Samsung 2006 Annual Report Download

Download and view the complete annual report

Please find the complete 2006 Samsung annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 154

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154

S A M S U N G E L E C T R O N I C S
A N N U A L R E P O R T 2 0 0 6

Table of contents

  • Page 1
    SAMSUNG ELECTRONICS ANNUAL REPORT 2006

  • Page 2
    ... Communication Corporate Citizenship Co-prosperity Green Management 50 53 55 Growth Future Financial Statements Board of Directors Investor Information Global Network 60 61 136 138 139 Please Read the Following Cautionary Statement Regarding Forward-looking Statements: This annual report includes...

  • Page 3
    2006 Financial Highlights Samsung Electronics and Consolidated Subsidiaries 2004 2005 2006 (in billions of KRW) Income Statement Sales Operating Profit Net Income 81,963 11,761 10,790 80,630 7,575 7,640 85,426 9,008 7,926 Balance Sheet Total Assets Total Liabilities Shareholders' Equity 69,...

  • Page 4
    ... Media business holds the top share of the world digital TV market. We also produce color monitors, DVD and Blu-ray disc players, notebook PCs, printers and portable entertainment devices such as digital camcorders and MP3 players. Our Telecommunication Networks category includes both mobile phones...

  • Page 5
    ... create new kinds of added value, offer products that meet customer needs and make Samsung a market leader. Our Semiconductor business consists of three major divisions: Memory, System LSI and Storage. We boast the world's most advanced DRAMs, SRAMs, NAND ï¬,ash memory chips and display driver ICs...

  • Page 6
    ...company stock. We continue to engage in diverse marketing activities to elevate brand value and position ourselves in the premium product segment. As a result, our global stature has continued to rise. For example, value of the Samsung brand rose from US$15 billion in 2005 to US$16.1 billion in 2006...

  • Page 7
    ...our own technologies and management systems to maintain a unique competitive edge. We are taking on the challenge of the future with creative ideas and innovation. Moreover, we work tirelessly to enhance your future, as Samsung Electronics shareholders. We are reinventing ourselves as a world leader...

  • Page 8
    ... foundation as a world-leading company with creative innovation and financial soundness. To Our Customers, Business Partners and Shareholders : The global economy had been growing solidly for several years but has showed signs of a steady slowdown since the second half of 2006, particularly in the...

  • Page 9
    ... Despite plummeting prices for NAND ï¬,ash memory chips, we have continued to cut production costs and have maintained the highest profitability among the world's chip makers. In the mobile phone segment, meanwhile, our new Ultra Edition series has led the trend toward ultra-slim models and further...

  • Page 10
    ... technology was applied to develop the world's first 1GB DRAM using 50-nanometer production processes and 32Gb NAND ï¬,ash memory with 40nm processing. In addition, we commercialized Mobile WiMAX, a next-generation wireless communication system. 2007 Business Environment and Management Strategies...

  • Page 11
    ... mainstay product lines (memory chips, LCDs, mobile phones, ï¬,at panel TVs), we will remain the most competitive and develop our competitiveness further by introducing new concepts first in the market and by controlling costs. In addition, our printers, Mobile WiMAX and other future growth engines...

  • Page 12
    WIDE+SLIM Get a wider view of the world from a slimmer device: Say good bye to the bulging pockets that cramp your style. Slimness is not only good for waistlines. You don't have to go to the stadium to enjoy your favorite football. Just switch on your TV. "Wider is better" does not only pertain to ...

  • Page 13

  • Page 14
    WIDE+SLIM Get a wider view of the world from a slimmer device: Say good bye to the bulging pockets that cramp your style. Slimness is not only good for waistlines. You don't have to go to the stadium to enjoy your favorite football. Just switch on your TV. "Wider is better" does not only pertain to ...

  • Page 15
    .... Wide screens provide a more realistic experience and give you more information at a glance. Slimmer products are easier to carry around. Samsung Electronics helps you communicate with the world on wider displays and the world's slimmest mobile phones. Ultra Edition 5.9 At 5.9mm, the Ultra Edition...

  • Page 16
    Blackjack Samsung's Blackjack is the first HSDPA smartphone launched in the US. Despite the ultra-slim (11.8mm) profile, you get an impressive suite of advanced functions and features, including QWERTY keypads, 2.3 ˝ LCD, 1.3M-pixel camera with camcorder capability, MP3 player, external memory ...

  • Page 17

  • Page 18
    Blackjack Samsung's Blackjack is the first HSDPA smartphone launched in the US. Despite the ultra-slim (11.8mm) profile, you get an impressive suite of advanced functions and features, including QWERTY keypads, 2.3 ˝ LCD, 1.3M-pixel camera with camcorder capability, MP3 player, external memory ...

  • Page 19
    ... are easy to use by anyone at any time, anyplace. Q1 Ultra The light and compact Ultra Mobile PC comes with splitQWERTY keypads and stylus pens to facilitate composing email or inputting data. The lithium-ion battery lasts 4.5 hours on a single charge, and the device supports 3.5G communications.

  • Page 20
    ... an unlimited world of creativity. We continue to advance our technology to store more data in less space. These efforts are changing the world at a dizzying..., which stores the electric charge in a non-conductive layer of ï¬,ash memory. With 40nm processing technology, we have opened a new chapter in...

  • Page 21

  • Page 22
    ... an unlimited world of creativity. We continue to advance our technology to store more data in less space. These efforts are changing the world at a dizzying..., which stores the electric charge in a non-conductive layer of ï¬,ash memory. With 40nm processing technology, we have opened a new chapter in...

  • Page 23
    ... the semiconductor industry. Our 40nm 32Gb NAND ï¬,ash memory chip packs 32.8 billion transistors, about five times the number of people in the world, into an area the size of your thumbnail. One 32GB memory card using eight 32Gb NAND ï¬,ash memory chips can store over 32 hours of DVD quality video...

  • Page 24
    COOL+CLEVER Smart looks and intelligent operation: Our homes are undergoing some amazing changes, with appliances getting more stylish and more capable of making their own decisions. Indeed, appliances are replacing wallpaper and furniture as the centerpiece of interior dé...

  • Page 25

  • Page 26
    COOL+CLEVER Smart looks and intelligent operation: Our homes are undergoing some amazing changes, with appliances getting more stylish and more capable of making their own decisions. Indeed, appliances are replacing wallpaper and furniture as the centerpiece of interior dé...

  • Page 27
    ... are making life more pleasant for customers and receiving high marks for performance, ease of use, attractive designs and quality. VRT TM Front Loading Washer Samsung combines style, stealth and substance with its new VRT TM (Vibration Reduction Technology) front loading washing machine. Our...

  • Page 28
    ...-generation HSDPA phone launched. · Mobile WiMAX awarded at World Forum. · JUN BD-P1000, world's first Blu-ray disc player, launched. Plays BDs, CDs and DVDs. · Ultra Edition, a premium mobile phone series, launched. · First HSDPA phones released in US. · Samsung honored as "Top TV Brand" in...

  • Page 29
    ... N. America. · Super Music Phone II, world's first with 8GB hard drive, introduced. · APR · World's first UMTS/mediaFLO mobile phone successfully demonstrated. · Premium Bordeaux LCD TV series launched. · Ultra-slim mobile phone named "Best Cellphone" at CTIA 2006. · First 3G DVB-H-enabled...

  • Page 30
    We are ready for the future with our creative innovations.

  • Page 31
    ... innovations and a challenging spirit are powerful tools. We are emerging as a global leader by taking on every challenge, remaining passionate and creating new concepts for the future. The latest products on display at M Zone in Seoul: We constantly study customer needs and sentiments to create new...

  • Page 32
    ... LSI devices and hard disc drives), LCDs (TFT-LCD products in various applications), Telecommunication Networks (mobile phones, telecommunication systems), Digital Appliances (washing machines, refrigerators, air conditioners and system cooking) and Digital Media (TVs, audio/video products, PCs...

  • Page 33
    ... convergence by developing innovative products that shape new lifestyles and by providing the cutting-edge technology to accelerate the convergence trend. We are now emerging as the maker of the world's most competitive digital products for home, mobile and office applications. Samsung LCD TV 23

  • Page 34
    ... of four major divisions: Visual Displays, Digital Audio-Video, Printing and Computer Systems. We are the world's top seller of TVs, and our distinctive product selection ranges from LCD monitors, printers, DVD and Blu-ray disc players, digital camcorders, home theater systems and MP3 players to...

  • Page 35
    ...Telecommunication Networks Digital Appliances Semiconductors LCDs Premium LCD TV for 2007 Samsung Electronics launched diverse AV and IT products that were either the world's first or world's best in 2006. Our lineup of innovative products, including the world's first Blu-ray disc (BD) player...

  • Page 36
    Digital Media Telecommunication Networks Digital Appliances Semiconductors LCDs 10.9 SGH-U600, Ultra Edition â...¡ Creative technologies and innovative services put the world into your palm. The IT industry is undergoing three kinds of convergence simultaneously. The first is in services, where...

  • Page 37
    ... at Samsung Electronics is giving rise to innovative mobile phone designs and new models that will create "blue oceans" of uncontested market space. We will continue to develop cutting-edge technologies and services based on the mobile phone to allow users access to a wealth of information, provided...

  • Page 38
    .... Samsung Electronics has been at the forefront of terminals and systems for 3G mobile communications services, and is now taking the lead in the HSDPA segment, known in the industry as a 3.5G technology. We put the world's first HSDPA phone on the market, followed by a phone that supports both...

  • Page 39
    Digital Media Telecommunication Networks Digital Appliances Semiconductors LCDs New life shapers, lifestyle innovation leader Technological advancements give people greater freedom and enjoyment. The superior functions made possible by advanced technology are transforming home appliances into ...

  • Page 40
    ... set a new industry trend by introducing the novel Quatro Cooling Refrigerator, featuring four separate compartments that are controlled and cooled independently. The Quatro has received tremendous global praise and recognition, including the "Best of Innovations" award at the 2006 International CES...

  • Page 41
    ... the problem no matter where the washing machine is installed. This feature is expected to boost sales of Samsung's front loading washers in the US and Europe. Our newest washing machine model has been widely praised at trade shows and won an Innovation Award at the 2007 International CES. 31

  • Page 42
    ...a wide range of new product lines branch off from traditional mobile devices. Samsung Electronics offers total mobile solutions to satisfy changing customer needs for digital products with more functionality and higher performance. World-leading technologies enable us to serve as a highly innovative...

  • Page 43
    ... devices that process user applications. We have pioneered the development of numerous advancements in chip technology that are now widely used in mobile, desktop and other digital products. Today, we produce the world's most advanced DRAM, SRAM, ï¬,ash memory and DDI (display driver IC) products...

  • Page 44
    ... our industry-leading market share for display driver ICs, a market we has dominated for the past five years, by offering DDI products for large-screen flat panels as well as mobile phones and PDAs. We also secured the top position in the application processor (AP) market for automobile navigation...

  • Page 45
    ...innovations such as the digital information display are affecting how people interact with their environment. Future displays will no longer be simple windows for peering at images or text data. Instead, they will become an integral part of life to enjoy anytime and anyplace. LCD Panels LCD Panels...

  • Page 46
    ... expected to drive the growth of the LCD TV market. The LCD market continues to spread beyond IT applications, with increasing sales of LCDs used in mobile products such as mobile phones, game consoles and PDAs. The supply base for LCD TV panels is also expanding, led by Samsung Electronics, and we...

  • Page 47
    ... product range, from the outdoor digital signboard market to the ultra-large-screen TV market. 52˝ Full-HD LCD (TV) New production lines to lead the standardization of the LCD TV segment We are expanding capacity to bolster our position in the rapidlyexpanding large-screen LCD TV market. Samsung...

  • Page 48
    We have special technology for adding value to life.

  • Page 49
    The brand is a value and a way of life. We engage in diverse marketing approaches to continue elevating our status as a premium brand. In Milan, a city of great culture and aesthetics: Samsung's cutting-edge products are on a par with the world's most exclusive brands.

  • Page 50
    ... of design at Samsung Electronics is growing and we operate 7 design centers: the Corporate Design Center in Seoul along with centers in London, Los Angeles, San Francisco, Shanghai, Tokyo and Milan. The experts at each location analyze local culture, lifestyles and industry trends, and their...

  • Page 51
    ... a 2006 iF Communication Design Award in the Interface category for its user-friendliness and intuitive display of the mobile phone functions. In addition, we have won design awards for PC screen savers, home gateway interfaces, audio-video network solutions, and exhibit promotion sites. 5. Touch...

  • Page 52
    Marketing Creating a premium brand Samsung Electronics has entered new territory as a premium brand, outshining many of the biggest names in the business. Brand Value 04 05 06 (in billions of USD) 12.55 (21th ) 14.95 (20th ) 16.16 (20 th) (source: Businessweek / Interbrand) 42

  • Page 53
    ...brand campaign The core value of Samsung Electronics involves benefitting people's lives through emotional and innovative technologies and design. We are getting this message out via multifaceted advertising campaigns in 60 countries that encompasses the four main media as well as the internet. The...

  • Page 54
    ... in Doha in 2006. We supplied more than 8,000 products around Doha during the Games. Visitors to the Samsung Digital Gallery could try out many of our top-of-the line products such as full-HD LCD TVs, Quatro refrigerators and Ultra Edition mobile phones. In addition, the Samsung Lounge offered free...

  • Page 55
    ... year of cellular phone sales in the US by setting up fifty Samsung Mobile Stations inside JFK International in New York. Travelers were able to recharge their mobile phones, laptop PCs and other digital products free of charge at these stations. We are planning more diverse marketing activities at...

  • Page 56
    ... competencies are important for becoming the world leader. First, a company must have the creative people who can develop the appropriate technologies. Second, cooperation is needed among business partners throughout the entire supply chain. Finally, new markets have to be pioneered continuously...

  • Page 57
    ... also working on innovative and unique printers and other products that can be as successful as the Bordeaux LCD TV was in 2006. A quarter of the entire workforce in R&D Our greatest asset is the solid pool of talented people who can develop value-added, market-leading products that bring new value...

  • Page 58
    We are fulfilling our role as a corporate citizen. 48

  • Page 59
    We are helping to build a society in which all members can live well. Samsung is ushering in the digital era, in which all people can enjoy richer, more rewarding lives. In China, where diverse ways of life comingle: Our efforts to understand local needs and bring communities together have elevated ...

  • Page 60
    Corporate Citizenship In concert with the local community The Samsung philosophy stresses the ideal of building a better global society. Therefore, we engage in diverse activities to improve the quality of life, contributing to local communities and promoting exchanges with the entire world. We ...

  • Page 61
    ...the same time, we continue to improve our operational transparency, shareholder value and social contributions. Our community service programs are part of an overall effort to earn trust and respect as a member of society. Social contributions on the global stage Our purpose is not limited to being...

  • Page 62
    ...children. During the 2006 Turin Winter Olympics, Samsung Electronics supported the Right to Play program, hosting an online charity auction at the Olympic Rendezvous @ Samsung (OR@S) in Piazza Solferino. The event brought in 30,000. The RTP auction was first held during the 2000 Sydney Summer Games...

  • Page 63
    ...free loans, giving small/mid-sized companies access to the hard-to-get investment capital they need to build new facilities and localize more of their product content. We also dispatched our engineers to suppliers to provide training and other technical support. Finally, we gave financial grants to...

  • Page 64
    ...for developing new technologies or production line equipment for semiconductors or LCDs. In 2006, we completed a three-year Enterprise Resource Planning (ERP) installation project to improve suppliers' information management systems and abilities to control finances internally. Our support included...

  • Page 65
    ...major segments that are all aimed towards helping to preserve the global environment: The Greening of Management is a constant improvement of our ESH program through the public disclosure of corporate information. The Greening of Products is our assumption of responsibility for all processes related...

  • Page 66
    ... EHS management system to ensure sustainable development, and our EHS certification continues to expand. Greening of Processes: putting clean process technology to work Samsung Electronics is minimizing the use of substances that contribute to global warming during production processes, and...

  • Page 67
    ... protect resources and nature. At Samsung Electronics, safety on the job is considered to be a fundamental part of doing business and an essential part of the workers' quality of life. Our top management pays particular attention to creating a safe and pleasant place to work. We constantly apply the...

  • Page 68
    We have the growth momentum to emerge as one of the world's very best.

  • Page 69
    ...have turned crises in opportunities, thereby laying the groundwork for global leadership. In Dubai, bold challenges and original ideas have captured global attention: Samsung Electronics provides the creative products and services that lead change and development here and elsewhere around the globe.

  • Page 70
    ... greater speed. • The electronics industry is watching the fall of the "four barriers" (price, technology, added value, and geographic region), and competition has become intense and unrestricted. • Digital technology is driving the convergence of devices, networks and services. • The domains...

  • Page 71
    Financial Statements 2006 Report of Independent Auditors Consolidated Balance Sheets Consolidated Statements of Income Consolidated Statements of Changes in Shareholders' Equity Consolidated Statements of Cash Flows Notes of Consolidated Financial Statements Non-consolidated Balance Sheets Non-...

  • Page 72
    ... as of December 31, 2006 and 2005, and the related consolidated statements of income, changes in shareholders' equity and cash ï¬,ows for the years then ended, expressed in Korean won. These financial statements are the responsibility of the Company's management. Our responsibility is to express an...

  • Page 73
    ... 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. Seoul, Korea March 5, 2007 This report is effective as...

  • Page 74
    ...(In thousands of U.S. dollars (note3)) 2006 Assets Current assets Cash and cash equivalents Short-term financial instruments (Note 4) Short-term available-for-sale securities (Note 5) Short-term held-to-maturity securities (Note 5) Trade accounts and notes receivable, net of allowance for doubtful...

  • Page 75
    ...)) 2006 Liabilities and Shareholders' Equity Current liabilities Trade accounts and notes payable Short-term borrowings (Note 14) Current maturities of long-term debts (Notes 14 and 15) Other accounts and notes payable Accrued expenses Income taxes payable Other current liabilities Total current...

  • Page 76
    Consolidated Statements of Income Samsung Electronics Co., Ltd. and Subsidiaries Years Ended December 31, 2006 and 2005 (In millions of Korean won (note3)) (In thousands of U.S. dollars (note3)) 2006 Sales (Note 28) Cost of sales (Note 28) Gross profit Selling, general and administrative ...

  • Page 77
    ... (note3)) (In thousands of U.S. dollars (note3)) 2006 Income before income tax and minority interests Income tax (Note 26) Income before minority interests Minority interests in losses of consolidated subsidiaries, net Net income Basic earnings per share (Note 27) (in Korean won and U.S. dollars...

  • Page 78
    Consolidated Statements of Changes in Shareholders' Equity Samsung Electronics Co., Ltd. and Subsidiaries Years Ended December 31, 2006 and 2005 (In millions of Korean won (Note 3)) Capital stock Shareholders' equity, January 1, 2006 Net income Change in ownership interests, including new stock ...

  • Page 79
    ...' equity, January 1, 2006 Net income Change in ownership interests, including new stock issues by consolidated subsidiaries Cumulative effects of changes of consolidated subsidiaries Cash dividends Disposal of treasury stock Acquisition of treasury stock Gain on valuation of available-for-sale...

  • Page 80
    Consolidated Statements of Changes in Shareholders' Equity Samsung Electronics Co., Ltd. and Subsidiaries Years Ended December 31, 2006 and 2005 (In millions of Korean won (Note 3)) Capital stock Shareholders' equity, January 1, 2005 Net income Change in ownership interests, including new stock ...

  • Page 81
    ...' equity, January 1, 2005 Net income Change in ownership interests, including new stock issues by consolidated subsidiaries Cumulative effects of changes of consolidated subsidiaries Cash dividends Disposal of treasury stock Acquisition of treasury stock Gain on valuation of availablefor-sale...

  • Page 82
    ...to equity-method investments Impairment losses on investments Deferred income taxes Other 6,872,793 522,926 269,450 281,826 16,470 109,494 (214,686) 267,572 31,396 (340,893) 14,499 115,565 540,972 16,413,471 Changes in operating assets and liabilities Increase in trade accounts and notes receivables...

  • Page 83
    ... debts Payment of dividends Acquisition of treasury stock Others Net cash used in financing activities Effect of exchange rate changes on cash and cash equivalents Net increase in cash and cash equivalents from changes in consolidated subsidiaries Net increase in cash and cash equivalents (545,201...

  • Page 84
    ... and sell semiconductors, LCD, telecommunication products, digital appliances and digital media products. SEC's shares of stock are publicly traded, and all issued and outstanding shares are listed on the Korea Stock Exchange. As of December 31, 2006, the major shareholders of SEC, including...

  • Page 85
    ...SELA) Samsung Electronics Mexico S.A.de C.V.(SEM) Samsung Electronics Argentina S.A. (SEASA) Samsung Receivables Corporation (SRC) Samsung Semiconductor Inc. (SSI) Samsung Information Systems America Inc. (SISA) Samsung Telecommunications America, L.P. (STA) Samsung International, Inc. (SII) Samsung...

  • Page 86
    ...Electronics Display (M) SDN.OMD. (HSD) (SDMA) Samsung Electronics (Malaysia) SDN.BHD. (SEMA) Samsung Vina Electronics Co., Ltd. (SAVINA) Samsung Gulf Electronics Co., Ltd. (SGE) Samsung India Electronics Ltd. (SIEL) Thai-Samsung Electronics Co., Ltd. (TSE) Samsung Electronics Philippines Corporation...

  • Page 87
    ... and development Samsung Telecommunications India(STI) Samsung Electronics Asia Holding Pte. Ltd.(SEAH) Sale of electronic goods and telephone manufacturing and sales Holding company Sale of electronic goods Semiconductor sales and sale of electronic goods A/V manufacturing Telecom system (PABX...

  • Page 88
    ... 100 Location Korea Americas International Cyber Marketing Co., Ltd SEMES America Inc. Samsung Electronics Chile Limitada (Ltda) Samsung Semiconductor International Inc. Samsung Semiconductor Mexico, S.A. De C.V. Tasman Properties, Inc. Internet game service Service Marketing and service Holding...

  • Page 89
    ... Investments Equity-Method Investments as of December 31, 2006, consist of the following: Location Investee Companies Percentage of ownership (%) 19.68 22.8 25.46 35.76 29.8 21.27 23.07 45.29 27.5 20 42.47 50 50 99 99 65.67 99 99 99 25 25 50 25 49 49.03 49 Location Korea Samsung...

  • Page 90
    ...22.71 20 28.6 Location Korea Samsung Everland Co., Ltd. ¹ Allat Corporation ¹ Korea Korea U.S.A Singapore Turkey Japan Americas Asia Content Management License Administrator LLC ² e-Samsung Asia (Holding) Pte. Ltd. ² Samsung Electronics Ticaret A.S. ² Future Technology & Service Coportion...

  • Page 91
    ... reported therein. Although these estimates are based on management's best knowledge of current events and actions that the Company Securities Investments in equity securities or debt securities are classified into trading securities, available-for-sale securities and held-tomaturity securities...

  • Page 92
    ... a subsidiary are reported in a separate component of shareholders' equity, and are not included in the determination of the results of operations. Assets and liabilities of the Company's foreign investees are translated at current exchange rates, while income and expenses Buildings and auxiliary...

  • Page 93
    ...payments and the fair value of the lease asset is recognized as the value of the capital lease asset or liability. The costs incurred during lease inception process are also recognized as part other capital lease cost. In case of operating lease as lessor, the lease assets are recognized as tangible...

  • Page 94
    ... assets and liabilities are computed on such temporary differences by applying statutory tax rates applicable to the years when such differences are expected to be reversed. Derivative Instruments Derivative financial instruments for trading or hedging purpose are valued at estimated market price...

  • Page 95
    ... to shareholders' equity. All derivative instruments are accounted for at fair value with the resulting valuation gain or loss recorded as an asset or liability. If the derivative instrument is not designated as a hedging instrument, the gain or loss is recognized in earnings in the period of change...

  • Page 96
    ... a separate component of shareholders' equity as other capital adjustments. Trade accounts receivable with recourse Trade accounts receivable without recourse Accounts that are valued at present value under long-term Short-term held-to-maturity securities as of December 31, 2006 and 2005, consist...

  • Page 97
    ... and 2005, are as follows: (In millions of Korean won) Accounts Short-term financing receivables Credit card assets Lease assets Installment finance General loans Less: Allowance for doubtful accounts 2006 2005 \3,323,235 107,293 448,653 1,210,031 5,089,212 (502,240) 4,586,972 \4,362,375 98...

  • Page 98
    ... transferred credit card receivables and financial assets to SangRokSoo 1st Securitization Specialty Co., Ltd., Badbank Harmony Co., Ltd. and Badbank Heemangmoah Securitization Specialty Co., Ltd. in accordance with the "personal credit rehabilitation" program in exchange for cash, preferred stock...

  • Page 99
    ... Hotels & Resorts Cheil Communications Inc. Samsung Fire & Marine Insurance Co., Ltd. Samsung Securities Co., Ltd. S1 Corporation Inc. Samsung Engineering Co., Ltd. Other companies Cheil Industries Inc. Korea Information Service Inc. Hanmi Capital Saehan Media SANYO Tomen device Corp. Others 2,449...

  • Page 100
    ... number of shares and percentage) 2006 Number of Percentage of Shares Owned Ownership (%) Related parties Samsung Petrochemical Co., Ltd. Samsung General Chemicals Co., Ltd. Samsung Venture Investment Corporation Samsung Life Insurance iMarketKorea Inc. International Cyber Marketing, Inc ¹ Samsung...

  • Page 101
    ...of shareholders' equity in other capital adjustments. (2) Long-Term Held-To-Maturity Securities Long-term held-to-maturity securities as of December 31, 2006 and 2005, consist of the following: (In millions of Korean won) 2006 Face Value Government and public bonds ABS subordinated securities \294...

  • Page 102
    ...) Number of Shares Owned 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. Samsung Corning Co., Ltd. Samsung Lions Co., Ltd. MEMC Electronic Materials Korea...

  • Page 103
    ...) Number of Shares Owned 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. Samsung Corning Co., Ltd. Samsung Lions Co., Ltd. MEMC Electronic Materials Korea...

  • Page 104
    ... Assets Samsung SDI Co., Ltd. Samsung Electro- Mechanics Co., Ltd. Samsung Techwin Co., Ltd. Seoul Commtech Co., Ltd. Samsung SDS Co., Ltd. Samsung Networks Inc. Samsung Corning Co, Ltd. Samsung Corning Precision Glass Co., Ltd. Samsung Thales Co., Ltd. Shanghai Bell Samsung Mobile Communications...

  • Page 105
    The changes in the book values of equity-method investments for the years ended December 31, 2006 and 2005, are as follows: (In millions of Korean won) 2006 Balance at Earnings Other Beginning (Losses) Increase of Year from Equity (Decrease) -Method Investments Samsung SDI Co., Ltd. Samsung ...

  • Page 106
    ... 452,665 408,531 1,466,305 1,173,974 Market value information of publicly listed investee companies as of December 31, 2006 and 2005, are as follows: (In millions of Korean won) 2006 Market Value Samsung SDI Co., Ltd. Samsung Electro- Mechanics Co., Ltd. Samsung Techwin Co., Ltd. \596,881 766,995...

  • Page 107
    ... to \1,209,161 million, net of revaluation tax, credits to deferred foreign currency translation losses and others, were credited to capital surplus, a component of shareholders' equity. In addition, on October 1, 2000, Samsung Kwangju Electronics Co., Ltd. revalued a substantial portion of its...

  • Page 108
    ... category and changes in foreign currency exchange rates. The changes in intangible assets for the years ended December 31, 2006 and 2005, are as follows: (In millions of Korean won) Account Production costs Selling and administrative expenses Research and development expenses 2006 \25,332...

  • Page 109
    ...-Term Deposits and Other Assets Long-term deposits and other assets as of December 31, 2006 and 2005, consist of the following: (In millions of Korean won) 2006 Long-term financial instruments Long-term trade receivables, net Long-term loans receivable, net Long-term guarantee deposits Long-term...

  • Page 110
    ... of the following: (In millions of Korean won) Annual interest rates (%) as of December 31, 2006 Korea Energy Management Corporation Samsung Life Insurance Co., Ltd. Samsung Shinhan 4th Special Purpose Company Kookmin Bank and others 3.8 - 4.5 3.0 - 3.8 2006 \576 172,320 117 \173,013 2005 \921...

  • Page 111
    ...coupon rate of 2.0% and with a maturity date of June 23, 2008. Convertible bonds are convertible to common stock at the exercise price of \43,040 adjusted from \8,608 to reï¬,ect issuance of new shares of five to one on November 2, 2006, effective from June 23, 2006 (or when listed on the exchange...

  • Page 112
    ...and changes in foreign currency exchange rates. 2005 \1,155,698 459,499 (179,363) (3,837) 1,431,997 (13,156) (1,001,591) (33,433) \721,205 (14,807) (840,268) \ 576,922 In 2006, Samsung Card Co., Ltd., a domestic subsidiary, implemented a defined benefit pension plan with Samsung Life Insurance...

  • Page 113
    ..., Samsung Card Co., Ltd. is insured against future contract commitments relating American Express from Woori Bank up to US$5 million. (C) As of December 31, 2006, the Company has technical assistance agreements with certain companies requiring payment for use of the technology or from sales of...

  • Page 114
    ... affiliates and subsidiaries with Korea Export Insurance Co. (I) As of December 31, 2006, the Co riat A L'Energie Atomique, (H) As of December 31, 2006, the Company has forward exchange contracts to manage the exposure to changes in currency exchanges rates in accordance with its foreign currency...

  • Page 115
    ... position of the Company. (J) In 2002, the United States Department of Justice Antitrust Division (the Justice Department) initiated an investigation into alleged anti-trust violations by the sellers of Dynamic Random Access Memory ("DRAM") in the United States, which include Samsung Semiconductor...

  • Page 116
    ...; and an accounts receivable factoring agreement with Korea Exchange Bank for up to \150,000 million. In relation to the credit sales facility agreement share, of which 100 million shares are cumulative, participating preferred stock that are non-voting and entitled to a minimum cash dividend at...

  • Page 117
    ...463,683 \ 37,369,265 ¹ The Commercial Code of the Republic of Korea requires the Company to appropriate as a legal reserve, an amount equal to a minimum of 10% of annual cash dividends declared, until the reserve equals 50% of its issued capital stock. The reserve is not available for the payment...

  • Page 118
    ... 10,434 \76,652 (B) Year-end Dividends (In millions of Korean won and number of shares) 2006 Number of shares eligible Common stock Preferred stock Dividend rate Common stock Preferred stock Dividend amount Common stock Preferred stock 128,758,653 shares 20,253,734 shares 100% 101% \ 643,793 102...

  • Page 119
    ...won) 2006 Common Stock Dividend per share Market price ¹ Dividend yield ratio \5,500 611,400 0.90% 2005 Preferred Stock \5,550 486,000 1.14% Common Stock \5,500 644,600 0.85% Preferred Stock \5,550 486,100 1.14% ¹ The average closing price for the prior week from 2 trading days before closing...

  • Page 120
    ... new shares of five to one so that the number of shares granted is decreased and exercise price is increased. The compensation expense recognized by Samsung Card Co., Ltd. was \2 million for the year ended December 31, 2005. The stock options of \1,231 million according to the SEC's ownership ratio...

  • Page 121
    ... income tax rate applicable to the Company, including resident surtax, is 27.5%. Income tax expense for the years ended December 31, 2006 and 2005, consists of the following: (In millions of Korean won) 2006 Current income taxes Deferred income taxes Items charged directly to shareholders' equity...

  • Page 122
    ... tax assets arising from the carryforwards Undisposed accumulated deficit Tax credit carryforwards \3,773,184 \1,236,484 \(419,949) \105,457 \3,353,235 \1,341,941 \334,513 \909,804 \(88,453) \78,318 \246,060 \988,122 \28,411 \980,149 \217,649 \7,973 Deferred tax relating to items charged to equity...

  • Page 123
    ... tax assets arising from the carryforwards Undisposed accumulated deficit Tax credit carryforwards \2,261,378 \587,918 \1,511,806 \648,566 \3,773,184 \1,236,484 \181,130 \531,845 \153,383 \377,959 \334,513 \909,804 \15,744 \625,535 \318,769 \284,269 Deferred tax relating to items charged to equity...

  • Page 124
    ... and number of shares) 2006 Net 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 (in Korean...

  • Page 125
    ..., 2006 and 2005, and the related receivables and payables as of December 31, 2006 and 2005, are as follows: (In millions of korean won) Sales Subsidiaries 2006 \3,...228 704 7,316 1,048 3 25,968 776,736 \1,646,867 SJC SLCD STA SET SSI SAPL SEHK SEA SSEG SEO SEUK SEF SSEL SII SEI SELS TSTC SESC Others...

  • Page 126
    ... and 2005, and the related receivables and payables as of December 31, 2006 and 2005, are as follows: (In millions of Korean won) Equity-method Investees Samsung SDI Co., Ltd. Samsung Corning Precision Glass Co., Ltd. Samsung ElectroMechanics Co., Ltd. Samsung SDS Co., Ltd. Seoul Commtech. Co., Ltd...

  • Page 127
    ...,021 6,950 15,979 \308,957 2005 \402,303 93,086 462 200,476 35,754 32,873 272,797 \1,037,751 Samsung Corporation iMarketKorea Inc. Samsung Life Insurance Co., Ltd. Cheil Communications Inc. Samsung Everland Co., Ltd. Samsung Heavy Industries Co., Ltd. Others \ 294,413 \ 4,403,767 \ 4,030,622 117

  • Page 128
    .... Samsung SDI America, Inc. SAPL Others Samsung Heavy Industries Co., Ltd. SAPL SJC Samsung Corporation Samsung Corporation SEH Cheil Industries Inc. SLCD SII Samsung Heavy Industries Co., Ltd. Further, as of December 31, 2006, the balances of beneficiary certificates from Samsung Securities Co...

  • Page 129
    ...2006 and 2005, assets and liabilities denominated in foreign currencies are as follows: (In millions of Korean won and foreign currencies in thousands) Foreign Companies Account Foreign Currency 2006... deposits US$ JPY EUR Others Trade accounts and notes receivable US$ JPY EUR Others 1,962...

  • Page 130
    ... \8,089,605 Monetary assets and liabilities of overseas subsidiaries after eliminating intercompany transactions are translated at the foreign exchange rate in effect as of the balance sheet date. Foreign currency translation gains and losses for the year ended December 31, 2006, amounted to \214...

  • Page 131
    ... Information A summary of consolidated financial data by industry as of December 31, 2006 and 2005, and for the years then ended, are follows: Consolidated balance sheets by industry (In millions of Korean won) Non-financial Business 2006 Assets Financial Business 2006 2005 2005 Current assets...

  • Page 132
    Consolidated statements of operations by industry: (In millions of Korean won) Non-financial Business 2006 Sales Cost of sales Selling, general and administrative expenses Operating profit (loss) Non-operating income Non-operating expenses Income (loss) before income tax Income tax expense (bene...

  • Page 133
    ... December 31, 2006: (In millions of Korean won) 2006 Summary of Business by Segment Digital Media Gross sales Intersegment sales Net sales Operating profit (loss) Total assets \44,717,513 Device TelecommSemiAppliances unications Conductor \10,271,757 \36,361,108 \40,757,627 LCD Finance Others...

  • Page 134
    ... year ended December 31, 2006: (In millions of Korean won) 2006 Summary of Business by Geographic Area Korea (Domestic) Gross sales Intersegment sales Net sales Operating profit Total assets \19,750,612 Korea (Export) \50,607,768 Asia \47,438,660 Americas \27,794,408 Europe \30,834,591 Africa...

  • Page 135
    ... 33 Subsequent Events These financial statements as of and for the year ended December 31, 2006, were approved by the Board of Directors on March 2, 2007. On January 12, 2007, the Board of Directors approved the purchase of treasury stocks consisting of 2,800,000 common shares and 400,000 preferred...

  • Page 136
    ...of U.S. dollars (note3)) 2006 Assets Current assets Cash and cash equivalents Short-term financial instruments (Note 4) Short-term available-for-sale securities (Note 5) Trade accounts and notes receivable, net of allowance for doubtful accounts (Note 6) Other accounts and notes receivable, net of...

  • Page 137
    ... 2006 Liabilities and Shareholders' Equity Current liabilities Trade accounts and notes payable Other accounts and notes payable Accrued expenses (Note 16) Income taxes payable Other current liabilities Total current liabilities Foreign currency notes and bonds (Note 14) Long-term advances received...

  • Page 138
    ... Loss on disposal of trade accounts and notes receivable Donations Loss on disposal of available-for-sale securities Loss on disposal of property, plant and equipment Foreign exchange losses Loss on foreign currency translation (Note 28) Loss on valuation of equity-method investments (Note 10...

  • Page 139
    ...for research and human resource development Cash dividends (Note 20) (Common stock: 100% in 2006 and 2005) (Preferred stock: 101% in 2006 and 2005) Reserve for loss on disposal of treasury stock Reserve for capital expenditure Total appropriations Unappropriated retained earnings carried over to the...

  • Page 140
    ... valuation of equity-method investments Deferred income taxes Others 5,680,609 447,360 253,740 37,876 (78,636) 3,691 (58,980) 28,988 (124,989) (1,440,674) 92,553 (10,871) 232,900 12,989,654 Changes in operating assets and liabilities Increase in trade accounts and notes receivable Decrease (Increase...

  • Page 141
    ... Acquisition of long-term available-for-sale securities Acquisition of equity-method investments Others Net cash used in investing activities \562,790 3,704,638 (3,718,158) 311,183 (10,078,237) 3,183 23,139 (18,539) (1,053,753) (217,475) (10,481,229) 2005 2006 2005 \288,775 3,574,058 (3,172...

  • Page 142
    ...Balance Sheet (Billion KRW) 2002 Assets Cash & Cash Eq. * Marketable Securities A/R (Traded) Inventory 64,955 6,872 1,...,432 41,607 2006 81,366 7,726 2,059 9,090 6,753 33,426 14,477 47,940 Liabilities Debt Stockholder's Equity Consolidated Income Statement (Billion KRW) 2002 Sales - COGS 59,569...

  • Page 143
    ... Investing Activities Acquisition of PP&E Cash Flow from Financing Activities Dividend Rights Issuance / Stock repurchase Consolidation adjustments Increase in Cash & Cash Eq. * Ratio (Billion KRW) 2002 ROE Profitability (Net Income/Sales) Asset Turnover (Sales/Asset) Leverage (Asset/Equity) 31...

  • Page 144
    ... 3,154 9,376 99 34,440 2005 50,539 4,951 1,917 1,497 2,909 10,882 96 39,657 2006 57,809 4,313 2,059 1,842 3,220 12,549 87 45,261 Liabilities Debt Stockholder's Equity Income Statement (Billion KRW) 2002 Sales - COGS 40,512 26,946 13,566 33.5% 6,321 7,245 17.9% 1,626 145 1,068 8,871 21...

  • Page 145
    ...Flow from Investing Activities Acquisition of PP&E Cash Flow from Financing Activities Dividend Rights Issuance / Stock repurchase Increase in Cash & Cash Eq. * Financial Ratios (Billion KRW) 2002 ROE Profitability (Net Income/Sales) Asset Turnover (Sales/Asset) Leverage (Asset/Equity) 32% 0.17...

  • Page 146
    ...deliberation and decision making processes. The BOD currently has 4 of these bodies: the Management Committee, Audit Committee, Outside Director Recommendation Committee and Internal Transaction Committee. The Samsung Electronics Board of Directors consists of thirteen members, 7 of whom are outside...

  • Page 147
    ..., Boston Consulting Group (2001-Present) CEO & President, Korea Exchange Bank (1999-2000) Vice Chairman, Korea Chamber of Commerce & Industry (1999-2000) Dong-Min Yoon · Outside Director (2006-Present) · Attorney at law, Kim & Chang Law Office (1999-Present) · Director, Social Protection and...

  • Page 148
    ... 600,000 Close 630,000 603,000 664,000 613,000 LONDON STOCK EXCHANGE GDR price in USD 2006 Q1 Q2 Q3 Q4 ADDITIONAL INFORMATION: The 2005 Samsung Electronics Annual Report and the latest investor information are available online at www.samsung.com/ir. You may also contact us at [email protected]...

  • Page 149
    ... 200, Myeongam-ri, Tangjeong-myeon, Asan Chungcheongnam-do Europe Samsung Electronics Europe Headquarters Samsung House, 1000 Hillswood Drive, Chertsey, Surrey, KT16 0PS PRODUCTION NETWORK Tel: 82-41-535-1114 Fax: 82-41-535-1117 KOREA Suwon Complex Cheonan Plant 510, Seongseong-dong, Cheonan...

  • Page 150
    ...SAMEX), Tijuana Tel: 1-619-671-1669 Malaysia Samsung Electronics Display (M) SDN. BHD. (SDMA), Seremban Tel: 60-6-678-7914 United States Samsung Austin Semiconductor, Llc (SAS), Austin Tel: 1-512-672-1000 Philippines Samsung Electronics Philippines Manufacturing Corp. (SEPHIL), Laguna Calamba Tel...

  • Page 151
    ... (SSS), Shanghai Tel: 86-21-5258-2211 Malaysia Samsung Malaysia Electronics (SME) SDN. BHD., Kuala Lumpur Tel: 60-3-2263-6600 EUROPE Austria Samsung Electronics Austria Gmbh (SEAG), Vienna Tel: 43-1-516-15 Philippines Samsung Electronics Philippines Corp. (SEPCO), Manila Tel: 63-2-722-7777...

  • Page 152
    ...-1122 Mexico Samsung Electronics Mexico S.A. de C.V. (SEM), Mexico City Tel: 52-55-5747-5100 Morocco Samsung Electronics Co., Ltd. Casablanca Office Tel: 212-22-335-383 Peru Samsung Electronics Co., Ltd. Peru Lima Office Tel: 51-1-221-4134 United States Samsung Electronics America, Inc. (SEA...

  • Page 153
    www.samsung.com

  • Page 154