Contents. Corporate Social Responsibility

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2 Contents Corporate Social Responsibility Employee Development and Labor Relations 32 Employee Welfare and Working Environment 36 Customer Service 42 Supplier Relations 43 Public Interests and Community Care Corporate Social Responsibility Report - 31

3 Corporate Social Responsibility As more and more corporations expand to become multinational operations, they are realizing that the implementation of a corporate social responsibility policy will increase the number of opportunities for their organizations to grow. For multinational corporations, their images and reputations play significant roles in improving their corporate competitiveness. UMC has always believed that it's the company's responsibility to operate ethically and be accountable to its stakeholders, including employees, consumers, shareholders, the supply chain, community and society. UMC already considers corporate social responsibility as an essential element and expects to continue practicing and promoting environmental protection and public interest efforts. Ultimately, UMC hopes to achieve a win-win situation from an economic, societal, and environmental standpoint, and move forward with our goal of sustainable growth. Employee Development and Labor Relations Human resources are the cornerstone of the hi-tech industry and the society, and is an indispensable asset at UMC. UMC is dedicated to fostering the growth of each employee. Current programs include UMC scholarship, funds for outstanding technical talent, overseas advanced education for outstanding engineers and collaboration plans with universities. UMC's goal is to aggressively foster exceptional talent for the company and the society in advance in order to contribute to the society and the hitech industry. UMC's roots in Taiwan continue to expand over the years; therefore the number of employees continues to increase. Since its establishment in 1980 in Hsinchu Science Park, UMC has grown to 7 fabs within the park. In addition to its Hsinchu Science Park base, UMC invested USD 3 billion in Taiwan's Southern Science Park in 1999 and built the first 300mm fab in Taiwan- Fab 12A. UMC moved its R&D team to Southern Science Park to accelerate the migration and volume production for product manufacturing and enables UMC to become the ideal partner for developing new products. UMC's R&D center is the only one of its kind in Southern Taiwan. Completed in 2007, UMC R&D center is the only nanotechnology development center in Southern Taiwan, providing customers with cutting-edge process technologies and comprehensive services. Moreover, it expects to become the crucial center for fostering semiconductor talent in Southern Taiwan. Capital, talent and manpower investment in Southern Science Park fully demonstrates UMC's determination to achieve the goal of "Rooted in Taiwan and expanding around the world". To attract more outstanding employees, UMC has established talents fostering programs. Moreover, UMC provides diversified facilities to enhance employees' well being by building a quality work environment, dormitories and recreation centers. The UMC Recreation Center in Hsinchu Science Park and Sports Park in Southern Science Park offer UMC employees places to relax and exercise. Recruiting The number of employees continues to increase over the years. UMC employees are from different parts of Taiwan, including Taoyuan, Hsinchu and Miaoli. Employees residing in Tainan and Kaohsiung account for 20% of all UMC employees. The employee number increase and registration are charted below: Corporate Social Responsibility Report

4 15,000 12,000 9,000 6,000 3, Average Age Average Years of Employment DL New employee hiring is not biased in age, gender, race or religion. There is absolutely no hiring of child labor. The employment contract is signed when the employer and the employee have mutual consensus. UMC's most hired positions are engineers and technicians, which account for 95% of all employees. Technicians 44% IDL Lienchiang TaoYuan County 460 County 0 Hsinchu County 1990 Kinmen Hsinchu City 1894 County 27 Miaoli County 1502 Taichung County 538 Taichung City 265 Changhwa County 461 Penghu County 16 Tainan County 836 Tainan City 569 Kaohsiung County 388 Kaohsiung City 517 Pingtung County 258 Administrators 5% 55 Keelung City 480 Taipei City 539 Taipei County 119 Yilan County 133 Nanton County 138 Hualien County 264 Yunlin County 132 Chiayi City 225 Chiayi County 37 Taitung County Engineers 51% Level of Education (%) Ph. D Master degree Bachelors/ Associate degree Secondary school and others UMC is facing employee loss due to changes in the industry and environment. To achieve t operating goals through human resource competitiveness and employee recruiting, retaining and development, UMC continues to employ various retention measures such as management systems, morale inspiration and new employee care to raise the retention rate and lower the resignation rate. Resignation rate over the years are charted as below: Male 48% Female 52% 5,000 4,000 3,000 2,000 1,000 Age 18_20 20_25 25_30 30_35 35_40 40_45 45_50 50_55 55_60 60_65 People 75 1,433 4,219 3,063 1, Corporate Social Responsibility Report - 33

5 The continued development and growth of a company is based on the efforts of its employees. UMC is dedicated to fostering the growth of each employee and attracts its talent through fair and impartial measures that target job seekers compatible with UMC's corporate culture and who are willing to grow along with the company. Hence, UMC hopes to achieve outstanding accomplishments for both the company and for its individuals. The Council of Labor Affairs and other organizations have recognized UMC's efforts in developing good labor relations. These organiz ations awarded U M C the honors of National HRD InnoPrize, Model Institution for the Promotion of Labor Welfare, Model Enterprise for the Promotion of Labor Education and the Model Enterprise for Industrial Relations distinctions. UMC will continue its policy of prioritizing its employees while contributing to society and targeting the sustainable growth of the company. Diversified Training Supported by department supervisors, UMC's training committee sets the guideline for training. Training is jointly participated by supervisors and employees. Each depar tment implements, records and evaluates training results. UMC creates a comprehensive learning environment that bonds the departments and provides an enjoyable training through e-learning, specialty enhancement training programs, management skills training programs, language capability training programs and self-development. Each employee can enjoy the fun of learning and growing through integrated company resources and extensive categories of classes. From basic training to advanced training, expertise and skills can be developed step by step. 專業技能評鑑體系 職級 以九上職等 八職等 七職等 六職等 五職等 B/F T/C Training Committee e-learning 新進人員訓練 Self-Development DL 指導教官訓練 課長領班訓練 基礎主管管理訓練 中階主管管理訓練 管理及培一訓級主管 EM Comprehensive Learning Environment UMC Training System OFF - OJT (OFF-JOB TRAINING) 新人訓練 管理才能訓練 專業能力訓練 個別進修 管理技能訓練體系 TQM 教育訓練體系 UMC clearly realizes that outstanding technology talent is the key to the development of next generation semiconductor technology. T h e r efore, U M C p l a n s professional engineering fostering prog r a m s b a s e d o n t h e n e e d of e a c h process technology. UMC hopes to help engineers develop their creativity in product manufacturing through solid training. In addition, UMC employees are required to participate in specialized training based on their job functions. The Balanced Scorecard System records each employee's necessary training hours. Based on organizational strategy changes, adjustment is made annually to meet the return on investment. Different classes are designed to meet different manager requirements as well as create the value of accountability. 專業技術訓練體系 工安環保衛教訓練體系 資訊系統應用訓練體系 e-learning 語言訓練體系 Business Groups 計劃訓練體系 Language 內部講師訓練體系 專題研習講座 Management Skills Specialty Enhancement 國內訓練 國外訓練 國外考察進修 SD 自我啟發 副學士進修 學士 二技進修 碩士班 讀書充電會 Corporate Social Responsibility Report

6 Various Training Status Management Training Skills Programs evaluates its employees' core capabilities in English, process quality and engineering ex p e r t i s e. T h i s h e l p s t o i m p r o v e manufacturing quality and meet customers' needs all over the world. Roadmap of Excellent Learning Environment in UMCs EM & Division Director ( 共 20Hr) Middle Manager ( 共 32Hr) First-line Manager ( 共 32Hr) EM & Division Director 二級主管 三級主管 Human resource & people management 高階主管讀書會 Manage Multiple Project Situational Leadership(II) Human resource & people management In-Basket Exercise New Manager Orientation Fundamental Management Training Problem Solving Decision Making (PSDM) Situational Leadership (II) Selection Interview Workshop Performance Management Min MBA ( 組織行為 / 組織管理 / 行銷管理 組織行為 HIgh impact Presentation Professional Presentation 組織行為 Specialty Eahancement Training Programs 到職 1 個月 2 個月 3 個月 4 個月 人才職前關係建立 製程通識教育養成 基礎技能培育訓練 I n a d d i t i o n t o v a r i o u s s p e c i a l t y enhancement training programs and management skills training programs, UMC also provides an easy and convenient selflearning environment. E-learning platform provides a channel for preparation before class and review after class, deepening the knowledge and skills learned and resulting in more fun in learning. 專業技能培育訓練 技術 e 學院 (e-learning) 在職訓練 (Class/Mentor) 進階專業技能培訓 組織人力素質提升 -Newcomer Training Programs Recruiting, fostering and retaining talents are the main purpose of UMC's training in shaping the company's culture. "The involvement and support from supervisors is the key for successful training." The efforts that every supervisor puts into these 90 days of complete and comprehensive training help UMC's new employees more easily blend into UMC's culture. U-Camp e-learning Platform As a multinational enterprise, UMC establishes a qualitative and quantitative basic skill evaluation system. Through TOEIC, SPC and a professional skill evaluation system, UMC ef fectively 2006 Corporate Social Responsibility Report - 35

7 -The Key to Successful Training Dr. Jackson Hu, Chairman and CEO of UMC, once said, "Training is the best way to create the coherence of divisions and to enhance an individual's capability." The hitech industry is now facing extraordinary competition as time and trends change rapidly. Management level now realizes the importance of training to retain talent since outstanding talent is difficult to find and develop. Talent retaining and fostering is a primary goal for the company and is a factor in UMC's continued growth as a world-class foundry. Employee Welfare and Working Environment In addition to compensation and bonus, UMC employees have increasing demands on their working environment and other welfare issues. UMC devotes itself to creating a safe and healthy working environment. By looking after employees needs in every aspect of life and creating a quality environment, UMC hopes every employee can enjoy their life at work. Compensation and Bonus Compared with other major competitors, UMC provides competitive compensation t o a t t r a c t o u t s t a n d i n g t a l e n t. T h e compensation level is based on the market. Gender does not influence compensation; instead, performance is the crucial factor for compensation differences. In addition, UMC offers various bonuses to reward employees hard work, including quarterly bonuses and annual dividends. UMC also sets up a reward measure to reward employees efforts in TQM, proposals and knowledge management. Stock bonus such as stock options and treasury stocks are offered as well. Employee Welfare System As to dining, various restaurants can be chosen from in each fab, combined with coffee shops and convenience stores. As to apparel, employees are allowed to wear casual clothes except for entering certain areas (such as cleanrooms) or employees at certain posts (such as receptionists). For inhabitance, DL and IDL can apply to live in UMC s dormitories. Fo transportation, regular free-of-charge buses are offered for fast and easy transportation. Finally, UMC s Recreation Center and Sports Park provides first class facilities and low entrance fees for employees entertainment and leisure. Furthermore, UMC provides channels for opinions and complaints, such as employee group discussion meetings, TECH discussion meetings and secretary discussion meetings to collect different suggestions and opinions to ensure the continual improvement of the company. UMC also follows government regulations by establishing explicit rules to protect employees rights, such as anti-sexual harassment regulation, a retirement system, and leave application. UMC is Taiwan s first private enterprise to adopt a four-shift rotation system. Particularly n o t e w o r t h y i s t h a t U M C p r o v i d e s comprehensive insurance systems to look af ter its employees as soon as they arrive at UMC. These include labor insurance, health insurance and free-ofcharge group insurance (including group insurance for NTD 2 million and cancer insurance). Employees family members are also covered by life insurance, accident insurance, and group health insurance. UMC s comprehensive insurance package offers employees peace of mind so they can dedicate their efforts to their work and society. UMC also fully protects employees right by following Labor Standards Law and other related regulations to handle employees retirement Corporate Social Responsibility Report

8 Employee Health UMC believes that employees are the most important asset for a corporation. Corporations require physically and mentally healthy employees to achieve efficient, high-quality performance. As such, UMC strives to create a working environment that facilitates employees' physical, mental and spiritual health. UMC also assists the well being of employees' family members. The working environment UMC creates results in increased morale and quality of life improvement for company employees. family members. In addition, UMC's health center conducts regular hearing and vision protection programs to prevent occupational injuries through work safety and health management. UMC's employee clinic, established in 2003 at the United Tower headquarters provides professional medical services on-site and through local medical resources. These services include outpatient services such as body checkups, family medicine, physical therapy & rehabilitation and metabolic evaluation. With more convenient, thoughtful clinic services, UMC employees are able to save the trouble of traveling back and forth to the hospital. Activities to Help Employees' Health Activities Projects Employee Assistance Others UMC offers free-of-charge, confidential psychological consultation to help UMC employees deal with mental stress. In addition, UMC educates its employees with the latest news on pursuing healthy living at work and home through its postings on the company intranet site, flyers, booklets and lectures. UMC conducts annual employee physical ex a m s p e r f o r m e d b y p r o f e s s i o n a l medical staf f and has an "individual health management plan" tailor-made for each employee through an "employee health information system". Through various health improvement activities and information, UMC employees gain a better understanding of how to manage their own health condition as well as their Health care in spring Skin care in summer Body care in autumn Women and children care in winter Keep fit and healthy Hearing care project Vision care project Other spcial projects (hypertension, hyperlipidemia, hyperglycemia ) Individual counseling Lectures and forums based on employees' requests Experience sharing chatroomsarticle sharing Flu vaccination Blood drive Activities in UMC Recreation Center Annual employee health check-up Care for your internal organs Activities to Promote Employees' Health Safe and Healthy Working Environment For environmental protection, UMC aims to be a sustainable development green enterprise with zero-pollution. In safety and health management, UMC targets zero-incident as the ultimate goal. In addition to complying with and exceeding industrial safety laws, UMC also adopts advanced techniques in safety and health, risk management and rescue to improve overall safety. Furthermore, UMC continues to encourage all employees to participate actively in safety and health training, and promotional activities Corporate Social Responsibility Report - 37

9 Making Safety a Core Value CEO s Vision: Our Goal Zero Injuries/incidents Creating a safety culture! -Environmental Safety and Health Management Cycle UMC establishes simple but effective e n v i r o n m e n t a l s a f e t y a n d h e a l t h management system by c ontinually improving the environmental safety and health risk management cycle, which includes: safety design for facilities, education and training for employees, systematic safety management measures and internal and external inspection. For inspections, UMC executives and managers conduct environmental safety and health inspections in each fab semi-annually. Moreover, an ex ternal inspection is conducted annually by third-party verifiers for each fab. pollution, waste pollution, chemical damage, physical damage, ergonomic damage, biological damage). For those high-risk operations, UMC will establish rules as countermeasures. In addition, to keep the information updated, UMC conducts a follow up evaluation every three years after any environmental safety and health exam is held prior to any process alteration or new task implementation. All data is recorded and tracked by the computer system. -Equipment Safety Management UMC establishes comprehensive equipment safety management measures. UMC requires vendors to provide SEMI S2 reports that meet international semiconductor safety requirements before any procurement. This will ensure equipment design meets the safety requirements. -Risk Evaluation in Environmental Safety and Health B a s e d o n t h e r e q u i r e m e n t o f ISO14001&OHSAS18001, UMC analyzed and classified different risk levels based on the frequency and severity degrees resulting from all operations (such as air -"Safety is My Responsibility" UMC concluded that 90% of accidents resulted from human error. Though lowering the risks in equipment and processes can reduce accidents, it cannot guarantee the safety of all employees. In order to achieve the goal of "zero-accident", the company will promote the mentality of "Safety is my responsibility". UMC declared the concepts of "Be aware of your own safety well as the safety of others" and Corporate Social Responsibility Report

10 "Safety is everyone's responsibility, and my personal accountability" as its foundations. Furthermore, UMC implements the FMEA method to foster employees' capabilities in risk analysis. Therefore, the company has established a complete channel for communication and proposing new ideas to ensure that employees' opinions are fully expressed and are followed with professional response and assistance. By doing so, UMC hopes to establish a working attitude of "Safety and health first" and carry out safety and hygiene management to further improve the quality of the working environment, and finally, to become a model for global safety and hygiene management. Methods: Self-prevention management and accident source management Top down Requirement: Adopt safety into corporate culture and production management Reward and punishment: Set concrete and systematic reward and punishment rules in industrial safety Bottom up Promotions: Continual improvements in industrial safety knowledge and skills -Environmental Safety and Health Training Online training for environmental safety and health provides easy access for UMC employees to inquire about available classes and individuals' status. Continuous training and promotion can strengthen employees' emergency response abilities and sense of safety and further lower accidents resulting from unsafe actions. Annual training programs include emergency response, government laws, the maintenance of safety and health management system, safety notice for special operation and supervision training. In addition to annual training programs, irregular training programs are planned for special cases. 897 classes were held in 2006 and 39,675 people were trained. In addition, 128 online classes are available to UMC employees so that employees can attend classes based on their own schedules. -Promotional Activities in Safety and Health UMC aggressively promotes the idea of safety and health by holding regular promotional activities. 1. ESH mailbox: UMC established ESH webpage and ESH forum to display posters, technique sharing and various information as they become available. ESH mailbox is also established to encourage employees to offer their suggestions. 2. ESH cards: ESH cards are distributed to each employee to constantly remind them to follow related regulations Corporate Social Responsibility Report - 39

11 3. UMC ESH Month: This annual activity includes outstanding performance selection (personnel), ESH slogan competition, emergency response competition, forums, movie screening and lectures. 4. ESH competition among all fabs: A company-wide competition that offers valuable prizes and a trophy for the fab that has outstanding performance in environment al safet y and health management. This competition not only demonstrates the executives' concerns in safety but also encourage self-management in all fabs. The winner in 2005 was awarded NTD 1 million. -Occupational Incident Statistics and Analysis The safet y of the environment and employees are primar y concerns for UMC. UMC established an incident report and investigation system for information disclosure and storage. Incidents are recorded and analyzed monthly and used to develop preventive measures. Occupational accident frequency rate was and Injury severity rate was Note: Occupational accident frequency rate = 100 employees who suffer job-related injures/numbers of accidents Injury severity rate = 100 employees who suffer job-related injures/total loss working days Occupational accident frequency rate: 100 employees who suffer job-related injuries/numbers of accidents Corporate Social Responsibility Report

12 Injury severity rate: 100 employees who suffer job-related injuries/total loss working days Emergency Response and UMC Fire Brigade UMC's hi-tech fire brigade was established in April 1999 and stands by 24 hours a day to quickly respond to all kinds of emergencies. Through constant training, UMC hopes to strengthen its emergency response capabilities at the early stages of any accident, therefore minimizing accident costs, shortening the time needed to resume operation, and reducing any impact to our customers. Fire Brigade also conducts specialty training at Hsinchu City s Fire Department training facilities and Seafarer Training Center to gain better proficiency in handling general fires, organic solvent fires and chemical disasters. The brigade also periodically sends key personnel abroad for various training (including TEEX, SCDF ) to learn the latest fire-fighting information. All members in UMC Fire Brigade are able to reflect and refresh what they have learned through the guidance of professional trainers, practical training and off-session discussion. - Employee Training and Emergency Response -UMC Fire Brigade Voluntary firefighters dedicate themselves to their daily work but are also able to rapidly mobilize into action during emergencies within minutes. Members of the brigade are required to complete 88 hours of basic rescue training upon enrollment, followed by scheduled monthly training to ensure that rescue skills and safety knowledge remain sharp. In addition to physical strength training, fire and chemistry disaster handling are also included in monthly training. UMC To further reduce the time it takes to resolve accidents, UMC's well-trained fire brigade partakes in several regular internal firefighting trainings, fire drills, and evacuation drills with all employees so that they have basic fire safety and emergency response skills. For example, each of UMC's 13,000 employees undergoes a 2 to 4 hour training program every three years, including basic fire safety lessons and fire extinguisher operation. For each fab, regular training is also held for ERT (Emergency Response Team) members to familiarize them with the response flows and rescue equipment. Other areas covered include specific duties such as commander, rescue team, logistic team, and announcement control team training Corporate Social Responsibility Report - 41

13 -UMC Brigade's Social Responsibility Customer Service Since 1995, UMC has devoted itself to foundry manufacturing technologies. As to post sale services, UMC provides customeroriented services based on our expertise. UMC sees situations from the customers' perspectiv and provides comprehensive services to meet each customer's needs. Since its establishment, UMC Fire Brigade has secured UMC's fab safety and fulfilled its duty as a corporate citizen based on UMC's corporate culture. In addition to sharing training results and rescue experience to firefighting departments and other companies, UMC Fire Brigade also takes an active role in providing rescue assistance when required by the community. UMC also helps local fire bureaus and other organizations train for fire and chemical disaster, such as National Fire Agency, Ministry of the Interior, Science Park Administration, Hsinchu City Fire Depatment, Miaoli County Fire Department, Tainan County Fire Bureau, Hsinchu County Environmental Protection Bureau, Central Police University, Industrial Technology Research Institute, etc. Organizations that have shown their acknowledgement and appreciation for prompt firefighting and rescue assistance from UMC Fire Brigade include Taiwan Power Company (Lon-Song Substation), WSMC, Powerchip Semiconductor Corp., XAC Automation Corp., Fu-Guo Chemical, Lite-On IT Corp., and Motech. Moreover, UMC Fire Brigade was chosen by the Environmental Protection Administration as the designated support unit for toxic/ chemical accidents. UMC believes that the efforts spent in emergency response will reassure our customers and shareholders of our commitment to safety and productivity. Customer Satisfaction Since the start of its operations, UMC has considered customer satisfaction as fundamental to its mission, and an ultimate goal. Such philosophy has expanded as the company's core value: customer-orientation, as the top priority of the company. Taking a customer point of view to offer total solutions for fulfilling customers' requests is the UMC's basis of behavior. -Online Service Platform: MyUMC In 1998, UMC established its MyUMC online information portal as a pioneer in the semiconductor foundry industry to eliminate geographic and time boundaries. MyUMC gives our customers easy access to our world-class foundry services by providing a total online supply chain solution. This application offers 24-hour access to detailed account information such as manufacturing, engineering, design and financial data through each user's own personalized MyUMC start page Corporate Social Responsibility Report

14 -Customer Satisfaction Survey UMC actively sends an annual customer satisfaction survey to customers (ACSS). The design of the questionnaire takes users' needs as the primary concern. The questionnaire provides items for customers to grade and encourages them to offer their opinions to explain the grades. The purpose of this survey is to help UMC achieve longterm improvement and growth and align UMC's strategies with its customers. Moreover, dedicated central customer satisfaction personnel (CCS) will help arrange face-to-face interviews for UMC management and its customers regarding the satisfaction survey. The purpose of the interviews is to better understand customer satisfaction and dissatisfaction levels. Furthermore, CCS can analyze the results and input of the survey, such as: UMC's annual customer satisfaction and dissatisfaction trend Competitiveness analysis Improvement perception analysis Strength/weakness analysis Top 10 most satisfied/dissatisfied items ranking, etc UMC makes extensive use of customer feedback in continuous improvement. As a result, related departments shall provide corresponding improvement actions with responsibility and accountability. CEO and top management executives of each division will review the proposed improvement actions before replying to customers. The survey result is an effective communication tool between UMC and customers that reflects and enhances customer satisfaction. Customer Privacy UMC's respect for customers directly reflects on the protection the company has for its customers' privacy. UMC sets its own regulations to protect customers' intellectual properties and signs contracts with its customers to protect their confidential data. Employees whose daily work involves confidential customer information are required to participate in regular online testing to ensure they work within the confidentiality policies while interacting with customers. Responsibility in Product's Safety and Health UMC has no direct potential threats to its customers or the general public since UMC does not have its own end products. However, to ensure the products provided to customers meet international standards and customer requirements, UMC checks government updates on environmental protection laws and regulations monthly and sets up quarterly examination plans for products containing hazardous substances by sending products to a third par ty organization for examinations on each item on the hazardous substance control list. Moreover, yearly examination results will be announced on umc.com to keep information transparent. Supplier Relations Contractor Management I n a d d i t i o n t o q u a l i f i e d c o n t r a c t o r evaluations, UMC has an "Environmental, safety and hygiene notice for contractors" d o c ument t h at i s distri b u ted to a l l contractors to inform them of relative company regulations regarding safety and health management. Moreover, UMC requires all contract workers to take " UMC's contractor ESH training program". There were 5,109 contractors that took this training during Furthermore, UMC established comprehensive e-system when issuing work permits to effectively control and monitor construction applications as well as during pre, during and post construction management. UMC also 2006 Corporate Social Responsibility Report - 43

15 requires construction safety meetings to be held between UMC supervisory employees and contractors before construction begins. During construction, in addition to responsible supervision, UMC's GRM&ESH Division will conduct random inspections to ensure all construction follows safety regulations. UMC e-system for Work Permit Green Supply Chain The RoHS (Restriction of the use of certain Hazardous Substances in electrical and electronic equipment) Directive has been in effect since July 1st, The RoHS Directive will ban electronic products that contain certain levels of six listed hazardous substances (lead, cadmium, mercury, Chromium VI, PBB and PBDE) from entering European markets, effectively creating a green trade barrier. Therefore, how to react to this international trend for environmental protection and improve UMC s green competitiveness have become new challenges for business operation. U M C has been aware of the green production trend from the international communit y and its customers since Since then, UMC has promoted green supply chain management and established an SOP for green procurement thorough supplier, processes and materials evaluations. UMC also regularly requires a third-party organization to examine UMC s products to ensure they meet environmental laws and regulations. UMC became a Sony Green Partner in 2003, and passed qualification again in These actions demonstrate that UMC s progress in hazardous substance management has gained recognition from our customers. U M C c o n d u c t s i nve s t i g a t i o n s a n d evaluations on its suppliers green product management status through management, monitoring and execution programs as part of its participation in the RoHS supplier guidance project initiated by Industrial Development Bureau, Ministry of Economic affairs, In addition, UMC conducts onsite assistance and investigations to major suppliers. For those who fail to meet the standard, UMC offers suggestions and implements follow-up examinations to ensure the completion of the whole green supply chain. Supplier Symposiums Meanwhile, to improve the efficiency if green product management, UMC established a cross- division HSPM (Hazardous Subst anc e s Proc e s s M anagement) committee to manage all implementation and promotion of related work. HSPM committee meets regularly to enforce execution through communication of project targets. In addition, HSPM committee works aggressively towards the qualification plan for QC IECQ HSPM Corporate Social Responsibility Report

16 Customer Engineering Design & Development Contract/design review flow Executive Secretary Procurement Materials and supply management Warehouse management Supply / materials flow management Management Representative Head Manufacturing- Hsinchu fabs Southern Taiwan fabs Singapore fabs Manufacturing flow Shipping management Contractor management Training/Promoting System audit Environmental protection management Fab logistics Measurement techniques Quality Assurance flow Customer Services UMC completed the final system audit for QC IECQ Hazardous Substance Process Management (HSPM) qualification on June 9th, 2006 to become the first semiconductor manufacturer worldwide to achieve HSPM certification for all fabs. The completion of QC IECQ HSPM qualification audit demonstrates UMC's capabilities in managing hazardous substances and meeting RoHS Directives. This qualification can ensure that UMC provides cutting-edge and environmentalfriendly IC manufacturing services and helps UMC's customers expand their market share. - Hazardous Substances Control and Management UMC established a hazardous substance c o nt r o l l i s t b a s e d o n i nter n a t i o n a l e nv i r o nment a l p r otection l aws and customers' requirements. Suppliers have to sign a guarantee and provide third-party examination reports if necessary to ensure their products meet the rules of this control list. Hazardous substances control is also applied to merchandising. All materials that violate the control will be deemed as disqualified products and returned to the suppliers. Suppliers are then required to provide correction and prevention measures. UMC Hazardous Substances Control List UMC QC IECQ HSPM Certificates By helping suppliers establish a hazardous substance control mechanism to conform to international regulations, this project enhances the competitiveness of the entire green supply chain. Key points for green management policies applied to suppliers are illustrated as below: -Supplier Classification Suppliers are classified based on their features and risk level. All suppliers have to fill in UMC's hazardous substance control list and self evaluate. UMC will conduct either 2006 Corporate Social Responsibility Report - 45

17 document reviews or on-site investigations to confirm the information they provide. Suppliers who fail to meet the standard have to make improvements in a limited period of time. Suppliers who fail at the new material assessment stage cannot become UMC qualified suppliers. Apply effective actions to HSPM Conform to UMC's criteria (>70%) Act Check PDCA Cycle Plane Supplier HSPM Management PDCA cycle -Green Procurement Management UMC's requirements regarding green procurement, including control rules on tier 2 and tier 3 suppliers, are sent to its suppliers accompanied with orders through an e-procurement system. In addition, suppliers must upload their examination results for materials and goods through this platform. UMC can then recognize items that violate the rules in advance and take countermeasures immediately. -Supplier Evaluations S u p p l i e r s ' e f f i c i e n c y i n m a n a g i n g hazardous substances will be included in UMC's supplier evaluations. Moreover, certain certificates for environmental protection efforts or hazardous substances management will count positively towards evaluations. UMC will cease procurement or disqualify the suppliers if they perform poorly in the evaluations. Plane Suppliers classification Through selfassessment/on-site audit to evaluate supplier's HSPM -Supplier Training UMC believes that suppliers play a crucial role in green supply chain management. Therefore, UMC regularly holds supplier t r a i n i n g m e e t i n g s t o p r o m o t e a n d communicate UMC's determination in implementing its green supply chain management system as well as items that suppliers shall cooperate on. UMC hopes to create a win-win situation for both UMC and suppliers based on green product consensus. To ensure the products we provide to customers meet international standards and customers' requirements, UMC checks for government updates on environmental protection laws and regulations monthly and sets up quarterly examination plans for products containing hazardous substances by sending products to a third par ty organization for examinations on each item on the hazardous substance control list. Moreover, yearly examination results will be announced on umc.com to keep information transparent. " S u s t a i n a b l e d e v e l o p m e n t a n d environmental protection issues have become important indexes for conducting international business," said Dr. Jackson Hu, chairman and CEO at UMC. "UMC has been very successful in practicing environmentally-friendly development and sustainable-resource utilization to achieve our goal of operating as a green enterprise. We have integrated the concept of sustainable development into our core business strategy, so that two seemingly contradictor y concepts, competitive business operation and environmental protection, can be harmonized for the benefit of society." UMC's years of promoting Corporate Social Responsibility Report

18 environmental protection, introducing sust ainable development to ols and participation in international environmental protection activities have gradually come to fruition. The World Bank Group gave official recognition to UMC's excellent environmental protection performance during its 2002 Global Summit of Sustainable Development. UMC also received the runner up award for Environmental Excellence from the Asian Institute of Management at their 2004 Asian CSR Awards. In 2006, UMC received the highest rank in a Corporate Social Responsibility Survey conducted by CommonWealth Magazine. These honors recognized UMC's efforts in promoting environmental protection, sustainable development and social responsibility in addition to pursuing business success and growth. Meanwhile, UMC was awarded several government honors such as the National Sustainable Development Award, Industrial Sustainable Excellence Award, Corporate Environmental Protection Award, Green Office Award, Water Conservation Award, Energy Saving Award, and others. In the future, UMC will continue to effectively control and manage hazardous substances through QC IECQ HSPM system to turn the green trade barrier into green opportunity. In addition, UMC will continue to involve itself in environmental protection issues to fulfill its responsibility as a corporate citizen. Public Interests and Community Care As UMC works hard to become a worldclass leading foundry, it also senses that an enterprise requires both hard work and the support from the society to be successful. Since its establishment, UMC has specified in its long-term operation guidelines that the company will make every effort to contribute back to society in addition to focusing on its business growth. Public Interests and Volunteer work Education and aid to minority groups are important considerations at UMC. In addition to long-term sponsorship, UMC also encourages its employees to expand their vision by participating in volunteer work. UMC's activities in public interest areas promoted over the years include "Building the future together for our children" (collaborating with World Vision Taiwan), sponsoring school tutoring services for children from mid-to-low income families (c onducted by Boyo Social Welfare Foundation) and fundraising to help Bluesky and Good Shepherd Social Welfare Services build shelters for dropouts. To realize this goal, UMC established the UMC Science and Culture Foundation in 1996 to sponsor and participate numerous activities in technology development, education, academic research, childcare, environmental protection, culture, art, public interest, and sports. UMC is also involved in community-care activities by way of the company's Candle Light Society, an organization that is formed voluntarily by UMC employees. The Candle Light Society acts as a bridge between UMC employees and charity groups to provide financial support or volunteer work. UMC Science and Culture Foundation Since its establishment, UMC Science and Culture Foundation has put forth great efforts to hold activities such as collaboration development with colleges, long-term education assistance, art and culture promotion and sponsorship, UMC's scholarship and other activities such as college basketball tournaments Corporate Social Responsibility Report - 47

19 - Spreading Hope Program-Supporting the Education for Children from Mid-to-Low Income Families In 2005, UMC noticed that the gap between the poor and the rich in Taiwan is expanding, creating an economic disadvantage that inhibits the education performance of children from mid-to-low income families. Therefore, UMC Science and Culture Foundation decided to provide education and care for these children. A proposal was passed during the board meeting to fund NTD 50 million to the Spreading Hope Program annually. This program will provide schoolwork tutoring services for children from mid-to-low income families with the hope of increasing these children's future competitiveness through education. On May 21st 2005, UMC's anniversary, the company designated the day as UMC Public Interest Day to convey the notion of community-care and contribution to society to all employees and their family members. UMC also launched its "Spreading Hope" program. This program, which became effective June 1st, 2005, provides education assistance and expands care to mid-tolow income families and children in remote areas of Taiwan. There are three stages in this program: First, UMC hopes to make up for the insufficiency of their education resources, establish good learning habits and enc ourage positive thinking by conducting schoolwork tutoring services. Secondly, through a filtering process, UMC provides scholarships to those children who are talented and willing to advance to higher education, and acts as a motivator for children's self-progress. Finally, through evaluation, UMC provides further higher education aid such as subsidiaries for advanced education, or arrangements to study abroad for those who continue to grow with higher self-expectation. Since the program began, 65 tutoring classes have been established in Hsinchu and Tainan to provide long-term tutoring services for children from mid-to-low income families. More than three thousand children have benefited from this service in the past two years. To further integrate the strength of UMC employees and their family members to participate in helping children from midto-low income families, UMC's voluntary tutoring service team was established in Since it establishment, there have been more than 300 people participating in UMC's voluntary tutoring service team. UMC also holds summer camps and giftraising activities at Christmas and other holidays. Many UMC employees not only participate in activities themselves but also invite their friends and family members to join in. In the future, UMC hopes to utilize more passionate educators and enterprises that share the same belief. Ultimately, UMC hopes these economically disadvantaged children can grow up with confidence and happiness through professional tutoring services by continual and long-term support from enterprises. Flag presentation ceremony for UMC volunteer teams Corporate Social Responsibility Report

20 The amount of sponsorship: annual amount of sponsorship and monthly cost per child analysis. activities with academic collaboration and other long-term development programs with several leading Taiwan universities. $30,000,000 $25,000,000 $20,000,000 $15,000,000 $10,000, As the numbers of the children continued to grow over the two years, the sponsored amount has been increased from NTD 10 million to 30 million. NTD 26.2 million was sponsored from 2005 to Most money is distributed as operation fees for tutoring centers, expenses for public interest activities in UMC's anniversaries and expenses for volunteer teams. Total student numbers, attendance rate, completion rate and average advance semester are shown in the chart below: Number of Children $5,000,000 $0 1st half of ,427,834 2nd half of 2005 Summer in ,196,191 1st half of nd half of 2006 Total verage) 1668 (counts) Attendance Rate 97% 96% 95% 94% 95% 95% Drop Rate 10.20% 6% 2.10% 1.80% 1.40% 4.30% Average Advance semesters (In Mathematics) Total Sponsored Amount Period Calculated: September 2005 to June 2007 Other Hsinchu Chutong Tainan Total -Fostering Talent for the Hi-tech Industry Since its establishment, UMC has grown and developed to solidify itself as part of the foundation of Taiwan's semiconductor industry with a global service network. UMC understands that quality talent drives sustainable growth, and therefore supplements its art and public interest To follow through on the theme of "Rooted in Taiwan, Expand to the World", UMC's R&D center in Southern Taiwan's Science Park will continue recruiting local technical talent as part of its long-term talent-fostering program. UMC believes it can improve the quality of hi-tech talent throughout Taiwan through comprehensive steps. Programs listed below are planned for fostering technical talent for the next generation in Taiwan: U M C S c h o l a r s h i p p r o g r a m: U M C scholarship program was established in 2004 to sponsor exceptional college students in the science and engineering fields. Collaboration plans: UMC has continued to enhance its collaboration with local government and academic institutions. By aggressively collaborating with leading universities, UMC hopes to encourage students to involve themselves in hightech research and further improve Taiwan's semiconductor technologies. Technical talent workshop and practical lectures for semiconductor processes: UMC has managed the technical talent workshop to help students bet ter under st and techniques for semiconductor processes. -Technology Related Ac tivities and Sponsorships UMC sponsors university technology forums and international academic meetings by donating equipment, sharing fab information, and holding large-scale seminars. UMC also holds national technical activities such as its "SoC design competition", "Campus creativity competition" and "New era technical talent meetings". These activities promote the gathering of college talents to 2006 Corporate Social Responsibility Report - 49

21 brainstorm and discuss different technical issues. -Promotion and Sponsorship of Various Sporting Events Ito encourage the younger generation to participate in healthy pastimes and sports, UMC sponsors a wide range of sporting events and has held numerous basketball and baseball summer camps along with its UMC Cup Women's Table Tennis Tournaments. In addition, UMC's encouragement of spor ting activities extends to sponsoring the Special Olympics Run and National High School Sports Day. The most well known among its activities is the UMC Cup Basketball Open Tournament, which has been held for seven consecutive years since It has become one of the largest college basketball tournaments in Taiwan. UMC sponsors large domestic sports competitions such as William Jones Cup International Basketball Tournaments and NBA Madness Events to promote basketball in Taiwan. UMC also invites minority groups to participate as well. Moreover, many UMC employees and their family members participated in "Swimming Across Sun Moon Lake" in 2006, which made UMC the biggest par ticipating organization that year. This again shows UMC's determination in promoting sports. -Promotion of Art and Community Relations UMC Science and Culture Foundation has sponsored and participated in numerous activities in technology development, education, academic research, childcare, environmental protection, culture, art, public interest, and sports. UMC recognizes and appreciates fine art through the sponsorship of large-scale performances such as the English Chamber Orchestra, Pianist Ruei Bin Chen's Concert and others, and also focuses on the promotion of community art activities such as Hsinchu Spring Music Festival and Suzhou Kunju Troupe's "Chang Sheng Dian" in Hsinchu. In addition, UMC continually sponsors campus art and culture activities and lectures at National Tsing Hua University, National Chiao Tung University and National Cheng Kung University. UMC hopes to improve the development in art and culture for the community through all kinds of support activities. Other sponsorships for art activities include Hsinchu Impressionism Painting Albums, English Chamber Orchestra, Art Season in National Cheng Kung University and others. UMC is the sponsor of Suzhou Kunju Troupe's "Chang Sheng Dian" in Hsinchu UMC Cup Basketball Open Tournament Corporate Social Responsibility Report