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67
Seoul, Korea
February 27, 2006
Affiliates agreed to sell 3,500,000 shares of Samsung Life
Insurance Co., Ltd., which were previously transferred to the
Creditors in connection with the petition for court receivership
of SMI by December 31, 2000. In the event that the sales
proceeds fall short of \2,450 billion, SEC and the Affiliates
have agreed to compensate the Creditors for the shortfall by
other means, including the participation in any equity offering
or subordinated debentures issued by the Creditors.
Any excess proceeds over \2,450 billion are to be distributed
to SEC and the Affiliates. In the event of delays, interest on
the agreed sales proceed amount of \2,450 billion has been
agreed to be paid to the Creditors by SEC and the Affiliates.
As of the balance sheet date, these transferred shares of
Samsung Life Insurance Co., Ltd. have not yet been sold.
As a result, on December 9, 2005, the Creditors filed a civil
lawsuit against Mr. Lee Kun-Hee, the chairman of SEC, SEC
and 27 other Samsung Group Companies, for losses arising
from breach of this agreement.
The Creditors are claiming for the agreed sales proceeds
of \2,450 billion and damages for delays amounting to
\2,287.9 billion, both with interest of 6% per annum from
January 1, 2001 until the date SEC was served with court
papers and 20% per annum thereafter until settlement.
Interest on the damages for delays has been calculated on
a monthly basis from January 1, 2001. In addition, the
Creditors are claiming further damages for delays (calculated
at 19% per annum on \2,450 billion) from December 1, 2005
until settlement.
As of the balance sheet date, the outcome of this litigation is
uncertain and accordingly, the ultimate effect of this matter
on the financial position of the Company cannot presently be
determined.
The amounts expressed in U.S. dollars, provided solely for the
convenience of the reader, have been translated on the basis
set forth in Note 3 to the accompanying consolidated financial
statements.
Accounting principles and auditing standards and their
application in practice vary among countries.
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, the procedures
and practices used in the Republic of Korea to audit such
financial statements may differ from those generally accepted
and applied in other countries. Accordingly, this report and
the accompanying consolidated financial statements are for
use by those who are informed about Korean accounting
principles or auditing standards and their application in practice.
This report is effective as of February 27, 2006, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the
time of reading this report, could have a material impact on the accompanying consolidated financial statements and notes thereto. Accordingly, the readers of the audit
report should understand that there is a possibility that the above audit report may have to be revised to reflect the impact of such subsequent events or circumstances, if any.
Samil PricewaterhouseCoopers is the Korean mumber firm of PricewaterhouseCoopers. PricewaterhouseCoopers refers to the network of member firms of
PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.