Frequently Asked Questions About UMC's Conversion Sale Program

1) What is the purpose of the UMC Conversion Sale Program?

The purpose of the UMC Conversion Sale Program (the "Program") is to facilitate sales, in a coordinated fashion, by holders of UMC common shares in the form of American Depositary Shares ("ADSs"). The ability of the shareholders to convert and sell UMC common shares in ADS form is limited under certain ROC and U.S. securities laws and certain provisions of UMC's ADS Deposit Agreement with Citibank, as Depositary. As a result, UMC has established the Program under which UMC will assist qualified selling shareholders in obtaining the regulatory approvals required to sell their UMC common shares in the form of ADSs. This is intended to make the process of conversion and sale of UMC common shares in ADS form more streamlined and practical. UMC does not recommend or promote the sale of UMC common shares by its shareholders. The Program permits conversion of UMC common shares into ADSs for the purpose of sale only, and holders of UMC common shares will not be allowed to convert UMC common shares into ADSs for the purpose of holding the ADSs. Any sale under the Program is subject to UMC and the selling shareholder obtaining all ROC and U.S. regulatory approvals, including the approvals of the Securities and Futures Bureau (the "SFB"), the Central Bank of China (the "CBC") and the New York Stock Exchange (the "NYSE"), and to market conditions. Interested shareholders should consult with their own independent legal advisors, at their own expense, and may wish to consult with the relevant regulatory authorities prior to submitting an application, in order to ascertain the probability of UMC and such shareholder in obtaining all necessary approvals.

2) What is the aggregate number of shares to be sold in the Sale Period and what is the frequency?

In establishing the aggregate number of UMC common shares to be sold in the Sale Period (as defined below), UMC has sought advice from international investment banks and other advisors. It is UMC's desire that the Program be designed and executed in an orderly manner to reduce the potential for disruption of the trading markets for UMC common shares and ADSs. UMC has built two features into the Program to achieve this – the total number of UMC common shares to be sold in the Sale Period and the frequency of the Sale Period are limited so as to minimize the potential disruption in the ADS and UMC common share markets.

3) Why and how are the eligibility requirements decided?

UMC, after consulting with its advisors, believes that eligibility requirements are necessary to ensure the Program can be executed in a practical and effective manner without creating a substantial administrative burden on UMC. In particular, it is UMC's belief that as the number of participating shareholders increases, the pro rata allocation in connection with a sale, which requires substantial record-keeping, and the execution of the sale and the tracking of each participating shareholder's interest, will become complicated and difficult to manage. As a result, after consulting with its financial advisors, UMC has determined that shareholders who hold no less than 0.04% of the total outstanding UMC common shares for a minimum period of one year will be eligible to participate in the Program. To ensure each Program applicant will have a chance to receive a meaningful allocation of UMC common shares to be sold under the Program, the Program limits the number of UMC common shares an applicant may apply to sell during the Sale Period to the total number of UMC common shares to be sold under the Program during the Sale Period.

In establishing the Program, UMC is assisting its existing long-term shareholders that wish to convert and sell their UMC common shares in ADS form. The one-year holding period has been established as a means for identifying the long-term shareholders that the Program is intended to assist, and to discourage undesirable and potentially manipulative arbitrage activities.

4) What is the reason for modifying the Program to exclude affiliates, management and employees?

Because capacity for sales is limited under the Program, UMC does not believe that it is appropriate to allow affiliated, management or employee shareholders to participate in the Program as this may prevent shareholders not otherwise affiliated with UMC from participating.

5) Can "Non-Resident Foreign Investors", formerly known as "Qualified Foreign Institutional Investors" ("QFIIs") participate in the Conversion Sale Program?

In accordance with the recent amendments (the "Amendments") to the "Regulations Governing Securities Investments by Overseas Chinese and Foreign Nationals" (the "Regulations") which became effective on October 2, 2003, the term QFII, and the restrictions on QFIIs have been abolished. QFIIs are now classified as a type of "Non-Resident Foreign Investors" and are allowed to participate in the issuance of overseas depositary receipts such as ADSs. The current program also does not prohibit Non-Resident Foreign Investors, as defined under applicable ROC Law, from applying to participate in the Program. However, as QFII applications to convert common shares into ADSs in the past have been rejected by the CBC, and the Amendments are still subject to interpretation and application by the relevant authorities, no assurance can be given to any Non-Resident Foreign Investors whose investments in UMC common shares are governed by the Regulations that they will receive approvals from the SFB and the CBC for converting and selling UMC common shares in ADS form. Interested Non-Resident Foreign Investors are encouraged to seek and obtain, at their own expense, legal advice to assist them in understanding and evaluating the domestic regulatory issues involved in the Program and determining whether they desire to participate in the Program.

6) Can selling shareholders convert and hold ADSs?

The Program permits conversion of UMC common shares into ADSs for sale only. Shareholders are not permitted to convert UMC common shares into ADSs for the purpose of holding the ADSs.

In addition, based on advice from its financial advisors, UMC believes that permitting shareholders to hold rather than immediately sell the ADSs could be disruptive to the UMC common share and ADS trading markets, since there would be market uncertainty over the timing and price of possible future sales of such an ADS "overhang".

7) Why not simply open up the existing ADS facility to have full two-way fungibility between UMC common shares and ADSs?

As described above, the Program has been designed to reduce the potential for disruption to the trading markets for UMC common shares and ADSs. Based on advice from its financial advisors, UMC believes that an abrupt and uncontrolled increase in the number of ADSs could be disruptive to these trading markets, so the Program has been designed with certain limitations as to size and frequency of conversion into and sale of ADSs. Though common shares may freely be redeemed from ADS, the sale of ADS representing common shares is still subject to the sponsorship of issue of ADS and governmental approval and, therefore, common shares and ADS are not fully fungible.

8) How does the Program work?

In summary, the Program requires an eligible shareholder interested in participating in a sale under the Program to submit an application to indicate the number of shares he/she wishes to sell. The application form will be submitted to the designated domestic securities firm (the "Administrative and Transfer Agent") under the Program, who will verify the eligibility of each interested selling shareholder. The Administrative and Transfer Agent will then allocate to each such eligible shareholder on a pro rata basis the number of ADSs he/she is entitled to sell during the Sale Period under the Program. UMC and the selling shareholders shall then commence the Board of Directors and regulatory approval processes. Upon receipt of all necessary approvals, each shareholder who continues to be interested in selling ADSs representing his/her shares shall execute an ADS Sale Agreement with the designated international investment bank (the "Trade Facilitator"), which will include, among other provisions, an irrevocable agreement by the selling shareholder to sell ADSs representing his/her shares to the Trade Facilitator within a certain period of time ("the Sale Period") to be notified by the Administrative and Transfer Agent. The Trade Facilitator will be entitled under the ADS Sale Agreement to purchase any or all of such ADSs for a price at or above a minimum selling price (the "Minimum Price") established by the selling shareholder, which can be changed prior to each New York business day during the Sale Period. If the sale is executed, the proceeds (after deduction of all commissions and other unpaid taxes, applicable fees and expenses incurred under the Program) will be distributed to the selling shareholder. The summary procedures described herein are incomplete and are provided for ease of reference only. Interested shareholders should review and comply with the procedures detailed in the application form. The entire process from shareholder application until the end of the Sale Period for sales is expected to last for approximately three to four months.

9) How complex is the conversion sale process? Can selling shareholders designate their own legal counsel, investment bank and local financial advisor?

As discussed above, the Program requires dedication of considerable management resources by UMC and the involvement of a number of advisors. Sales under the Program also require certain regulatory approvals and filings. Pursuit of this on a transaction-by-transaction basis for individual shareholders would be impractical. Thus, a streamlined and standard set of procedures has been established. Shareholders desiring to sell shares in the form of ADSs are required to comply with these standard procedures using the Administrative and Transfer Agent, trade facilitator, escrow agent and paying agent designated by UMC. Because certain aspects of the Program are complex, interested shareholders are encouraged to seek and obtain, at their own expense, legal and financial advice to assist them in understanding and evaluating the Program and in order to determine whether their participation would be desirable. UMC will not, however, accept any proposals for revisions to the Program documents or procedures.

10) When and how will sales take place after eligible shareholders have entered into an ADS Sale Agreement?

Under the ADS Sale Agreement, the Trade Facilitator will have the option to purchase the ADSs during the Sale Period commencing from the execution of the ADS Sale Agreements. The decision as to whether to purchase the ADSs, the number of UMC common shares to be purchased and the timing of purchases during the Sale Period shall be made at the sole discretion of the Trade Facilitator. Eligible shareholders will have the right to specify a minimum price per each ADS to be sold and will have the right to modify this minimum price prior to any New York business day during the Sale Period, with details as set out in the ADS Sale Agreement.

11) How will the selling price be determined?
In his/her ADS Sale Agreement with the Trade Facilitator, each participating shareholder will specify the Minimum Price below which the Trade Facilitator will not be entitled to purchase ADSs representing such shareholder's UMC common shares. Each shareholder will be entitled to change such Minimum Price daily, subject to certain time period restrictions. The Minimum Price will be the minimum "gross" selling price payable to such shareholder before deduction of fees, commissions and expenses. The Trade Facilitator will attempt to provide third party buyers for any ADSs purchased under the Program. To the extent such sales are made to buyers at prices above the shareholder's Minimum Price (or the highest minimum price under any ADS Sale Agreement pursuant to which the Trade Facilitator is purchasing UMC common shares substantially contemporaneously as part of the same transaction), the price to be paid to the selling shareholder for such ADSs will be the average price received by the Trade Facilitator in such sales (which may be at a discount to the prevailing market price for the ADSs). The purchase price for the ADSs also may be limited if the selling shareholder has not paid a sufficient amount in advance to cover the securities transfer taxes payable in Taiwan in connection with the sale of the ADSs to the Trade Facilitator (See Question 14 below). The foregoing is a summary of the purchase price provisions that will be included in the ADS Sale Agreement, and interested shareholders are directed to and should carefully review and understand those provisions before deciding whether to participate in the Program.

12) Can a shareholder specify multiple Minimum Prices or revise or withdraw his order to sell during the Sale Period?

Only one Minimum Price can be established for all of the ADSs representing shares that each eligible shareholder desires to sell during the Sale Period. However, subject to the provisions set forth in the ADS Sale Agreement, each eligible shareholder may change his/her minimum price for any unsold ADSs once each business day. An eligible shareholder may not withdraw his/her shares from the Program during the Sale Period unless the signed ADS Sale Agreement between the selling shareholder and the Trade Facilitator is terminated on a mutual basis. However, the selling shareholder shall remain liable for all Attributable Expenses incurred or contracted for prior to the time of such termination and responsible for any additional legal and other expenses incurred by such withdrawal.

13) Can a shareholder choose the number of UMC common shares he makes available for sale under the Program and will all shares which are made available for sale be sold by the end of the Sale Period?

Subject to the one-year minimum holding period, eligible shareholders may choose any number of their UMC common shares representing more than 0.04% of the outstanding UMC common shares. The Administrative and Transfer Agent will then provide an indicative pro rata allocation based on total demand by potential sellers. Once a shareholder receives government approval to sell that allocated number of shares, such shareholder is required to make available for sale all of the shares for which he has obtained approval, or he forfeits his right to sell any ADSs during that Sale Period. During the Sale Period, the Trade Facilitator may or may not purchase any or all of the shares which were made available for sale and therefore the eligible shareholder may or may not sell any or all of their shares. At the end of the Sale Period, the certificates for any shares that have not been purchased in ADS form by the Trade Facilitator can be collected from the escrow agent and returned to the relevant eligible shareholder.

As part of the same transaction, the Trade Facilitator is likely to exercise its rights to purchase shares pursuant to multiple selling shareholders' ADS Sale Agreements at the same time. The ADS Sale Agreements require the Trade Facilitator, to the extent reasonably practicable and in line with market practice, to allocate on a pro rata basis sales of shares amongst selling shareholders with a Minimum Price below the sales price for a transaction. To the extent practicable and in line with market practice, the Trade Facilitator will allocate shares purchased pro-rata to the number of shares remaining under each Sale Agreement over which the Trade Facilitator has exercised purchase rights.

14) Why does the shareholder have to make certain representations and warranties in the ADS Sale Agreement?

The shareholder must confirm that he is eligible for the Program. The shares to be sold in ADS form are likely to be sold into the United States or to United States persons and will be sold in transactions exempt from registration under the United States Securities Act of 1933, as amended (the "Securities Act"). As a result, it is necessary for the Trade Facilitator to confirm in representations and warranties certain factual information necessary to comply with applicable exemptions under the Securities Act. Also the Trade Facilitator needs to know that the selling shareholder acquired the shares being sold for investment purposes and not with a view to distribute them in this Program or otherwise.

15) How will the securities transfer tax be paid to the ROC National Tax Administration in connection with any sale of shares in ADS form?

In connection with the sale of any ADSs representing his or her shares, the selling shareholder is required to pay a securities transfer tax to the ROC National Tax Administration equal to 0.3% of the gross sale price for such shares. In order to facilitate the Program, Citibank, as paying agent for the Program, after receiving the securities transfer tax payment from the selling shareholder, will make the payment on behalf of the selling shareholders after each Sale. Prior to signing the ADS Sale Agreement, each selling shareholder will be required to pay to Citibank an amount that is approximately the amount of securities transfer tax that would be payable in connection with a sale in ADS form of all of the shares that the selling shareholder proposes to sell, at a price equal to twice the recent price of the ADSs (the "Reference Price"). This mechanism allows for possible increases in the price of ADSs during the Sale Period. If the selling shareholder does not pay such amount to Citibank, the selling shareholder will not be entitled to sign an ADS Sale Agreement. If during the Sale Period, the market price of the ADSs increases significantly to more than 80% of the Reference Price, the Administrative and Transfer Agent will notify the selling shareholder and instruct the selling shareholder to pay an additional amount to Citibank in respect of the securities transfer tax, based on the new market price multiplied by two. If the selling shareholder does not pay the required additional amount by the required date, it will not be able to sell any ADSs representing its shares in the Program after such date. At all times, the price at which its shares may be sold will be limited by the Reference Price unless such additional tax amount has been paid to Citibank. Within seven days after the end of the Sale Period under the ADS Sale Agreement, Citibank will pay the selling shareholder the difference between all amounts paid to Citibank in respect of such securities transfer tax and all amounts paid by Citibank to the ROC National Tax Administration in respect of securities transfer tax on ADSs representing shares sold by the selling shareholder.

16) How and when will the proceeds be distributed to the shareholders?

Transaction closing for each sale is expected to be between three and five days after any purchase by the Trade Facilitator and the selling shareholders will be notified of the exact date by the Administrative and Transfer Agent as soon as practicable after each sale. For each sale, after deduction of the commission and fees to the Trade Facilitator and the Administrative and Transfer Agent, the National Association of Securities Dealer's ("NASD") transaction fees, if any, and any other expenses payable by the selling shareholder, within one business day following the closing of the sale the proceeds of any sale will be distributed to each eligible shareholder who has sold shares.

17) What is the total cost to participate in this Program?

Selling shareholders are responsible for the following fees and expenses, payable at different times during the Program:

(i) Expenses in connection with administering the Program and preparation for sale

Selling shareholders are responsible for a portion of all of the expenses (the "Attributable Expenses") incurred by UMC or others in connection with the Program, which are currently estimated to be 0.75-1.0% of total sale proceeds. Attributable Expenses consist of (i) all fees and expenses in connection with applying for and receiving necessary regulatory approvals in the ROC, (ii) all fees of the Administrative and Transfer Agent (excluding the transaction commissions described below), the escrow agent, and the paying agent, (iii) all fees and expenses of counsel for UMC, the escrow agent, the Administrative and Transfer Agent, the paying agent and the Trade Facilitator and (iv) all fees and expenses in connection with applying for and receiving approval of the NYSE for the listing of the ADSs on the NYSE. These Attributable Expenses are payable whether or not the shareholder is deemed eligible to participate in the Program, whether or not the necessary Board of Directors and ROC regulatory approvals are received and whether or not a sale is executed. In addition to the Attributable Expenses, the Trade Facilitator, the Administrative and Transfer Agent and the depositary will charge commissions based, and deducted from, sales proceeds. The Administrative and Transfer Agent is responsible for notifying the applicant of the exact allocation amount, due dates for the receipt of necessary documentation and wiring instruction details.

Each selling shareholder shall bear a pro-rata portion of all of the Attributable Expenses. The Attributable Expenses are payable within two business days after the selling shareholder receives its indicative allocation from the Administrative and Transfer Agent following the application deadline. Any insufficient amounts received shall be paid for by the selling shareholder prior to continuing the Program and any excess shall be refunded upon closing. Attributable Expenses are deemed payable whether or not the shareholder is deemed eligible to participate in the Program, whether or not the necessary Board of Directors and ROC approvals are received and whether or not a sale is executed.

(ii) Securities transfer taxes

Securities transfer taxes, equal to 0.3% of gross sales proceeds, as described in question 15 above are due and payable within four business days after one business day from the date the SFB Approval/Disapproval is to be sent by the Administrative and Transfer Agent..

(iii) Commissions and Transfer Fees

Selling commission for the Trade Facilitator, transaction fees for the Administrative and Transfer Agent and SEC transaction fees are payable upon completion of each sale and expected to be approximately 3%. These fees are to be deducted from the gross proceeds at closing prior to any remittance to the selling shareholder. The Trade Facilitator will charge a commission of 1.8% and the Administrative Agent will charge a transfer fee of 0.2% on proceeds from sales. The Trade Facilitator will also collect the SEC transaction fee of 0.00418% payable to the National Association of Securities Dealers, Inc. The Depository will also charge a fee of up to US$0.05 per ADS issued.

18) Why do shareholders have to complete a W-8/W-9 Certificate?

Each shareholder is required to complete a W-8/W-9 and provide it to the Trade Facilitator to confirm that such shareholder is a foreign person or a U.S. person (for purposes of U.S. income tax laws) and whether they are subject to certain U.S. information return reporting or backup withholding rules. Each shareholder should consult its own tax or legal advisor regarding which form to complete and how to complete the form.

19) Will this Program be modified over time?

The Program is formulated based on the considerations discussed herein, current market conditions and advice from advisors and counsel. UMC will monitor the workability, efficiency and effectiveness of the Program and may revise the Program accordingly. The Program may also be revised, suspended or terminated at any time solely at the discretion of UMC, except such actions may in no way interfere with the settlement of transactions entered into by the Trade Facilitator.

20) What is the next step for interested eligible selling shareholders?

Eligible selling shareholders, or their agents or custodians, interested in participating in the program should contact Sinopac Securities Corporation on (886-2)2518-7190, or (886-2-) 2508-8834 for further inquiry or to obtain a copy of the application form for the Program in person which contains details on the procedures for the Program at 2F, 9-1 Chien Kuo N. Rd., Sec. 2, Taipei, Taiwan, ROC.

The primary operative documents that a shareholder will need to complete and execute in connection with participation in the Program are as follows:

1. The Application Form, with all attachments indicated therein, including:
Application Form
Letter of Representations
Letter of Undertaking
Power of Attorney
Use of Proceeds
Application for Off-Exchange Trading

2. The ADS Sale Agreement, with the Annexes and Exhibits referenced therein, including:
The Supplemental Information Form
Notice of Change in Minimum Price
W-8/W-9

3. The Escrow Agreement, with the attachments referenced therein, including:
List of Serial Numbers of the Share Certificates
Instructions to the Depositary.