 288,922  |  
|noncontrolling interests                                    |  |                                 | (2,207,629 | ) |         |  | (72,378    | )       |  |  | (2,141,220  | ) |  |  | (70,737  | )
|Other comprehensive income (loss), net of tax               |  |                                 |            |   |         |  |            |         |  |  |             |   |  |  |          |  
|Cumulative translation adjustment                           |  |                                 | (1,890,175 | ) |         |  | (5,192,884 | )       |  |  | 3,176,545   |   |  |  | 104,940  |  
|Attributable to:                                            |  |                                 |            |   |         |  |            |         |  |  |             |   |  |  |          |  
|the Company                                                 |  |                                 | (1,723,657 | ) |         |  | (4,971,823 | )       |  |  | 3,162,457   |   |  |  | 104,475  |  
|noncontrolling interests                                    |  |                                 | (166,518   | ) |         |  | (221,061   | )       |  |  | 14,088      |   |  |  | 465      |  
|Unrealized gains (losses) on securities                     |  |                                 | 26,982,940 |   |         |  | (3,056,478 | )       |  |  | (12,745,112 | ) |  |  | (421,047 | )
|Attributable to:                                            |  |                                 |            |   |         |  |            |         |  |  |             |   |  |  |          |  
|the Company                                                 |  |                                 | 26,982,940 |   |         |  | (3,056,478 | )       |  |  | (12,745,112 | ) |  |  | (421,047 | )
|noncontrolling interests                                    |  |                                 |           |   |         |  |           |         |  |  |            |   |  |  |         |  
|Unrecognized pension cost                                   |  |                                 | (606,330   | ) |         |  | (590,007   | )       |  |  | 32,185      |   |  |  | 1,063    |  
|Attributable to:                                            |  |                                 |            |   |         |  |            |         |  |  |             |   |  |  |          |  
|the Company                                                 |  |                                 | (719,680   | ) |         |  | (600,625   | )       |  |  | 32,185      |   |  |  | 1,063    |  
|noncontrolling interests                                    |  |                                 | 113,350    |   |         |  | 10,618     |         |  |  |            |   |  |  |         |  
|                                                            |  |                                 |            |   |         |  |            |         |  |  |             |   |  |  |          |  
|Other comprehensive income (loss)                           |  |                                 | 24,486,435 |   |         |  | (8,839,369 | )       |  |  | (9,536,382  | ) |  |  | (315,044 | )
|                                                            |  |                                 |            |   |         |  |            |         |  |  |             |   |  |  |          |  
|Comprehensive income (loss)                                 |  |                                 | 24,850,794 |   |         |  | 14,704,373 |         |  |  | (2,931,927  | ) |  |  | (96,859  | )
|                                                            |  |                                 |            |   |         |  |            |         |  |  |             |   |  |  |          |  
|Comprehensive loss attributable to noncontrolling interests |  |                                 | (2,260,797 | ) |         |  | (282,821   | )       |  |  | (2,127,132  | ) |  |  | (70,272  | )
|Comprehensive income (loss) attributable to the Company     |  |                                 | 27,111,591 |   |         |  | 14,987,194 |         |  |  | (804,795    | ) |  |  | (26,587  | )

Statement of Accumulated Other Comprehensive Income (Loss) Attributable to the Company



|                                  |  |                                 |            |   |                                       |  |             |                          |  |  |                                            |   |  |  |            |  
|--------------------------------- |  | ------------------------------- | ---------- | - | ------------------------------------- |  | ----------- | ------------------------ |  |  | ------------------------------------------ | - |  |  | ---------- | -
|                                  |  | Cumulativetranslationadjustment |            |   | Unrealizedgains (losses)on securities |  |             | Unrecognizedpension cost |  |  | Accumulatedothercomprehensiveincome (loss) |  
|                                  |  | NT$000                         |            |   | NT$000                               |  |             | NT$000                  |  |  | NT$000                                    |  
|Balance at December 31, 2009      |  |                                 | (388,328   | ) |                                       |  | 27,800,300  |                          |  |  | 80,069                                     |   |  |  | 27,492,041 |  
|Other comprehensive loss          |  |                                 | (4,971,823 | ) |                                       |  | (3,056,478  | )                        |  |  | (600,625                                   | ) |  |  | (8,628,926 | )
|                                  |  |                                 |            |   |                                       |  |             |                          |  |  |                                            |   |  |  |            |  
|Balance at December 31, 2010      |  |                                 | (5,360,151 | ) |                                       |  | 24,743,822  |                          |  |  | (520,556                                   | ) |  |  | 18,863,115 |  
|Other comprehensive income (loss) |  |                                 | 3,162,457  |   |                                       |  | (12,745,112 | )                        |  |  | 32,185                                     |   |  |  | (9,550,470 | )
|                                  |  |                                 |            |   |                                       |  |             |                          |  |  |                                            |   |  |  |            |  
|Balance at December 31, 2011      |  |                                 | (2,197,694 | ) |                                       |  | 11,998,710  |                          |  |  | (488,371                                   | ) |  |  | 9,312,645  |  
|                                  |  |                                 |            |   |                                       |  |             |                          |  |  |                                            |   |  |  |            |  



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##### Table of Contents

UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Reconciliation of Consolidated Stockholders Equity



|                                                                                              |  |                   |             |   |         |  |             |         |  |  |           |  
|--------------------------------------------------------------------------------------------- |  | ----------------- | ----------- | - | ------- |  | ----------- | ------- |  |  | --------- | -
|                                                                                              |  | As of December 31 |            
|                                                                                              |  | 2010              |             |   | 2011    | 
|                                                                                              |  | NT$000           |             |   | NT$000 |  |             | US$000 | 
|Stockholders equity, R.O.C. GAAP                                                             |  |                   | 225,136,029 |   |         |  | 212,124,963 |         |  |  | 7,007,762 |  
|Compensation                                                                                  |  |                   | 31,517      |   |         |  | 3,567       |         |  |  | 118       |  
|Equity investees                                                                              |  |                   | (142,469    | ) |         |  | (260,363    | )       |  |  | (8,602    | )
|Investments in debt and equity securities Adjustments due to change in ownership of investees |  |                   | 1,765,401   |   |         |  | 1,668,913   |         |  |  | 55,134    |  
|Convertible bond liabilities                                                                  |  |                   |            |   |         |  | (521,944    | )       |  |  | (17,243   | )
|Goodwill and business combinations                                                            |  |                   | 1,301,125   |   |         |  | (7,615      | )       |  |  | (251      | )
|Treasury stock and related disposal                                                           |  |                   | (2,624,152  | ) |         |  | (2,044,381  | )       |  |  | (67,538   | )
|Pension                                                                                       |  |                   | (344,827    | ) |         |  | (254,179    | )       |  |  | (8,397    | )
|Tax effect of U.S. GAAP adjustments                                                           |  |                   |            |   |         |  | (69,326     | )       |  |  | (2,290    | )
|                                                                                              |  |                   |             |   |         |  |             |         |  |  |           |  
|Stockholders equity, U.S. GAAP                                                               |  |                   | 225,122,624 |   |         |  | 210,639,635 |         |  |  | 6,958,693 |  
|                                                                                              |  |                   |             |   |         |  |             |         |  |  |           |  

Movements in Consolidated Stockholders Equity in Accordance with U.S. GAAP



|                                                                                                       |  |                                 |             |   |         |  |             |         |  |  |             |   |  |  |           |  
|------------------------------------------------------------------------------------------------------ |  | ------------------------------- | ----------- | - | ------- |  | ----------- | ------- |  |  | ----------- | - |  |  | --------- | -
|                                                                                                       |  | For the year ended December 31, |            
|                                                                                                       |  | 2009                            |             |   | 2010    |  |             | 2011    | 
|                                                                                                       |  | NT$000                         |             |   | NT$000 |  |             | NT$000 |  |  | US$000     |  
|Balance at January 1,                                                                                  |  |                                 | 190,891,667 |   |         |  | 213,240,491 |         |  |  | 225,122,624 |   |  |  | 7,437,153 |  
|Compensation                                                                                           |  |                                 | 969,277     |   |         |  | 1,549,083   |         |  |  | 890,370     |   |  |  | 29,414    |  
|Cash dividends                                                                                         |  |                                 |            |   |         |  | (6,233,002  | )       |  |  | (14,033,575 | ) |  |  | (463,613  | )
|Adjustment of additional paid-in capital and retained earnings accounted for under the equity method   |  |                                 | (84,851     | ) |         |  | (52,670     | )       |  |  | 1,418       |   |  |  | 47        |  
|Changes in additional paid-in capital for purchases of subsidiary shares from noncontrolling interests |  |                                 | 2,497,039   |   |         |  | 408,011     |         |  |  | (310,113    | ) |  |  | (10,245   | )
|Cumulative translation adjustment on foreign long-term investment                                      |  |                                 | (1,722,666  | ) |         |  | (4,971,823  | )       |  |  | 3,162,457   |   |  |  | 104,475   |  
|Change in fair value of marketable securities                                                          |  |                                 | 28,556,633  |   |         |  | (3,201,421  | )       |  |  | (13,324,883 | ) |  |  | (440,201  | )
|Treasury stock and related disposal                                                                    |  |                                 | (3,343,777  | ) |         |  | (4,618,121  | )       |  |  | 758,799     |   |  |  | 25,068    |  
|Exercise of employees stock options                                                                   |  |                                 |            |   |         |  | 2,542       |         |  |  | 1,004,050   |   |  |  | 33,170    |  
|Pension                                                                                                |  |                                 | (719,680    | ) |         |  | (600,625    | )       |  |  | 32,185      |   |  |  | 1,063     |  
|Changes in noncontrolling interests                                                                    |  |                                 | (6,375,139  | ) |         |  | 5,984,039   |         |  |  | (1,409,372  | ) |  |  | (46,560   | )
|Net income attributable to the Company                                                                 |  |                                 | 2,571,988   |   |         |  | 23,616,120  |         |  |  | 8,745,675   |   |  |  | 288,922   |  
|                                                                                                       |  |                                 |             |   |         |  |             |         |  |  |             |   |  |  |           |  
|Balance at December 31,                                                                                |  |                                 | 213,240,491 |   |         |  | 225,122,624 |         |  |  | 210,639,635 |   |  |  | 6,958,693 |  
|                                                                                                       |  |                                 |             |   |         |  |             |         |  |  |             |   |  |  |           |  
|Total Stockholderss equity attributable to:                                                           |  |                                 |             |   |         |  |             |         |  |  |             |   |  |  |           |  
|the Company                                                                                            |  |                                 | 212,752,903 |   |         |  | 218,650,997 |         |  |  | 205,577,380 |   |  |  | 6,791,456 |  
|noncontrolling interests                                                                               |  |                                 | 487,588     |   |         |  | 6,471,627   |         |  |  | 5,062,255   |   |  |  | 167,237   |  
|                                                                                                       |  |                                 |             |   |         |  |             |         |  |  |             |   |  |  |           |  
|                                                                                                       |  |                                 | 213,240,491 |   |         |  | 225,122,624 |         |  |  | 210,639,635 |   |  |  | 6,958,693 |  
|                                                                                                       |  |                                 |             |   |         |  |             |         |  |  |             |   |  |  |           |  



F-103



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##### Table of Contents

UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Summarized U.S. GAAP consolidated balance sheet and statement of operations information
is presented below:



|                        |  |                    |             |  |         |  |             |         |  |  |           | 
|----------------------- |  | ------------------ | ----------- |  | ------- |  | ----------- | ------- |  |  | --------- | 
|                        |  | As of December 31, |            
|                        |  | 2010               |             |  | 2011    | 
|                        |  | NT$000            |             |  | NT$000 |  |             | US$000 | 
|Current assets          |  |                    | 93,790,493  |  |         |  | 84,055,511  |         |  |  | 2,776,859 | 
|Non-current assets      |  |                    | 187,596,718 |  |         |  | 195,404,755 |         |  |  | 6,455,393 | 
|Current liabilities     |  |                    | 45,468,186  |  |         |  | 42,946,840  |         |  |  | 1,418,792 | 
|Non-current liabilities |  |                    | 10,796,401  |  |         |  | 25,873,791  |         |  |  | 854,767   | 



|                                                        |  |                                 |             |   |         |  |             |         |  |  |             |   |  |  |            |  
|------------------------------------------------------- |  | ------------------------------- | ----------- | - | ------- |  | ----------- | ------- |  |  | ----------- | - |  |  | ---------- | -
|                                                        |  | For the year ended December 31, |            
|                                                        |  | 2009                            |             |   | 2010    |  |             | 2011    | 
|                                                        |  | NT$000                         |             |   | NT$000 |  |             | NT$000 |  |  | US$000     |  
|Net operating revenues                                  |  |                                 | 91,389,765  |   |         |  | 126,441,544 |         |  |  | 116,702,723 |   |  |  | 3,855,392  |  
|Cost of goods sold                                      |  |                                 | (76,209,202 | ) |         |  | (89,929,148 | )       |  |  | (95,594,489 | ) |  |  | (3,158,060 | )
|Operating income (loss)                                 |  |                                 | (2,322,977  | ) |         |  | 21,393,686  |         |  |  | 2,572,552   |   |  |  | 84,987     |  
|Net income                                              |  |                                 | 364,359     |   |         |  | 23,543,742  |         |  |  | 6,604,455   |   |  |  | 218,185    |  
|Less: Net loss attributable to noncontrolling interests |  |                                 | (2,207,629  | ) |         |  | (72,378     | )       |  |  | (2,141,220  | ) |  |  | (70,737    | )
|Net income attributable to the Company                  |  |                                 | 2,571,988   |   |         |  | 23,616,120  |         |  |  | 8,745,675   |   |  |  | 288,922    |  

A reconciliation of the significant balance sheet accounts under R.O.C. GAAP to the amounts determined
under U.S. GAAP is as follows:



|                                              |  |                    |            |   |         |  |            |         |  |  |           |  
|--------------------------------------------- |  | ------------------ | ---------- | - | ------- |  | ---------- | ------- |  |  | --------- | -
|                                              |  | As of December 31, |           
|                                              |  | 2010               |            |   | 2011    | 
|                                              |  | NT$000            |            |   | NT$000 |  |            | US$000 | 
|Cash and Cash Equivalents:                    |  |                    |            |   |         |  |            |         |  |  |           |  
|As reported under R.O.C. GAAP                 |  |                    | 51,271,105 |   |         |  | 49,070,128 |         |  |  | 1,621,081 |  
|Reclassification to marketable securities     |  |                    | (237,499   | ) |         |  | (8,000     | )       |  |  | (264      | )
|                                              |  |                    |            |   |         |  |            |         |  |  |           |  
|As adjusted under U.S. GAAP                   |  |                    | 51,033,606 |   |         |  | 49,062,128 |         |  |  | 1,620,817 |  
|                                              |  |                    |            |   |         |  |            |         |  |  |           |  
|Held-to-maturity financial assets:            |  |                    |            |   |         |  |            |         |  |  |           |  
|As reported under R.O.C. GAAP                 |  |                    |           |   |         |  | 13,524     |         |  |  | 447       |  
|Reclassification from cash & cash equivalents |  |                    | 237,499    |   |         |  | 8,000      |         |  |  | 264       |  
|                                              |  |                    |            |   |         |  |            |         |  |  |           |  
|As adjusted under U.S. GAAP                   |  |                    | 237,499    |   |         |  | 21,524     |         |  |  | 711       |  
|                                              |  |                    |            |   |         |  |            |         |  |  |           |  



F-104



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##### Table of Contents

UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                                    |  |                    |              |   |         |  |              |         |  |  |             |  
|------------------------------------------------------------------- |  | ------------------ | ------------ | - | ------- |  | ------------ | ------- |  |  | ----------- | -
|                                                                    |  | As of December 31, |             
|                                                                    |  | 2010               |              |   | 2011    | 
|                                                                    |  | NT$000            |              |   | NT$000 |  |              | US$000 | 
|Available-for-sale financial assets:                                |  |                    |              |   |         |  |              |         |  |  |             |  
|As reported under R.O.C. GAAP                                       |  |                    | 37,298,738   |   |         |  | 23,960,004   |         |  |  | 791,543     |  
|Reclassification from financial assets measured at cost, noncurrent |  |                    |             |   |         |  | 157,253      |         |  |  | 5,195       |  
|Change in fair value of investment in securities                    |  |                    |             |   |         |  | (62,612      | )       |  |  | (2,069      | )
|                                                                    |  |                    |              |   |         |  |              |         |  |  |             |  
|As adjusted under U.S. GAAP                                         |  |                    | 37,298,738   |   |         |  | 24,054,645   |         |  |  | 794,669     |  
|                                                                    |  |                    |              |   |         |  |              |         |  |  |             |  
|Long-term Investment under cost method, equity method & others:     |  |                    |              |   |         |  |              |         |  |  |             |  
|As reported under R.O.C. GAAP                                       |  |                    | 16,845,103   |   |         |  | 19,619,253   |         |  |  | 648,141     |  
|Reclassification to Available-for-sale financial assets             |  |                    |             |   |         |  | (157,253     | )       |  |  | (5,195      | )
|Ownership change in equity investees                                |  |                    |             |   |         |  | (104,636     | )       |  |  | (3,456      | )
|Equity Investees                                                    |  |                    | 56,821       |   |         |  | 49,566       |         |  |  | 1,638       |  
|Treasury stock and related disposal                                 |  |                    | (2,624,152   | ) |         |  | (2,044,381   | )       |  |  | (67,538     | )
|                                                                    |  |                    |              |   |         |  |              |         |  |  |             |  
|As adjusted under U.S. GAAP                                         |  |                    | 14,277,772   |   |         |  | 17,362,549   |         |  |  | 573,590     |  
|                                                                    |  |                    |              |   |         |  |              |         |  |  |             |  
|Property, plant and equipment, total cost:                          |  |                    |              |   |         |  |              |         |  |  |             |  
|As reported under R.O.C. GAAP                                       |  |                    | 562,979,537  |   |         |  | 616,063,131  |         |  |  | 20,352,268  |  
|Business combination and ownership change in consolidated entities  |  |                    | 16,254,110   |   |         |  | 17,703,713   |         |  |  | 584,860     |  
|                                                                    |  |                    |              |   |         |  |              |         |  |  |             |  
|As adjusted under U.S. GAAP                                         |  |                    | 579,233,647  |   |         |  | 633,766,844  |         |  |  | 20,937,128  |  
|                                                                    |  |                    |              |   |         |  |              |         |  |  |             |  
|Property, plant and equipment, accumulated depreciation:            |  |                    |              |   |         |  |              |         |  |  |             |  
|As reported under R.O.C. GAAP                                       |  |                    | (428,492,265 | ) |         |  | (463,622,840 | )       |  |  | (15,316,249 | )
|Business combination and ownership change in consolidated entities  |  |                    | (12,840,788  | ) |         |  | (14,103,959  | )       |  |  | (465,939    | )
|                                                                    |  |                    |              |   |         |  |              |         |  |  |             |  
|As adjusted under U.S. GAAP                                         |  |                    | (441,333,053 | ) |         |  | (477,726,799 | )       |  |  | (15,782,188 | )
|                                                                    |  |                    |              |   |         |  |              |         |  |  |             |  
|Property, plant and equipment, accumulated impairment:              |  |                    |              |   |         |  |              |         |  |  |             |  
|As reported under R.O.C. GAAP                                       |  |                    | (1,725,272   | ) |         |  | (3,115,991   | )       |  |  | (102,940    | )
|Business combination and ownership change in consolidated entities  |  |                    | (1,609,502   | ) |         |  | (1,845,830   | )       |  |  | (60,979     | )
|                                                                    |  |                    |              |   |         |  |              |         |  |  |             |  
|As adjusted under U.S. GAAP                                         |  |                    | (3,334,774   | ) |         |  | (4,961,821   | )       |  |  | (163,919    | )
|                                                                    |  |                    |              |   |         |  |              |         |  |  |             |  



F-105



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##### Table of Contents

UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                         |  |                    |             |   |         |  |              |         |  |  |            |  
|-------------------------------------------------------- |  | ------------------ | ----------- | - | ------- |  | ------------ | ------- |  |  | ---------- | -
|                                                         |  | As of December 31, |            
|                                                         |  | 2010               |             |   | 2011    | 
|                                                         |  | NT$000            |             |   | NT$000 |  |              | US$000 | 
|Goodwill:                                                |  |                    |             |   |         |  |              |         |  |  |            |  
|As reported under R.O.C. GAAP                            |  |                    | 304,728     |   |         |  | 50,863       |         |  |  | 1,680      |  
|Due to business combination and ownership change         |  |                    | 99,993,048  |   |         |  | 99,951,402   |         |  |  | 3,301,996  |  
|Accumulated impairment loss on goodwill                  |  |                    | (98,786,326 | ) |         |  | (100,000,663 | )       |  |  | (3,303,623 | )
|                                                         |  |                    |             |   |         |  |              |         |  |  |            |  
|As adjusted under U.S. GAAP                              |  |                    | 1,511,450   |   |         |  | 1,602        |         |  |  | 53         |  
|                                                         |  |                    |             |   |         |  |              |         |  |  |            |  
|Bonds Payable:                                           |  |                    |             |   |         |  |              |         |  |  |            |  
|As reported under R.O.C. GAAP                            |  |                    |            |   |         |  | 11,984,404   |         |  |  | 395,917    |  
|Conversion right and issuance costs of Convertible bonds |  |                    |            |   |         |  | 573,523      |         |  |  | 18,947     |  
|                                                         |  |                    |             |   |         |  |              |         |  |  |            |  
|As adjusted under U.S. GAAP                              |  |                    |            |   |         |  | 12,557,927   |         |  |  | 414,864    |  
|                                                         |  |                    |             |   |         |  |              |         |  |  |            |  

Cash Flows Information

The Company applies R.O.C. SFAS No. 17, Statement of Cash Flows which is similar to U.S. GAAP. The principal differences between the two standards relate to classification. Under R.O.C.
GAAP, all certificates of deposit are classified as cash and cash equivalents. Under U.S. GAAP, cash equivalents are short-term, highly liquid investments that are readily convertible to cash with original maturities of three months or less. As of
December 31, 2009, 2010 and 2011, the amounts of time deposit with original maturities more than three months are NT$11,740 million, NT$238 million and NT$8 million, respectively. Summarized cash flow information under U.S. GAAP would be
presented as follows:



|                                                             |  |                                 |             |   |         |  |             |         |  |  |             |   |  |  |            |  
|------------------------------------------------------------ |  | ------------------------------- | ----------- | - | ------- |  | ----------- | ------- |  |  | ----------- | - |  |  | ---------- | -
|                                                             |  | For the year ended December 31, |            
|                                                             |  | 2009                            |             |   | 2010    |  |             | 2011    | 
|                                                             |  | NT$000                         |             |   | NT$000 |  |             | NT$000 |  |  | US$000     |  
|Net cash inflows (outflows) from:                            |  |                                 |             |   |         |  |             |         |  |  |             |   |  |  |            |  
|Operating activities                                         |  |                                 | 32,421,854  |   |         |  | 53,495,013  |         |  |  | 41,653,800  |   |  |  | 1,376,075  |  
|Investing activities                                         |  |                                 | (22,418,628 | ) |         |  | (46,276,452 | )       |  |  | (54,890,561 | ) |  |  | (1,813,365 | )
|Financing activities                                         |  |                                 | 4,943,793   |   |         |  | (10,173,874 | )       |  |  | 9,922,989   |   |  |  | 327,816    |  
|Effect of exchange rate changes on cash and cash equivalents |  |                                 | (550,708    | ) |         |  | (424,041    | )       |  |  | 1,342,294   |   |  |  | 44,344     |  
|                                                             |  |                                 |             |   |         |  |             |         |  |  |             |   |  |  |            |  
|Net increase (decrease) in cash and cash equivalents         |  |                                 | 14,396,311  |   |         |  | (3,379,354  | )       |  |  | (1,971,478  | ) |  |  | (65,130    | )
|Cash and cash equivalents at January 1                       |  |                                 | 40,016,649  |   |         |  | 54,412,960  |         |  |  | 51,033,606  |   |  |  | 1,685,947  |  
|                                                             |  |                                 |             |   |         |  |             |         |  |  |             |   |  |  |            |  
|Cash and cash equivalents at December 31                     |  |                                 | 54,412,960  |   |         |  | 51,033,606  |         |  |  | 49,062,128  |   |  |  | 1,620,817  |  
|                                                             |  |                                 |             |   |         |  |             |         |  |  |             |   |  |  |            |  



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UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Net income attributable to the Company and transfers (to) from noncontrolling interests
are as follows:



|                                                                                                                 |  |                                 |           |   |         |  |            |         |  |  |           |   |  |  |         |  
|---------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | --------- | - | ------- |  | ---------- | ------- |  |  | --------- | - |  |  | ------- | -
|                                                                                                                 |  | For the year ended December 31, |          
|                                                                                                                 |  | 2009                            |           |   | 2010    |  |            | 2011    | 
|                                                                                                                 |  | NT$000                         |           |   | NT$000 |  |            | NT$000 |  |  | US$000   |  
|Net income attributable to the Company                                                                           |  |                                 | 2,571,988 |   |         |  | 23,616,120 |         |  |  | 8,745,675 |   |  |  | 288,922 |  
|                                                                                                                 |  |                                 |           |   |         |  |            |         |  |  |           |   |  |  |         |  
|Transfers (to) from noncontrolling interests                                                                     |  |                                 |           |   |         |  |            |         |  |  |           |   |  |  |         |  
|Increase (Decrease) in the Companys paid-in capital for purchase of common shares from noncontrolling
interests |  |                                 | 2,497,039 |   |         |  | 408,011    |         |  |  | (310,113  | ) |  |  | (10,245 | )
|Increase in the Companys paid-in capital for a subsidiary acquisition of its own common shares                  |  |                                 | 7,536     |   |         |  |           |         |  |  |          |   |  |  |        |  
|Decrease in the Companys paid-in capital for employees exercise of the stock options                            |  |                                 | (14,536   | ) |         |  | (25,500    | )       |  |  | (15,511   | ) |  |  | (512    | )
|                                                                                                                 |  |                                 |           |   |         |  |            |         |  |  |           |   |  |  |         |  
|Net transfers from noncontrolling interests                                                                      |  |                                 | 2,490,039 |   |         |  | 382,511    |         |  |  | (325,624  | ) |  |  | (10,757 | )
|                                                                                                                 |  |                                 |           |   |         |  |            |         |  |  |           |   |  |  |         |  
|Change from net income attributable to the Company and transfers from noncontrolling interests                   |  |                                 | 5,062,027 |   |         |  | 23,998,631 |         |  |  | 8,420,051 |   |  |  | 278,165 |  
|                                                                                                                 |  |                                 |           |   |         |  |            |         |  |  |           |   |  |  |         |  

Concentration of credit risk

The Company designs, develops, manufactures and markets a variety of semiconductor products. Financial instruments that potentially
subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents and trade accounts and notes receivable. The Company limits its exposure to credit loss by depositing its cash and cash equivalents
with high credit quality financial institutions. The Companys revenues and trade accounts and notes receivable are derived primarily from the sale of production foundry wafers, including memory and logic products and wafers. For the years
ended December 31, 2009, 2010, and 2011, the Company distributed its products on a global basis but mainly to customers in Asia (65.21%, 67.87%, and 64.04%, respectively), America (21.69%, 16.88%, and 17.92%, respectively), and others (13.10%,
15.25%, and 18.04%, respectively). The Companys sales are primarily derived from wafer sales and denominated in currencies other than NT Dollars, primarily US Dollars. One customers revenue represented 12% of the consolidated revenue for
the year ended December 31, 2009, and two customers revenue represented 11% and 11%, respectively, of the consolidated revenue for the year ended December 31, 2010, and two customers revenue represented 13% and 10%,
respectively, of the consolidated revenue for the year ended December 31, 2011. The Company routinely assesses the financial strength of substantially all customers. The Company also requires collateral for certain sales to mitigate the credit
risk.



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##### Table of Contents

UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Summarized Financial Information required by ASC 235-10-S99-1

The following table provides summarized financial information of the Companys equity investees as required by ASC 235-10-S99-1,
Notes to Financial Statements, SEC Materials.

On group basis:



|                           |  |                    |               |  |      |  |        | 
|-------------------------- |  | ------------------ | ------------- |  | ---- |  | ------ | 
|                           |  | As of December 31, |              
|                           |  | 2010               |               |  | 2011 | 
|                           |  | NT$                |               |  | NT$  | 
|                           |  |                    | (In millions) | 
|Current assets             |  |                    | 15,371        |  |      |  | 21,816 | 
|Non-current assets         |  |                    | 19,793        |  |      |  | 31,397 | 
|Current liabilities        |  |                    | 7,308         |  |      |  | 8,368  | 
|Long-term liabilities      |  |                    | 1,047         |  |      |  | 3,787  | 
|Redeemable preferred stock |  |                    | 587           |  |      |  | 563    | 
|Noncontrolling interests   |  |                    |              |  |      |  | 47     | 



|                                                                                                                              |  |                                 |       |  |      |  |       |      |  |  |        |  
|----------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | ----- |  | ---- |  | ----- | ---- |  |  | ------ | -
|                                                                                                                              |  | For the year ended December 31, |      
|                                                                                                                              |  | 2009                            |       |  | 2010 |  |       | 2011 | 
|                                                                                                                              |  | NT$                             |       |  | NT$  |  |       | NT$  | 
|                                                                                                                              |  | (In millions)                   |      
|Net sales                                                                                                                     |  |                                 | 6,224 |  |      |  | 9,611 |      |  |  | 8,451  |  
|Gross Profit (loss)                                                                                                           |  |                                 | 2,173 |  |      |  | 2,208 |      |  |  | (400   | )
|Income (loss) from continuing operations before extraordinary items and cumulative effect of a change in accounting
principle |  |                                 | 612   |  |      |  | 254   |      |  |  | (1,004 | )
|Net income (loss)                                                                                                             |  |                                 | 615   |  |      |  | 244   |      |  |  | (924   | )

On an individual basis:



|                    |  |                    |       |  |      |  |       | 
|------------------- |  | ------------------ | ----- |  | ---- |  | ----- | 
|                    |  | As of December 31, |      
|                    |  | 2010               |       |  | 2011 | 
|                    |  | NT$                |       |  | NT$  | 
|                    |  | (In millions)      |      
|Current assets      |  |                    | 7,786 |  |      |  | 4,865 | 
|Current liabilities |  |                    | 2,434 |  |      |  | 1,848 | 



|                                                                                                                              |  |                                 |       |  |      |  |     |      |  |  |        |  
|----------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | ----- |  | ---- |  | --- | ---- |  |  | ------ | -
|                                                                                                                              |  | For the year ended December 31, |      
|                                                                                                                              |  | 2009                            |       |  | 2010 |  |     | 2011 | 
|                                                                                                                              |  | NT$                             |       |  | NT$  |  |     | NT$  | 
|                                                                                                                              |  | (In millions)                   |      
|Net sales                                                                                                                     |  |                                 | 1,685 |  |      |  | 785 |      |  |  | (1,337 | )
|Gross Profit (loss)                                                                                                           |  |                                 | 1,609 |  |      |  | 684 |      |  |  | (1,428 | )
|Income (loss) from continuing operations before extraordinary items and cumulative effect of a change in accounting
principle |  |                                 | 1,609 |  |      |  | 684 |      |  |  | (1,428 | )
|Net income (loss)                                                                                                             |  |                                 | 1,609 |  |      |  | 684 |      |  |  | (1,428 | )



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UNITED MICROELECTRONICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



New Accounting Pronouncements

In May 2011, the FASB issued ASU 2011-4 Fair Value Measurement (Topic 820) Amendments to Achieve Common Fair Value Measurement and
Disclosure Requirements in U.S. GAAP and IFRSs. This ASU is not expected to have material impact on U.S. GAAP as the amendment represents the converged guidance of the FASB and the IASB on fair value measurement, and results in greater comparability
of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRSs. The amendments in this Update are required to be applied prospectively, and are effective for interim and annual periods
beginning after December 15, 2011, with earlier application not permitted. As the ASU does not require additional fair value measurements and is not intended to establish valuation standards or affect valuation practices outside of financial
reporting, the Company does not expect this amendment to have a material impact on our consolidated financial statements.

In
June 2011, the FASB issued ASU 2011-5 Comprehensive Income (Topic 220) Presentation of Comprehensive Income. The amendment changes how other comprehensive income (OCI) is presented including the presentation requirements for reclassification
adjustments of items out of accumulated other comprehensive income which is superseded by ASU 2011-12. Instead of being included in the statement of owners equity, the items classified as OCI will be moved to the page in the financial
statements that includes the income statement. This ASU does not change what would be classified as OCI but addresses how to present OCI either in a single continuous statement of comprehensive income or in two separate but consecutive statements.
In both options, the entity will be required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive
income. The amendments in this Update should be applied retrospectively, and are effective for fiscal years and interim periods beginning after December 15, 2011. The Company is currently evaluating the potential impact, if any, that the
adoption of ASU 2011-5 will have on our consolidated financial statements.

In September 2011, the FASB issued ASU 2011-8
IntangiblesGoodwill and Other (Topic 350) Testing Goodwill for Impairment. The standard is intended to reduce the cost and complexity of the annual goodwill impairment test with the option of performing a qualitative
assessment to determine whether further impairment testing is necessary. If entities determine, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, the two-step
impairment test would be required. The ASU does not change how goodwill is calculated or assigned to reporting units, nor does it revise the requirement to test goodwill annually for impairment. The amendments are effective for annual and interim
goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an
entitys financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. This standard is not expected to have a material impact on the
Companys consolidated financial statements in the near future.

In December 2011, the FASB issued ASU 2011-11 Balance
Sheet (Topic 210) Disclosures about Offsetting Assets and Liabilities. The new requirement is about disclosure of the nature of an entitys rights of setoff and related arrangements associated with its financial instruments and derivative
instruments. The Update are designed to make financial statements that are prepared under U.S. GAAP more comparable to those prepared under IFRSs. The ASU is effective for annual reporting periods beginning on or after January 1, 2013, and
interim periods within those annual periods, with retrospective application required. This standard is not expected to have a material impact on the Companys future consolidated financial statements.



F-109