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Samsung Electronics
Annual Report 2005
Samsung Electronics
Annual Report 2005

Table of contents

  • Page 1
    Samsung Electronics Annual Report 2005 Samsung Electronics Annual Report 2005

  • Page 2
    ...from the Board 06 Message from the CEO 13 Life Unlimited 23 Unlimited Challenge _ Business Divisions 44 Unlimited Innovation _ R&D, Design, Brand Marketing, Corporate Citizenship 59 Financial Section 2005 138 Board of Directors 140 Investor Information 141 Global Network...

  • Page 3
    Financial Highlights Samsung Electronics and Consolidated Subsidiaries Sales in billions of USD Operating Profit in billions of USD Net Income in billions of USD Earning Per Share in thousands of USD 78.5 79.5 11.3 10.3 65 54.1 49 7.5 7.5 5.3 5.0 30 2003 2004 2005 2003 2004 2005 ...

  • Page 4
    ...3,097,458 10,927,036 2003 \ 15,303,152 2,817,809 9,825,081 Net sales Operating profit (loss) Asset \ 20,914,815 2,480,001 11,965,742 2003 (in trillions of KRW) 2004 2005 (in millions of KRW) Digital Appliance Business 2005 5.4 5.6 2004 \ 5,390,822 21,740 3,403,424 2003 \ 4,936,535 (49,160...

  • Page 5
    ...Its industry leadership is demonstrated by its no.1 global market share in monitors and televisions and its many award-winning products, such as the world's largest LCD TV, the world's first Blu-ray player, and the world's smallest color laser printer. • In 2005, the Digital Media Business...

  • Page 6
    ... the highest standard for business management Samsung Electronics is committed to creating a progressive entrepreneurial environment with the highest standards of corporate governance, transparency, and accountability. Guided by these principles, the Board of Directors (BOD) oversees the...

  • Page 7
    ...40% of net profits to pay dividends of USD 5.43 per share and repurchase shares worth a total of USD 1.97 billion. Samsung Electronics held "Analyst Day 2005," the first of its kind by an Asian company, in order to enhance the value of our stock. During this event, the presidents of all business...

  • Page 8
    Message from the CEO Pursuing a future without limits Jong-Yong Yun Vice Chairman and Chief Executive Officer 14 15 6

  • Page 9
    ... over 100 million units thanks to global hits like our blue- black phones, the D500 and D600. In LCDs, the successful ramp-up of our Line 7-1, the S-LCD joint venture line with Sony, enabled the company to enhance its top position in the LCD panel market and to lead the growth of digital TVs. 7

  • Page 10
    ... our leadership in the global IT industry by successfully demonstrating WiBro technology. Samsung Electronics is also investing heavily in our brand equity through overseas marketing campaigns for our premium products. As a result of such efforts, Samsung is positioned...

  • Page 11
    ...in memories, displays, mobile handsets, and digital TV through the timely launch of innovative products that surpass the competition in cost, quality, and design. In businesses such as printers, system LSI, next generation storage, and air control systems, the company will...

  • Page 12
    ... Mobile Communications Printers System LSI Mass Storage Air Control Systems LCD 11% Telecommunication Digital Appliance Network & Others 27% 13% 2005 Net sales by business segment, consolidated basis (Finance segment excluded) • S econd, the company will build our creative leadership...

  • Page 13
    ... cost structure, the company will focus on standardizing components and software, along with strengthening the strategic procurement of those standardized parts. • Lastly, the company will continue our commitment to shareholder-centric policies. The employees of Samsung Electronics...

  • Page 14
    ... are different from those of the past. To become a premier global company, we have to go into uncharted territory and define for ourselves what we need to do and how we need to do it. In 2006, the employees of Samsung Electronics will continue to pursue a future without limits by facing and...

  • Page 15
    Life Unlimited Samsung Electronics marries design inspiration with advanced scientific research to produce elegant, popular, and highly desirable products that life the limits of our lives.

  • Page 16
    SGH-P900 DMB Mobile Phone Europe's first T-DMB (Terrestrial Digital Media Broadcasting) phone delivers mobile TV and radio, a 2 Megapixel camera, and an MP3 player-just in time for this year's World Cup.

  • Page 17
    ... unlimited It used to be impossible to grab a quiet moment amidst the hectic life of the city. But now you can relax and keep up with your latest soap opera in the palm of your hand. With our T-DMB phone, you can even switch to play your favorite song or snap a picture of...

  • Page 18
    ... to take him to the aquarium, but at the last minute had to go on a business trip. But don't worry, the dolphins will just come to him when Daddy gets back. And with the lifelike quality of our LCD TV, he'll probably think those playful creatures are about to get him wet.

  • Page 19
    R7 series LCD TV High Definition viewing and 5-speaker surround sound in a stylish premium design. Our DNIeâ„¢ (Digital Natural Image engine) technology delivers lifelike 1366 X 768 resolution and 4000 :1 Dynamic Contrast. Our innovative S-PVA (Super Patterned Vertical Alignment) LCD provides...

  • Page 20
    Worldwide business unlimited NT-X60 Notebook PC Designed to meet the demands of professional notebook PC users, Samsung's X60 features accelerated 3D graphics, enhanced wireless connectivity and high performance multi tasking functionality.

  • Page 21
    ... numbers at lightning speed. SPH-M8000 Mobile WiMAX Phone The first Mobile WiMAX phone with a slide-out QWERTY keyboard and Windows Mobile OS. It combines phone and office into one wireless device supporting a high-speed data service that provides seamless mobility for business people...

  • Page 22
    Video excitement unlimited It was hard for this rollerblader to have much fun while she also was busy recording it. All that video equipment would really slow her down. Now our Sports Camcorder puts the lens on her helmet and the rest of the tiny camera in her pocket to move her ahead of the pack.

  • Page 23

  • Page 24
    Life unlimited...the world everyone dreams of...the world more elegant and satisfying...the world Samsung Electronics makes real. SC-X210L Sports Camcorder This ultra-compact camcorder lets you capture the action even when you're in it. Clip on the external lens for hands-free operation. 10 x ...

  • Page 25
    ... quality and performance in digital media, communications, digital appliances, semiconductors, and LCD displays. Samsung Electronics is constantly questioning what is accepted as the ultimate in capability and reliability. We answer these challenges in five business divisions, dedicated to pushing...

  • Page 26
    DIGITAL MEDIA BUSINESS In digital media products, technology is not the essence. Technology is the enabler. The essence is what people want - SPD- 50P7HD PDP TV 24

  • Page 27
    and also what people don't know they want - yet. These are the unprecedented experiences our cutting - edge products can deliver- because we continue to develop technology beyond accepted limits. Unlimited Enjoyment 25

  • Page 28
    ... part in the standardization of DLNA (Digital Living Network Alliance). We continued to introduce new product concepts, such as memory camcorders. We acquired an MP3 player business from a subsidiary and more than doubled its sales. Ranked NO. 2 in the mono laser printer and Financial...

  • Page 29
    ... products, including FPTVs, LCD monitors, DVDs, digital camcorders, laser printers, notebook PCs, and MP3 players. Operationally, we moved into our new Digital Research Center last October which will foster synergy among related businesses. In particular, the center is equipped...

  • Page 30
    TELECOMMUNICATION NETWORK BUSINESS Unlimited Mobility The world is converging onto a digital platform that unites telecommunications, video, photography, music, movies, and television. A wireless world- at rest and in motion- is available in the palm of your hand. We are driving this convergence. ...

  • Page 31
    SGH-D820 Mobile Phone SGH-P900 Mobile Phone 29

  • Page 32
    ...dual-LCD folder phone to, most recently, the world's first 8-megapixel camera phone. In playing a major role in helping shape the mobile multimedia world, the division has built significant market share in mobile handset production, steadily rising to the top tier of the industry...

  • Page 33
    ... competitors." Soonbong Chun Financial Associate World's First Product SGH-i300 Mobile Phone The world's first music smartphone offers an incredible 3GB of hard disk drive storage. It's also the first phone with "Plug & Play Files-toGo", allowing PC users to easily transfer files in any format...

  • Page 34
    DIGITAL APPLIANCE BUSINESS Digital technology is changing the home of today as it is used to develop products that are exceedingly effortless, industrious and environment-friendly. At Samsung, we center our design, our engineering and our development on the limitless possibilities that digital ...

  • Page 35
    SRT689QDGR Refrigerator 33

  • Page 36
    ... challenges, Samsung Electronics' Digital Appliance Business showed steady growth in 2005, thanks to our innovative technologies and designs. In the last two years, we added a full line of cooking appliances, completing our range of kitchen products that will support strong...

  • Page 37
    ...stronger product line-up and sales infrastructure. Globally, we will make further advancements to our leading positions in microwave ovens and vacuum cleaners. Samsung stands by its commitments to growth via R&D. In the Digital Appliance Business, the emphasis is on developing...

  • Page 38
    ... of the technology inside. We challenge the limits of current capabilities to design products that are the first and best of breed. This is the essence of our established success and it continues to drive us as we work to develop innovative semiconductor solutions that anticipate and meet new needs...

  • Page 39
    16Gb NAND Flash Memory 37

  • Page 40
    ...As a global industry leader, we are further concentrating our resources on building core competencies on the mobile and digital consumer fronts. Memory Samsung Electronics, the market leader in numerous memory product areas, updated our record of decade-long market leadership once...

  • Page 41
    ... focus on premium products, especially DDIs, CISs, mobile application processors, chip card ICs, and media player ICs. Storage Samsung Electronics has been stepping up its hard disk drive business continuously in both volume and technology; achieving 10% market share...

  • Page 42
    LCD BUSINESS

  • Page 43
    ... the market drives LCD screens ever-larger, we never forget the thousands of smaller applications, from cameras to mobile phones to kiosks of every dimension. These products are just as important and far more pervasive. We're also focused on the limitless possibilities of next-generation displays...

  • Page 44
    ... maintain its number one position in total sales. In October, the LCD Business exceeded monthly sales of USD 1 billion, and in November, total sales for the year reached USD 10 billion, the first time these milestones were reached in the industry. The LCD Business has had the largest market share in...

  • Page 45
    ...: mobile LCDs, laptop LCDs, monitor LCDs, and TV LCDs by 2008. In small and mid-sized LCDs, we collaborate with companies to future displays including OLED, with the goal of being the number one company for these next-generation products. In the PID (Public Information Display) market...

  • Page 46
    Unlimited Innovation Pursuing innovation in four key areas: R&D, Design, Brand Marketing, and Corporate Citizenship. Beyond the specific areas we pursue in each of our business divisions, Samsung Electronics looks at pursuing innovation without limits across four broad areas of our overall activity...

  • Page 47
    ...expanding the limits of our products' capabilities are the key to our leadership. At Samsung Electronics, we believe people and technology are our core resources. Our success is built on using creative and innovative technology to create new lifestyles and new markets. This is why we...

  • Page 48
    ... of home entertainment is here with the world's first consumer Blu-ray disc player. The highdefinition format was developed by a group of top companies including Samsung Electronics. a host of new applications including broadcasting, home networking, video telephony, VOD, and navigation...

  • Page 49
    ... our brand a marketplace icon. The world's first single-sheet, 40-inch OLED (Organic Light-Emitting Diode) establishes Samsung Electronics' leadership in nextgeneration ultra-slim, ultra sharp flat panel TVs. It was made possible by replacing costly polysilicon approaches with standard...

  • Page 50
    ... R&D Innovation Recent R&D Accomplishments 6.82 % of consolidated sales 2005 2004 2003 in trillions of KRW Patent Management Achieve Top 3 by 2007 US patents filed in 2005 : 2005 WiBro system and devices 50nm 16Gb (MLC) NAND flash memory World's biggest TFT drive AMOLED 5.50 ( 6.82%) 4.90...

  • Page 51
    ...dot, and Design for Asia Awards, in addition to hundreds of top domestic honors. It's not surprising Samsung has built a solid reputation as the brand to watch for must-have new products that appeal to style conscious consumers all over the world. We are consistently...

  • Page 52
    ... of today's marketplace. This international network of design centers is strategically important in developing products for both local and global markets. Being local, each design center is well positioned to understand and analyze local cultures, living patterns, lifestyles, and trends...

  • Page 53
    ...Seung-Ho Lee Product Designer Integrating the User Experience Our commitment and focus is on showing the world unlimited human ingenuity. As part of this commitment, we have created the position of chief design officer, giving our designers a direct link to top management, one more way...

  • Page 54
    ...) LA Lab (LA) Samsung Design Japan (Tokyo) Samsung Design America (San Francisco) Talented designers at seven design centers around world, collaborating on cutting-edge products, winning the industry's most prestigious awards. LCD TV (LT46G1) âˆ' 2005 iF âˆ' 2005 red dot Mobile Phone (SGH-E800...

  • Page 55
    ...focus. We invest around USD 3 billion a year in brand marketing activities, and it is money well spent. In Interbrand's annual rankings of the world...the biggest gain in value of any Global 100 brand for the last five years, with a 186% surge to USD 14.9 billion by the end of ...

  • Page 56
    ... Times Square, at the world center of business. Samsung sponsored Chelsea FC which won the Championship Trophy for the 2005/2006 English Premier League. Players from around the world gathered in Singapore for the opening ceremony of the World Cyber Games 2005, sponsored by Samsung Electronics...

  • Page 57
    ... Winter Games, we provided WOW (Wireless Olympic Works) services, putting games information and event results onto mobile phones used for Olympic Games Operations. We also set up the Olympic Rendezvous at Samsung (OR@S) as the central point of our on-site...

  • Page 58
    ... ways possible; to support the less fortunate in the community; and to help celebrate and preserve our heritage and culture. Samsung is honored to support the International Paralympic Committee, including exclusive Competition Bibs sponsorship for the Torino 2006 Paralympic Winter Games.

  • Page 59
    ...000 "Samsung DigitAll Hope" award. A further USD 30,000 was donated to the Margaret Drive Special School in Singapore. Samsung Electronics held a charity run to support the National Palace Museum in Taiwan. About 30,000 participants raised USD 0.5 million for a cultural fund. A Better Life for...

  • Page 60
    ... years. In Dubai, Samsung Electronics donated digital products to the Children's Hospital computer room and the Al Nur Foundation, a social organization. Samsung and Microsoft jointly announced the winners of the annual "Hope for Education" essay contest, awarding prizes worth USD 2.2 million...

  • Page 61
    ...Sheets 76 Consolidated Statements of Income 78 Consolidated Statements of Changes in Shareholders' Equity 82 Consolidated Statements of Cash Flows 84 Notes of Consolidated Financial Statements Non-consolidated Five-year Financial Summary 134 136 Consolidated Five-year Financial Summary...

  • Page 62
    ... production lines of the 3G phones. Also, our Digital Media/Appliance businesses posted the world's highest sales figure in the TV market including LCD TV, PDP TV, and CRT TV. This reaffirms Samsung Electronics' industry leadership in the TV market and also enhances its position as a world...

  • Page 63
    ...we mainly focus on the high-end market. In 2006, the company will solidify its leadership in the high-end market through continuously releasing innovative products and diversifying models of mega pixel camera phone, slim phone, and W-CDMA phone. Digital Media Business Creates the Digital Culture...

  • Page 64
    ..., TFT-LCD monitor and LCD TV panel in LCD Business, mobile phone and network system in Telecommunication Network Business. And more in Digital Media Network Business which oversees AV and PCs and Digital Appliances Network dealing with washing machines, refrigerators and air conditioners. By...

  • Page 65
    ... 1.06 M shares - Issued shares before Share Cancellation in 2004: Total 179,502,764 Shares (Ordinary 155,609,337 / Preferred 23,893,427) 5. Productions by division Division Digital Media Telecommunication Network Semiconductor LCD Digital Appliance Others Total ( non-consolidated ) (in...

  • Page 66
    ... Sub-total LCD Domestic Export Sub-total Digital Appliance Domestic Export Sub-total Others Domestic Export Sub-total Total Domestic Export Sub-total \ 10,294,908 47,162,762 \ 57,457,670 \ 10,036,763 47,595,596 \ 57,632,359 7. Major CAPEX and Source of fund Title ( non-consolidated...

  • Page 67
    ... on important business issues and conducted thorough reviews on them. 2. Balance Sheet and Income Statements Balance Sheets and Income Statements show the Company's financial status including assets, liabilities, profits and losses in accordance with the generally accepted accounting standards...

  • Page 68
    ...the financial position of Samsung Electronics Co., Ltd. and its subsidiaries as of December 31, 2005 and 2004, and the results of their operations, the changes in their shareholders' equity and their cash flows for the years then ended in conformity with accounting principles generally accepted...

  • Page 69
    .... The accompanying consolidated financial statements are not intended to present the financial position, results of operations and cash flows in conformity with accounting principles and practices generally accepted in countries and jurisdictions other than the Republic of Korea. In addition...

  • Page 70
    ... assets Prepaid expenses and other current assets Total current assets Lease payment receivables under capital lease Property, plant and equipment, including revalued portion, net of accumulated depreciation Long-term available-for-sale securities Equity-method investments Intangible assets, net...

  • Page 71
    ...2005 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Trade accounts and notes payable Other accounts and notes payable Accrued expenses Income taxes payable Other current liabilities Total current liabilities Foreign currency notes and bonds Long-term advances received Long-term accrued...

  • Page 72
    ...Non-operating expenses Interest expense Foreign exchange losses Loss on foreign currency translation Loss on valuation of investments using the equity method of accounting Others Total non-operating expenses Ordinary profit Extraordinary income Extraordinary loss Net income before income taxes...

  • Page 73
    ... dividends (Dividend rate: 10% in 2005 and 100% in 2004) Retirement of treasury stock Net income Total retained earnings before appropriations Appropriations Legal reserve Reserve for business rationalization Reserve for research and human resource development Cash dividends (Common stock...

  • Page 74
    ... Gain on valuation of investments using the equity method of accounting Loss on valuation on investments using the equity method of accounting Deferred income taxes Others Total items not involving cash flows Changes in operating assets and liabilities: Increase in trade accounts and notes...

  • Page 75
    ...available-for-sale securities Acquisition of equity-method investments Others Net cash used in investing activities Cash flows from financing activities Repayment of current portion of long-term debt Payment of dividends Acquisition of treasury stock Exercise of stock options Others Net cash used...

  • Page 76
    ... current assets Total current assets Property, plant and equipment, including revalued portion, net (note 11) Long-term available-for-sale securities (note 9) Long-term held-to-maturity securities (note 9) Equity-method investments (note 10) Deferred income tax assets (note 26) Intangible assets...

  • Page 77
    ... 18) Long-term advances received (note 19) Accrued severance benefits, net (note 17) Deferred income tax liabilities (note 26) Other long-term liabilities Total liabilities Commitments and contingencies (note 19) Shareholders' equity Capital stock (note 20) Common stock Preferred stock Capital...

  • Page 78
    ...note 30) Gain on valuation of equity method investments (note 10) Others Non-operating expenses Interest expense Foreign exchange losses Loss on foreign currency translation (note 30) Loss on valuation of equity method investments (note 10) Impairment losses on investments Others 218,233 1,124...

  • Page 79
    ... in losses of consolidated subsidiaries, net Net income Basic earnings per share (note 27) (in Korean won and U.S. dollars) Diluted earnings per share (note 27) (in Korean won and U.S. dollar) The accompanying notes are an integral part of these consolidated financial statements. 2004...

  • Page 80
    ... of changes of consolidated subsidiaries Cash dividends Disposal of treasury stock Retirement of treasury stock Acquisition of treasury stock Gain on valuation of available-for-sale securities Gain on valuation of investments using the equity method of accounting Loss on valuation of investments...

  • Page 81
    ... of changes of consolidated subsidiaries Cash dividends Disposal of treasury stock Retirement of treasury stock Acquisition of treasury stock Gain on valuation of available-for-sale securities Gain on valuation of investments using the equity method of accounting Loss on valuation of investments...

  • Page 82
    ... effects of changes of consolidated subsidiaries Cash dividends Disposal of treasury stock Retirement of treasury stock Acquisition of treasury stock Loss on valuation of available-for-sale securities Gain on valuation of investments using the equity method of accounting Stock option compensation...

  • Page 83
    ... effects of changes of consolidated subsidiaries Cash dividends Disposal of treasury stock Retirement of treasury stock Acquisition of treasury stock Loss on valuation of available-for-sale securities Gain on valuation of investments using the equity method of accounting Stock option compensation...

  • Page 84
    ... transfer of trade accounts and notes receivable Bad debt expenses Compensation cost for stock options Loss on foreign currency translation Gain on foreign currency translation Minority interest in earnings of consolidated subsidiaries, net Loss on valuation of investments using the equity method...

  • Page 85
    ...accounts and notes receivable Proceeds from disposal of property, plant and equipment Acquisition of property, plant and equipment Proceeds from sale of long-term available-for-sale securities Proceeds from sale of long-term held-to-maturity securities Proceeds from sale of equity-method investments...

  • Page 86
    ...1.09 Name of Shareholder Citibank N.A. Samsung Life Insurance Co., Ltd. Samsung Corporation Lee Kun-Hee and others National Pension Corporation NTC-GOV SPORE Samsung Fire & Marine Insurance Co., Ltd. Consolidated Subsidiaries The consolidated financial statements include the accounts of SEC...

  • Page 87
    ... Card Co., Ltd. STECO Co., Ltd. SEMES Co., Ltd. (formerly known as DNS Korea Co., Ltd.) Samsung Electronics Service Co., Ltd. Home appliances manufacturing Consumer financing Semiconductor equipment manufacturing Semiconductor equipment manufacturing Service center for electronic goods Sales...

  • Page 88
    ... Holding Company (Financing) Sale of electronic goods Sale of electronic goods Distribution and sale of electronic goods Sale of electronic goods and telephone Semiconductor sales Sale of electronic goods Semiconductor sales Sale of electronic goods Logistics Monitor manufacturing Marketing 148...

  • Page 89
    ...) Research center Sale of electronic goods CTV, VCR manufacturing and sales Sale of electronic goods Monitor manufacturing and sales Home appliances manufacturing and sales CTV manufacturing and sales Sale of electronic good CTV manufacturing and sales of electronic goods CTV and washing machine...

  • Page 90
    ... Souzhou Samsung Electronics Co., Ltd. (SSEC) Samsung (China) Investment Co., Ltd. (SCIC) Tianjin Samsung Electronics Co., Ltd. (TSEC) Home appliances manufacturing and sales Holding company and sales VCR manufacturing and sales Monitor manufacturing CTV manufacturing HHP manufacturing LCD...

  • Page 91
    ... Chile Mexico Mexico Europe Samsung Russia Service Center, Ltd. Samsung-Crosna Joint Stock Company Samsung Electronics Austria Gmbh Samsung Electronics Ukraine Samsung Telecommunications Benelux Samsung Electronics Manufacturing (UK) Ltd. Service Telecom (Exchanges) Marketing Marketing...

  • Page 92
    ... in the consolidated financial statements for the year ended December 31, 2005, are as follows: Location Korea Asia Asia Name of Subsidiaries Samsung Electronics Hainan Fiberoptics Korea. Co., Ltd. (SEHF-K) Samsung Malaysia Electronics SDN BHD (SME) Samsung India Software Operations Pvt...

  • Page 93
    ... increment, net of revaluation tax, is first applied to offset accumulated deficit and deferred foreign exchange losses, if any. The remainder may be credited to other capital Equity-Method Investments In the consolidated financial statements of the Company, investments in business entities in...

  • Page 94
    ... transferred to common stock. A new basis for calculating depreciation is established for revalued assets. Depreciation is computed using the straight-line method over the following estimated useful lives: Estimated useful lives Buildings and auxiliary facilities Structures Machinery and equipment...

  • Page 95
    ... of the goods are transferred to the buyer. Revenue from installation service contracts is recognized using the percentageof-completion method. Foreign Currency Translation Assets and liabilities denominated in foreign currencies are translated into Korean won at the rate of exchange in effect as...

  • Page 96
    .... All won amounts are expressed in U.S. dollars at the rate of \1,013 to US$1, the exchange rate in effect on December 31, 2005. Such presentation is not in accordance with generally accepted accounting principles in either the Republic of Korea or the United States, and should not be construed...

  • Page 97
    ...485 181,511 1,463,199 510 186,745 52,170 \ 2,476,620 Government and public bonds Financial institution bonds Subordinated securities \ - 178 \ 152 29,593 Financial institution bonds Fair-value investments 3 Beneficiary certificates 4 ABS senior securities \ 585,225 166,199 1,114,543...

  • Page 98
    ... Value Discount Present Value Period Weighted-Average Interest Rate (%) Long-term loans and others Long-term payables \ 89,204 \ 619,797 \ 16,952 \ 87,641 \ 65,952 \ 532,156 2003.7~ 2011.12 2000.12~ 2014.8 4.8 ~ 8.0 3.8 ~ 8.0 Note 7: Inventories Inventories, net of valuation losses, as...

  • Page 99
    ... 31, 2004, have been reclassified as credit card assets. As a result, the Company has restated the prior year financial statements to reclassify both short-term available-for-sale securities amounting to \308,357 million and long-term available-for-sale securities amounting to \758,560 million...

  • Page 100
    ...,716 457,800 28,914 363 1,281,793 Fair-value investments Cost-method investments Government and public bonds and others Funds 1 (1) (2) (3) Classâ...¡ beneficiary certificates accounted for as long-term available-for-sale securities as of December 31, 2004, have been reclassified as...

  • Page 101
    ... Value Samsung Heavy Industries Co., Ltd. Samsung Fine Chemicals Co., Ltd. The Shilla Hotel & Resorts Cheil Communications Inc. Samsung Fire & Marine Insurance Co., Ltd. Samsung Securities Co., Ltd. S1 Corporation lnc. Samsung Engineering Co., Ltd. Cheil Industries lnc. Korea Information Service...

  • Page 102
    ..., these investments in affiliated companies were not valued using the equity method, due to the immateriality of their asset values or the Company's inability to exercise a significant influence over the operating and financial policies. Losses on impairment of cost-method investments resulting...

  • Page 103
    ...recorded in a separate component of shareholders' equity as other capital adjustments. In relation to government and public bonds and others, an impairment loss of \11,838 million was recorded as nonoperating expense for the year ended December 31, 2004. (2) Long-Term Held-To-Maturity Securities...

  • Page 104
    ...) Number of Shares Owned Percentage of Ownership (%) Acquisition Cost Net Book Value Recorded Book Value Samsung SDI Co., Ltd. Samsung Electro-Mechanics Co., Ltd. Samsung Techwin Co., Ltd. Seoul Commtech Co., Ltd. Samsung Economic Research Institute Samsung SDS Co., Ltd. Samsung Networks Inc...

  • Page 105
    ...) Number of Shares Owned Percentage of Ownership (%) Acquisition Cost Net Book Value Recorded Book Value Samsung SDI Co., Ltd. Samsung Electro-Mechanics Co., Ltd. Samsung Techwin Co., Ltd. Seoul Commtech Co., Ltd. Samsung Economic Research Institute Samsung SDS Co., Ltd. Samsung Networks lnc...

  • Page 106
    ...) 11,766 8 \ 71,482 \ 26,716 \ 43,070 Information relating to the elimination of unrealized gains and losses as of December 31, 2005 and 2004, follows: (in millions of Korean won) 2005 Inventories Property, Plant and Equipment and Intangible Assets \ 605 693 62 111 (2,163) (117) 1 2,559...

  • Page 107
    ... Earnings Beginning (Losses) from of Year Equity Method Investments \ 161,607 24,130 (5,906) 12,609 46,431 5,707 236,175 27,237 11,899 13,600 (41,776) 3,907 \ 495,620 Other Increase (Decrease) Balance at End of Year Samsung SDI Co., Ltd. Samsung ElectroMechanics Co., Ltd. Samsung Techwin Co., Ltd...

  • Page 108
    Financial information of investee companies as of December 31, 2005 and 2004, follows: (in millions of Korean won) 2005 Assets Liabilities Sales Net income (Loss) Assets 2004 Liabilities Sales Net income (Loss) Samsung SDI Co., Ltd. Samsung ElectroMechanics Co., Ltd. Samsung Techwin Co., Ltd. ...

  • Page 109
    ...from changes in consolidation category, merger and changes in foreign currency exchanges rates. In accordance with the Asset Revaluation Law, on January 1, 1980, 1982, 1998 and April 1, 1999, SEC revalued a substantial portion of its property, plant, equipment and investments in equity securities...

  • Page 110
    ... to US$ 5,547 thousand), respectively, is pledged as collaterals for various loans from financial institutions. As of December 31, 2005, property, plant, equipment are insured against fire and other casualty losses, and business interruption losses of up to \ 55,261,920 million and \ 21,298,026...

  • Page 111
    ... 59,735 \ 153,997 \ \ 2004 17,379 53,630 45,180 116,189 Production costs Selling and administrative expenses Research and development expenses Note 13: Long-Term Deposits and Other Assets Long-term deposits and other assets as of December 31, 2005 and 2004, consist of the following: (in...

  • Page 112
    ... the following: (in millions of Korean won) Annual interest rates (%) as of December 31, 2005 2.8 - 4.5 6.9 2.5 - 4.9 \ \ 2005 2004 Korea Energy Management Corporation Samsung Life Insurance Co., Ltd. Samsung Shinhan 4th Special Purpose Company Hana Bank Others 921 320,000 215,346 5,949 542...

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    ...rates (%) as of December 31, 2005 5.3 4.9 - 6.9 0.4 - 13.3 \ \ 2005 2004 National Agricultural Cooperative Federation Shinhan Bank Royal Bank of Scotland Foreign financial institutions... 9,554,196 Maturities of long-term debts outstanding, excluding premiums and discounts on debentures, as of ...

  • Page 114
    ... payments Others 1 Less: Cumulative deposits to the National Pension Fund Severance insurance deposits Balance at the end of the year 1 (14,807) (840,268) \ 576,922 Others include amounts from changes in consolidation category and changes in foreign currency exchange rates. 112

  • Page 115
    ... Korean financial institutions with a combined maximum limit of \718,500 million. (E) The Company leases certain property, plant and equipment under various capital lease arrangements. Assets recorded under capitalized lease agreements are included in property, plant and equipment with a total...

  • Page 116
    ... Company maintains credit insurance against its approved foreign customers on behalf of its affiliates and subsidiary companies with Korea Export Insurance Co. (J) As of December 31, 2005, the Company has forward exchange contracts to manage the exposure to changes in currency exchanges rates...

  • Page 117
    ... have agreements with financial institutions to sell certain eligible trade accounts receivable under which, on an ongoing basis, a maximum of US$1,595 million can be sold. The Company has trade notes receivable discounting facilities with various Korean banks, including Korea First Bank with...

  • Page 118
    ..., subject to the Board of Directors' approval, to issue shares of common or preferred stock to investors other than current shareholders for issuance of depository receipts, general public subscription, urgent financing with financial institutions, and strategic alliance. SEC is authorized...

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    ... gain on disposal of property, plant and equipment and 10% of net earnings for each year, until the shareholders' equity equals 30% of total assets. This reserve is not available for the payment of cash dividends, but may be transferred to capital stock or used to reduce accumulated deficit...

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    ...,500 3.47% Dividend per share Market price as of December 31, 2005 and 2004 Dividend yield ratio Note 23: Treasury Stock As of December 31, 2005, the Company holds 16,679,040 shares of its own common stock and 2,179,693 shares of its own preferred stock. These treasury stocks are recorded...

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    ... the equity method Loss on valuation of investment using the equity method Stock option compensation Cumulative translation adjustments Others Note 25: Stock Option Plan The Company has a stock option plan that provides for the granting of stock purchase options to employees or directors who...

  • Page 122
    ...224 million for the periods thereafter. Samsung Card Co. Ltd., a domestic subsidiary, has granted 375,000 shares in stock options over two periods. The exercise price and the number of shares granted to employees and directors of Samsung Capital Co., Ltd. as part of the merger in 2004 have been...

  • Page 123
    ... purposes Equity-method investments Depreciation Capitalized interest expense Accrued income Accrued expenses Deferred foreign exchange gains Impairment losses on investments Others Deferred tax assets arising from the carryforwards Undisposed accumulated deficit Tax credit carryforwards...

  • Page 124
    ...purposes Equity-method investments Depreciation Capitalized interest expense Accrued income Accrued expenses Deferred foreign exchange gains Impairment losses on investments Others \ Deferred tax assets arising from the carryforwards Undisposed accumulated deficit Tax credit carryforwards...

  • Page 125
    ...income as reported on the statements of income Adjustments: Dividends for preferred stock Undeclared participating preferred stock dividend Net income available for common stock Weighted-average number of common shares outstanding Earnings per share Diluted earnings per share for the years ended...

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    ... by applying the treasury stock method. Under the treasury stock method, the proceeds from the exercise of the stock options are assumed to be used to purchase common stock at the average market price. The incremental shares which is the difference between the number of shares assumed to be...

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    ...1,880,625 The related company loans resulting from significant ...Sales 2005 2004 Purchases 2005 2004 Receivables 2005 2004 Payables 2005 2004 Equity-method investees Samsung SDI Co., Ltd. 1 Samsung SDS Co., Ltd. Samsung ElectroMechanics Co., Ltd. Samsung Corning Precision Glass Co., Ltd. Samsung...

  • Page 128
    ...203 122 212,021 6,950 7,829 Payables 2005 2004 \ 437,365 70,337 1,930 160,269 26,722 18,951 53,395 \ 768,969 Company Samsung Corporation iMarketKorea Inc. Samsung Life Insurance Co., Ltd. Cheil Communications Inc. Samsung Everland Co., Ltd. Samsung Heavy Industries Co., Ltd. Others 2004 \ 56...

  • Page 129
    ...Foreign company 2005 2004 Korean Won (Equivalent) Foreign Currency Foreign Currency Amount Korean Won (Equivalent) Domestic company 2005 Foreign Currency Amount Korean Won (Equivalent) 2004 Korean Won (Equivalent) Account Foreign...5,218 121,038 Trade accounts and notes receivable ... assets US...

  • Page 130
    ...,109 141,047 2,792 118 278,066 Short-term borrowings, (including document against acceptance) Other current liabilities US$ JPY EUR Others Long-term other accounts payable US$ Others Foreign currency notes and bonds (including current portions) 200,000 449,927 4,417,318 461,079 1,533...

  • Page 131
    ...35,741,684 \ 54,753,708 Financial Business 2005 2004 ASSETS Current assets Investments Property, plant and equipment Intangible assets Total assets LIABILITIES Current liabilities Non-current liabilities Total liabilities SHAREHOLDERS' EQUITY Capital stock Capital surplus Retained earnings Capital...

  • Page 132
    ... 7,598,628 10,828,224 (1,301,251) (1,427,413) (41,464) 38,689 - - \ 7,640,092 \ 10,789,535 \ (1,301,251) \ (1,427,413) In the above consolidated financial statements of the nonfinancial business, the financial service subsidiary has been accounted for using the equity method. 130

  • Page 133
    ...,610) \ 17,656,558 \ 247,700 Digital appliance Telecommunication Network Semiconductor LCD Finance Others Elimination Consolidated \ 80,629,510 \ 80,629,510 \ 7,575,498 \ 74,461,798 Gross sales Intersegment sales Net sales Operating profit (loss) Total assets \ 10,594,106 \ 36,641,463...

  • Page 134
    ...,486,869 (4,171,148) \ 12,315,721 \ \ Korea (Export) \ 50,719,397 (45,773,056) 4,946,341 Asia America Europe Africa Elimination Consolidated \ 80,629,510 \ 80,629,510 \ 7,575,498 Gross sales Intersegment sales Net sales Operating profit (loss) Total assets \ 43,268,723 (18,082,515) \ 25...

  • Page 135
    ... to available-for-sale securities Reclassification of construction-in-progress and machinery in transit to other property, plant and equipment accounts Current maturities of other long-term liabilities Decrease in retained earnings arising from retirement of treasury stock \ 1,846,815 818...

  • Page 136
    ... using the equity method of accounting Others Total non-operating income Non-operating expenses Interest expense Foreign exchange loss Loss on foreign currency translation Loss on valuation of investments using the equity method of accounting Loss on valuation of inventories Loss on impairment...

  • Page 137
    ... using the equity method of accounting Others Total non-operating income Non-operating expenses Interest expense Foreign exchange loss Loss on foreign currency translation Loss on valuation of investments using the equity method of accounting Loss on valuation of inventories Loss on impairment...

  • Page 138
    ... Gain on valuation of equity method investments Others Total non-operating income Non-operating expenses Interest expense Foreign exchange loss Loss on foreign currency translation Loss on valuation of equity method investments Impairment losses on investments Others Total non-operating...

  • Page 139
    ... Gain on valuation of equity method investments Others Total non-operating income Non-operating expenses Interest expense Foreign exchange loss Loss on foreign currency translation Loss on valuation of equity method investments Impairment losses on investments Others Total non-operating...

  • Page 140
    Board of Directors SEC works to enhance its business by encouraging a progressive and entrepreneurial environment based on the highest standards of governance, transparency, and accountability. Under such policy, the BOD administers the performance of management, sets corporate management ...

  • Page 141
    ...Director, Financial Planning Standards Board of Korea [2000-Present] President & CEO, Kookmin Investment Trust Management [1998-2000] Managing Director, Korea Long Term Credit Bank [1998] Jae-Sung Hwang Outside Director, Samsung Electronics Co., Ltd. [2000-Present] Senior Advisor, Kim & Chang...

  • Page 142
    ... Luxemburg Stock Exchange under the symbol "SAMDR". A total of 29,306,594 GDRs are currently outstanding, representing 14,653,297 common shares. For information regarding our global depository receipts, please contact Citibank, N.A. DR Shareholder Services in the US at 877-248-4237, or e-mail...

  • Page 143
    ... SP - Brasil Europe Samsung Electronics Europe Headquarters Samsung House, 1000 Hillswood Drive, Chertsey, Surrey, KT16 0PS Southeast Asia Samsung Electronics Southeast Asia Headquarters 83 Clemenceau Ave, #09-00 UE Square, Singapore 239920, Singapore PRODUCTION NETWORK KOREA Suwon Complex...

  • Page 144
    ...5644-6400 [Mexico] Samsung Electronics México (production) (SEM), Queretaro Tel: 52-442-296-9003 Samsung Méxicana S.A. de C.V. (SAMEX), Tijuana Tel: 1-619-671-1669 [United States] Samsung Austin Semiconductor, Llc (SAS), Austin Tel: 1-512-672-1000 SALES NETWORK ASIA PACIFIC [Australia] Samsung...

  • Page 145
    ...-7114 [Japan] Samsung Japan Corporation (SJC), Tokyo Tel: 81-3-6234-2111 [Malaysia] Samsung Malaysia Electronics Sdn. Bhd. (SME), Kuala Lumpur Tel: 60-3-2263-6600 [The Philippines] Samsung Electronics Philippines Co. (SEPCO), Manila Tel: 63-2-722-7777 [Singapore] Samsung Asia Private. Ltd. (SAPL...

  • Page 146
    ...Office NORTH AMERICA [Canada] Samsung Electronics Canada Inc. (SECA), Toronto Tel: 905-542-3535 [Mexico] Samsung Electronics México S.A. de C.V. (SEM), Mexico City Tel: 52-55-5747-5100 [United States] Samsung Electronics America, Inc. (SEA), Ridgefield Park Tel: 1-201-229-4000 Samsung Electronics...

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    WWW.SAMSUNG.COM

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