IV.

Management Discussion and Analysis

1. Note on forward-looking statements
This annual report includes forward-looking statements that relate to future events and can be generally identified by
phrases containing words such as “believes,” “expects,” “anticipates,” “foresees,” “forecasts,” “estimates” or other words
or phrases of similar meaning. These forward-looking statements are not guarantees of future performance and may
involve known and unknown risks, uncertainties and other factors that may affect our actual results, performance,
achievements or financial position, making them materially different from the actual future results, performance,
achievements or financial position expressed or implied by these forward-looking statements. Unless otherwise specified,
all data presented in this report is from our consolidated financial statements.

Uncertain events that could positively or negatively affect the Company’s management condition and financial
performance include, but are not limited to:

• Trends of financial markets domestically and abroad, including changes in exchange rates and interest rates
• The Company’s strategic decision making, including disposals and purchases of businesses
• Unexpected sudden changes in core businesses such as CE, IM, Semiconductor, DP and Harman
• Other changes domestically and abroad that can affect management condition and financial performance

The Company assumes no obligation to revise or update this report to reflect risks or uncertainties that arise after the
reporting period.

2. Overview
The business environment remained challenging in 2020 as a slowdown in developed markets weighed on the global
economy due to effects of the prolonged pandemic, while uncertainties, such as a US-China trade conflict, intensified.

Despite the formidable economic conditions, the support of our shareholders and hard work of our employees enabled
Samsung Electronics in 2020 to achieve total revenue of KRW 237 trillion and operating profit of KRW 36 trillion on a
consolidated basis, and total revenue of KRW 166 trillion and operating profit of KRW 21 trillion on a standalone basis.

Our financial structure remained sound—we recorded a debt ratio of 37.1%, capital adequacy ratio of 73.0%, and ROE of
9.8% on a consolidated basis. On a standalone basis, the respective figures were 25.3%, 79.8%, and 8.6%. Our brand
value in 2020 was evaluated at USD 62.3 billion (Interbrand; October 2020), up 2% from last year’s figure and rising one
position to become the world’s fifth most valuable brand.

On the business side, we further strengthened profitability and cost competitiveness of the component business, extending
our capabilities in core technologies to include full-fledged migration to 6th generation V-NAND. In addition, we
solidified our industry and market leadership by launching the Galaxy Z Flip and Z Fold 2 while expanding sales of ultra-
large QLED TVs and Bespoke products.

In 2021, we expect the external environment to remain difficult: macro uncertainties such as trade conflicts and COVID-
19 are likely to persist, while intensifying competition for our main products amid a rapidly changing paradigm in the IT
industry will present numerous hurdles. As always, we plan to face challenges head on and use our meticulous preparation
to turn them into opportunities.

Samsung Electronics Business 1 / 263

Report
3. Financial position and performance (consolidated)
A. Financial position
(KRW mil)

Classification 2020 2019 Increase/decrease % change

Current assets 198,215,579 181,385,260 16,830,319 9.3%

- Cash and cash

29,382,578 26,885,999 2,496,579 9.3%
equivalents

- Short-term financial
92,441,703 76,252,052 16,189,651 21.2%
instruments

- Other current
financial 2,828,562 5,641,652 (2,813,090) (49.9%)
assets

- Trade and other

30,965,058 35,131,343 (4,166,285) (11.9%)
receivables

- Inventories 32,043,145 26,766,464 5,276,681 19.7%

- Other current assets 10,554,533 10,707,750 (153,217) (1.4%)

Non-current assets 180,020,139 171,179,237 8,840,902 5.2%

- Other non-current
13,778,185 9,969,716 3,808,469 38.2%
financial assets

- Associates and joint

8,076,779 7,591,612 485,167 6.4%
ventures

- Property, plant and

128,952,892 119,825,474 9,127,418 7.6%
equipment

- Intangible assets 18,468,502 20,703,504 (2,235,002) (10.8%)

- Other non-current
10,743,781 13,088,931 (2,345,150) (17.9%)
assets

Total assets 378,235,718 352,564,497 25,671,221 7.3%

Current liabilities 75,604,351 63,782,764 11,821,587 18.5%

Non-current liabilities 26,683,351 25,901,312 782,039 3.0%

 Classification 2020 2019 Increase/decrease % change

Total liabilities 102,287,702 89,684,076 12,603,626 14.1%

Equity attributable to
267,670,331 254,915,472 12,754,859 5.0%
owners of the parent

Non-controlling
8,277,685 7,964,949 312,736 3.9%
interest

Total equity 275,948,016 262,880,421 13,067,595 5.0%

Total liabilities and

378,235,718 352,564,497 25,671,221 7.3%
equity

Capital adequacy ratio 73.0% 74.6% (1.6%p)

Debt-to-equity ratio 37.1% 34.1% 3.0%p

Inventory turnover 4.9 5.3 (0.4)

Presented in accordance with K-IFRS.
In case of rejection at the AGM or any revisions, amended figure and reasons will be announced via a corrective disclosure.

Samsung Electronics’ total assets in 2020 were KRW 378.2357 trillion, an increase of KRW 25.6712 trillion (7.3%) from
the previous year. This includes an increase of KRW 16.1897 trillion in short-term financial instruments, KRW 9.1274
trillion in tangible assets caused by large-scale facility investment for the semiconductor and DP businesses.

Total liabilities were KRW 102.2877 trillion, an increase of KRW 12.6036 trillion (14.1%) from the previous year. This
includes an increase of KRW 11.8216 trillion (18.5%) in current liabilities and an increase of KRW 0.7820 trillion (3.0%)
in non-current liabilities. The changes are attributable to a KRW 3.0425 trillion increase in tax liability and a KRW 1.7570
trillion increase in deferred tax liabilities. In addition, in 2020, lease liabilities and short-term borrowing increased by
KRW 2.6617 trillion and 2.1600 trillion respectively.

Total equity was KRW 275.9480 trillion, an increase of KRW 13.0676 trillion (5.0%) from the previous year. Retained
earnings increased by KRW 16.4853 trillion year-on-year from net income of KRW 26.0908 trillion and dividends of
KRW 9.6192 trillion. Other components of equity decreased by KRW 3.7183 trillion due to factors such as the overseas
operations translation difference.

In terms of financial ratios, the Company maintained a sound financial structure as the capital adequacy ratio decreased by
1.6%pts from the previous year to 73.0% and the debt-to-equity ratio increased by 3.0%pts from the previous year to
37.1%.
B. Performance

(KRW mil)

Classification 2020 2019 Increase/decrease % change

Sales
236,806,988 230,400,881 6,406,107 2.8%
Cost of sales
144,488,296 147,239,549 (2,751,253) (1.9%)
Gross profit
92,318,692 83,161,332 9,157,360 11.0%
Selling and administrative expenses
56,324,816 55,392,823 931,993 1.7%
Operating profit
35,993,876 27,768,509 8,225,367 29.6%
Other income
1,384,068 1,778,666 (394,598) (22.2%)
Other expenses
2,488,902 1,414,707 1,074,195 75.9%
Gain on valuation using the equity
method of accounting 506,530 412,960 93,570 22.7%

Financial income
12,267,600 10,161,632 2,105,968 20.7%
Financial expenses
11,318,055 8,274,871 3,043,184 36.8%
Income before income tax expense
36,345,117 30,432,189 5,912,928 19.4%
Income tax expense
9,937,285 8,693,324 1,243,961 14.3%
Net income
26,407,832 21,738,865 4,668,967 21.5%
Equity attributable to owners of the
parent 26,090,846 21,505,054 4,585,792 21.3%

Non-controlling interests
316,986 233,811 83,175 35.6%
Presented in accordance with K-IFRS.
In case of rejection at the AGM or any revisions, amended figure and reasons will be announced via a corrective disclosure.

In 2020, revenue increased year-on-year by KRW 6.4061 trillion (2.8%) to KRW 236.8070 trillion driven by expanding
sales of TVs and premium digital appliances as well as growing memory demand. Operating profit increased by KRW
8.2254 trillion (29.6%) to KRW 35.9939 trillion.

Income before income taxes increased year-on-year by KRW 5.9129 trillion (19.4%) to KRW 36.3451 trillion, and net
income increased by KRW 4.6690 trillion (21.5%) to KRW 26.4078 trillion.

We continued to maintain a sound financial structure, showcased by an increase in ROE by 1.3%pts year-on-year to 9.8%,
as well as increase in net profit ratio by 1.8%pts to 11.2%.
[Performance by division]

(KRW mil)

2020 2019 Change

Classification Division Business
Amount Share Amount Share Amount (%)

CE Division 48,173,324 20.3% 45,322,843 19.7% 2,850,481 6.3%

IM Division 99,587,493 42.1% 107,266,155 46.6% (7,678,662) (7.2%)

Semi-
72,857,803 30.8% 64,939,052 28.2% 7,918,751 12.2%
conductor
Sales DS Division
DP 30,585,715 12.9% 31,053,929 13.5% (468,214) (1.5%)

Total 103,036,146 43.5% 95,518,002 41.5% 7,518,144 7.9%

Harman Division 9,183,748 3.9% 10,077,096 4.4% (893,348) (8.9%)

Overall Sales 236,806,988 100.0% 230,400,881 100.0% 6,406,107 2.8%

CE Division 3,561,536 9.9% 2,508,998 9.0% 1,052,538 42.0%

IM Division 11,472,671 31.9% 9,272,468 33.4% 2,200,203 23.7%

Semi-
18,804,970 52.2% 14,016,302 50.5% 4,788,668 34.2%
conductor
Operating profit DS Division
DP 2,236,919 6.2% 1,581,333 5.7% 655,586 41.5%

Total 21,120,231 58.7% 15,581,687 56.1% 5,538,544 35.5%

Harman Division 55,518 0.2% 322,331 1.2% (266,813) (82.8%)

Overall operating profit 35,993,876 100.0% 27,768,509 100.0% 8,225,367 29.6%

Includes inter-divisional sales.
2019 sales and operating profit was revised to include Health & Medical Equipment Business.

(CE Division)

The CE Division’s revenue in 2020 increased by KRW 2.8505 trillion (6.3%) from the previous year to KRW 48.1733
trillion. Operating profit grew by KRW 1.0525 trillion (42.0%) to KRW 3.5615 trillion, the gains driven by an increase in
sales of premium products, which include ultra-large QLED TVs, Grande AI, and models in the Bespoke lineup.

CE continues to grow by focusing on strategic products: market-leading ultra-large QLED TVs featuring premium
technology, Bespoke refrigerators tailored to experience-oriented lifestyles, as well as large dryers, module-type air
purifiers, and garment care appliances.

In the TV business, we continue to extend the boundaries of the overall market with innovative products such as 8K ultra-
large TVs, Neo QLEDs that are full of innovative technologies, our Lifestyle TVs—The Premier in 120”–130”, The
Frame, The Serif, and The Sero—which are suitable for different lifestyles, as well as soundbars, outdoor signage, and
gaming monitors. We offer new user experiences by applying AI and IoT to our picture and audio technologies, and have
remained atop the TV market, having captured the highest market share for a 15th consecutive year by utilizing our design
competitiveness.

In 2021, we will keep executing our strategy in the premium TV market. For QLED, we aim to hone our competitiveness
in picture quality with new models of further-enhanced Neo QLED TV, and launch MICRO LED TVs with top features in
80” to 110” range. In addition, we will enhance our eco-friendly activities, including the use of eco packaging and solar-
powered remote control.

In the home appliance business, we continue to add and increase conveniences in our consumers’ lives with innovative
products and services based on highly-efficient, eco-friendly technologies that are a result of a deep understanding of
changing lifestyles. We are also creating new value with smart appliances that connect with other devices as well as a suite
of services based on Bixby and SmartThings.

In 2021, we will keep fortifying our status as a global brand in home appliances by increasing sales of hygiene-related
products to suit contactless lifestyles to counter the spread of COVID-19 and expanding Bespoke lineup—launched to
address customer needs to enjoy the user experience—from refrigerators to other products

(IM Division)

The IM division’s revenue in 2020 was KRW 99.5875 trillion, a decrease of KRW 7.6787 trillion (7.2%) compared to the
previous year, while operating profit increased by KRW 2.2002 trillion (23.7%) to KRW 11.4727 trillion. Although HHP
sales declined due to the pandemic, operating profit grew as tablet sales increased and production costs improved.

Despite rapidly developing technologies and mounting global uncertainties, the IM Division achieved solid results by
adopting new technologies and strengthening our lineup, focusing mainly the Galaxy Series, our premium models.

Starting with the April 2019 launch of the Galaxy S10 5G, the world’s first 5G smartphone, we quickly addressed the
initial stages of the 5G market by introducing a number of 5G models and created a new category in the mobile market by
introducing Galaxy Fold with a foldable display. In 2020, we led the mobile technology trend by introducing Galaxy Z
Flip, which folds from top-down, and a further enhanced Z Fold, the Galaxy Z Fold2. In addition, we strengthened our
product competitiveness by revamping our mass-market lineup, mainly the A Series, a move that was well received by the
market and contributed to bolstering business efficiency.

To lead market changes amid fierce competition, we will differentiate our premium products by expanding our 5G lineup
and bringing our foldable products to the mainstream. We will also quickly embrace state-of-the-art technologies to keep
strengthening competitiveness of our mass-market models. Moreover, we will offer new and innovative user experiences
by leading the convergence of technologies such as 5G, AI, and IoT. We will also provide a colorful and easy-to-use
mobile experience for our smartphone users via connection with premium tablets including Galaxy Tab S, wearable
devices such as a smartwatch, Wi-Fi Bluetooth earphones, and other accessories, as well as practical and valuable services
such as Samsung Pay, Samsung Health, SmartThings, and more.

(DS Division: Semiconductor)

The semiconductor business’s 2020 revenue increased by KRW 7.9188 trillion (12.2%) from the previous year to KRW
72.8578 trillion due to strong demand for server and mobile. Operating profit increased by KRW 4.7887 trillion (34.2%)
to KRW 18.8050 trillion year-on-year.

In the memory business, we achieved a solid performance by addressing demand from contactless businesses amid
exacerbating uncertainties due to prolonged impact of COVID-19. In 2021, we will preemptively address the changes
expected to take place after the pandemic by capitalizing on our product competitiveness, as demand is expected to be
strong driven by an acceleration of a digital transformation and economic recovery.

For DRAM, we are the only player in the industry to mass produce EUV-based products, having become the first to secure
core technology in next-generation DRAM development and achieving a breakthrough in advanced node processes. We
will continue to lead the market by enhancing competitiveness in the markets for emerging technologies, including AI and
edge computing.
For NAND, we conducted full-fledged migration to 6th-generation V-NAND while actively addressing mobile and laptop
SSD demand. We will work to expand our market share by entering the premium market with high-performance SSDs and
by securing leadership in both the capacity and function of mobile products.

System LSI grew year-on-year, led by increase in demand for IT devices on the continuation of a trend toward remote
working and learning due to COVID-19. We will remain flexible to changes in the market by expanding our new areas of
business where strong growth is expected, such as in automotives and wearables.

For SoC products, we improved our competitiveness and strengthened our lineup with high-end products as well as
flagship products. In addition, we are preparing for the future by developing our own next-generation communications
technology solutions and GPU solutions. For image sensors, we are leading the market for mobile image sensors that are
on the level of DSLR with ISOCELL Bright technology. We will continue to grow by strengthening our portfolio by
developing and commercializing sensors with new technologies, such as image sensors for automotives.

Foundry demand is expected to be strong for the time being, due to competition between fabless customers and growing
demand for data centers and PCs. We will address the demand via EUV-line ramp-ups and early operation of the new line
in Pyeongtaek. In addition, we will continue expanding our business by securing technology competitiveness in advanced
nodes and diversifying our legacy process portfolio.

(DS Division: Display)

The DP Division’s revenue in 2020 was KRW 30.5857 trillion, slightly down from the previous year by KRW 0.4682
trillion (1.5%). However, operating profit increased by KRW 0.6556 trillion (41.5%) to KRW 2.2369 trillion as sales of
value-added OLED panels expanded.

In mobile display, market uncertainties were aggravated by weak consumer sentiment due to the pandemic and rising
competition. Yet, we solidified our position in the smartphone panel market by increasing our customer base thanks to our
continuous efforts to offer differentiated technology.

In 2021, amid accelerating penetration of 5G smartphones, we will continue to improve the basic features of OLED panels
as smartphone makers are likely to increasingly adopt the technology in their growing number of 5G models for
advantages such as power efficiency and ultra-thin design. We will also use our differentiated technology to expand our
customer base. Moreover, we will secure technologies needed to increase accessibility of foldable products and enhance
product quality through cooperation with our clients.

In large displays, we will solidify the foundation for our business in the premium market by changing our business
structure based on our differentiated technology to QD display in a timely manner and establishing a solid customer
portfolio.

(Harman Division)
The Harman Division’s revenue and operating profit in 2020 declined year-on-year as COVID-19 weakened demand from
automotive companies and consumers. Revenue decreased by KRW 0.8933 trillion (8.9%) to KRW 9.1837 trillion and
profitability decreased by KRW 0.2668 trillion (82.8%) to KRW 0.0555 trillion.

Harman is working to continue its outstanding performance in automotive components, consumer audio, and professional
solutions. To do so, we constantly strive to enhance our competitiveness through innovations, conversion with other areas
of our businesses—including mobile, IT, display, and AI—and with offerings of a variety of brands and product groups.

As a leader in the car component market, we will continue to supply the quality made famous by the Harman brand across
all segments, ranging from the mass-market through to and beyond premium models. We will enhance the leadership even
further by spearheading technology innovations, such as the world’s first 5G TCU (telematics control unit).

In the consumer audio market, Harman’s innovative technologies have firmly established the brand’s reputation among
consumers and music lovers. Our portable Bluetooth speakers and earphones have achieved the highest market share for
several years based on our brand reputation, leading the consumer audio market. We will continue to launch products to
deliver new user experiences, improving our performance and pushing our brand reputation even higher.

We expect the business environment in 2021 to remain clouded by external uncertainties—the prolonged pandemic, short
supply of automotive semiconductors globally, and trade conflicts, all amid and intense competition. We plan to face such
challenges head on and keep preparing thoroughly for the future, such as by offering a whole new experience inside an
automobile by integrating IT and connectivity technologies with automotive technology and thus strengthening our
position in the connected car market. Through these efforts, we will achieve solid earnings and, in turn, contribute to
enhancing shareholder value.

C. New and closed businesses

N/A
D. Changes in organizational structure
In November 2016, the Company spun off its printing solutions business and established S-Printing Solution Co., Ltd.,
and then completed the sale of the printing solutions business in November 2017; in June 2017, the System LSI
business was divided into Foundry and System LSI businesses.

[As of December 2016]

Before After
CE Division (Visual Display, Digital Appliances, Printing Solution, CE Division (Visual Display, Digital Appliances, Medical Devices)
Medical Devices)
Business
organization IM Division (Mobile, Network) IM Division (Mobile, Network)

DS Division (Memory, System LSI, DP) DS Division (Memory, System LSI, DP)
Korea, North America, Latin America, Europe, CIS, Southwest Asia, Korea, North America, Latin America, Europe, CIS, Southwest Asia,
Regional Southeast Asia, China, Middle East, Africa Southeast Asia, China, Middle East, Africa
headquarters Americas (DS), Europe (DS), China (DS), Southeast Asia (DS), Japan Americas (DS), Europe (DS), China (DS), Southeast Asia (DS),
(DS) Japan (DS)

[As of June 2017]

Before After
CE Division (Visual display, Digital appliances, Medical CE Division (Visual display, Digital appliances, Medical
devices) devices)
Business IM Division (Mobile, Network) IM Division (Mobile, Network)
organization
DS Division (Memory, System LSI, DP) DS Division (Memory, System LSI, Foundry, DP)

- Harman Division
Korea, North America, Latin America, Europe, CIS, Southwest Asia, Korea, North America, Latin America, Europe, CIS, Southwest
Regional Southeast Asia, China, Middle East, Africa Asia, Southeast Asia, China, Middle East, Africa
headquarters Americas (DS), Europe (DS), China (DS), Southeast Asia (DS), Japan Americas (DS), Europe (DS), China (DS), Southeast Asia (DS),
(DS) Japan (DS)
The Harman Division was added with the acquisition of Harman International Industries, Inc. in March 2017.
The Health & Medical Equipment Business was excluded from the CE Division in 1Q18 and re-included in 1Q20.
E. Foreign exchange risk
The Company experiences currency gains and losses based on the different functional currency of each entity due to
global operations. As such, the Company is exposed to foreign currency volatility from exchange positions of currencies,
especially related to the US dollar, Euro, Indian rupee and Japanese yen.
(KRW)
Currency 2020 2019 Change Change (%)
USD 1088.00 1157.80 (69.80) (6.0)
EUR 1338.24 1297.43 40.81 3.1
INR 14.86 16.23 (1.37) (8.4)
JPY 10.54 10.63 (0.09) (0.9)

The foreign currency exposure to financial assets and liabilities of a 5% currency rate change against the Korean won
(before income tax) are presented below:
(KRW mil)
December 31, 2020 December 31, 2019
Currency
Increase Decrease Increase Decrease
USD 174,400 (174,400) 163,062 (163,062)
EUR 112,244 (112,244) 127,507 (127,507)
INR 21,959 (21,959) 64,153 (64,153)
JPY (22,143) 22,143 (23,062) 23,062

To minimize foreign exchange risk arising from operating activities, the Company maintains the same level of equity and
liability in each currency regardless of foreign exchange fluctuations. The Company’s foreign exchange management
policy requires normal business transactions (including imports and exports) to be conducted in the local currency or for
the cash-in currency to be matched with the cash-out currency.

The Company effectively manages its foreign exchange risk by regular monitoring foreign exchange rates and limits all
foreign exchange transactions besides the purpose of hedging risks.

F. Recognition of asset impairment loss

The Company conducts an annual review on asset impairment of CGUs (cash generating unit). The recoverable amount of
a CGU is based on the calculation of value in use, and the value in use is calculated using a BTCF (before tax cash flow)
assumption that based on the financial budget for the next five years (or longer if mid- to long-term plans for new
businesses with emerging technologies are deemed appropriate) approved by the management committee. In calculating
terminal-year cash flow for period that exceeds the term, assumption of fixed average growth (does not exceed industry
average) was used.

Impairment losses are recognized to the extent the carrying amount exceeds the recoverable amount of a CGU. The
recoverable amount is determined by choosing the greater figure between the use-value and fair-value, which deducts the
disposal amount per cost. Recognized impairment gains or losses in 2020 reached KRW 325.2 billion for tangible assets
and KRW 918.1 billion for intangible assets.

Refer to 『E. Equity Investments in other corporations』 of 『IX. Affiliates and Subsidiaries』 for more details about asset
impairment loss.
4. Liquidity, financing, and expenditure
Due to large investments made by the Company, maintaining adequate levels of liquidity is critical. The Company strives
to achieve this goal by periodically forecasting its cash flow, estimating required cash levels, and managing income and
expenses.

The Company preemptively manages risks by predicting cash flow on a regular basis. We efficiently manage liquidity risk
through cash pooling by region, which allows the use of internal funds in case of lack of funds in the region. The cash
pooling program allows sharing of surplus funds among entities and contributes to minimizing liquidity risk and
strengthening the Company’s competitive position by reducing capital operating expenses and finance expenses.

In addition, the Company provides payment guarantees, securing the limit of borrowing for overseas subsidiaries to
prepare for any potential need for large-scale liquidity.

A. Current status of liquidity

The Company has ample liquidity according to the liquidity assessment index of the global credit rating agency Moody’s.
The Company’s cash coverage (liquid funds/borrowings), which is a major liquidity index that Moody’s uses, corresponds
to the highest level, Aaa.

2020 2019
Cash coverage (liquid 617% 591%
funds/borrowings)
Moody’s requires 400% or higher for an Aaa rating

As of December 31, 2020, the Company’s liquidity is presented below:

(KRW mil)
Classification 2020 2019 Change
Liquid funds
Cash and cash equivalents 29,382,578 26,885,999 2,496,579

Short-term financial instruments 92,441,703 76,252,052 16,189,651

Short-term financial assets at amortized cost 2,757,111 3,914,216 (1,157,105)

Financial assets at fair value through profit or loss 71,451 1,727,436 (1,655,985)

Total financial assets 124,652,843 108,779,703 15,873,140

Borrowings
Short-term borrowings 16,553,429 14,393,468 2,159,961
Current portion of long-term liabilities 716,099 846,090 (129,991)
Debentures 948,137 975,298 (27,161)
Long-term borrowings 1,999,716 2,197,181 (197,465)
Total financial liabilities 20,217,381 18,412,037 1,805,344
Net cash (liquid funds – borrowings) 104,435,462 90,367,666 14,067,796
Current portion of long-term liabilities is current portion of long-term borrowings and current portion of debentures.

As of the end of 2020, the Company had KRW 124.6528 trillion of financial assets.
These liquid funds include: i) cash and cash equivalents; ii) short-term financial instruments; iii) short-term financial
assets at amortized cost; and iv) financial assets at fair value through other comprehensive income. This balance increased
by KRW 15.8731 trillion from KRW 108.7797 trillion at the end of the previous year.
The Company’s borrowings (including debentures) are KRW 20.2174 trillion, an increase of KRW 1.8053 trillion from
KRW 18.4120 trillion at the end of the previous year.

The Company’s liquidity includes an inflow of KRW 65.2870 trillion in cash flows from operating activities and an
outflow of KRW 40.2718 trillion in acquisition of tangible assets, and KRW 9.6768 in dividends. The Company’s net cash
(liquid funds – borrowings) in 2020 is KRW 104.4355 trillion, which is an increase of KRW 14.0678 trillion from KRW
90.3677 trillion at the end of the previous year.

B. Financing and expenditures

(Borrowings)

As of December 31, 2020, the Company’s borrowings (including debentures) are presented below:
(KRW mil)
Annual interest rate
Classification Creditor (%) 2020 2019

Short-term borrowings
Collateralized borrowings Woori Bank, etc. 0.0–18.3 14,275,043 11,734,361

Non-collateralized borrowings CitiBank, etc. 0.0–16.3 2,278,386 2,659,107

Total short-term borrowings 16,553,429 14,393,468

Liquid long-term borrowings

Bank borrowings - - - 35,376

Capital lease liabilities CSSD, etc. 3.8 710,781 805,068

Total liquid long-term borrowings 710,781 840,444

Long-term borrowings
Capital lease liabilities CSSD, etc. 3.8 1,999,716 2,197,181

Annual interest
Classification Issuance date Maturity date 2020 2019
rate (%)
Debentures
USD denominated 38,080 (USD 46,312
Oct 2, 1997 Oct 1, 2027 7.7
straight bonds 35,000,000) (USD 40,000,000)
USD denominated 435,200 (USD 463,120
May 11, 2015 May 15, 2025 4.2
debenture bonds 400,000,000) (USD 400,000,000)
EUR denominated 468,383 (EUR 454,100
May 27, 2015 May 27, 2022 2.0
debenture bonds 350,000,000) (EUR 350,000,000)
Sub Total 941,663 963,532
Premium on bonds payable (discount on bonds payable) 11,792 17,412
Total 953,455 980,944
Deduction: Current debentures -5,318 -5,646
Non-current debentures 948,137 975,298

(Borrowings and payment of borrowings)

The Company’s short-term borrowing increases or decreases depending on the discount amount of trade receivables. In
2020, short-term borrowing and long-term borrowing increased by KRW 2.1912 trillion and 0.0145 trillion, respectively.
KRW 0.8649 trillion of debenture and long-term borrowing was repaid.
(Plan for payment of borrowings)

The Company’s plan for payment of borrowings (including debentures) is presented below:
(KRW mil)
Year of payment Amount of payment
2021 17,343,561

2022 1,031,993

2023 456,643

2024 359,807

2025~ 1,246,801

Total 20,438,805
Amount calculated excluding bond discount, premium on bonds payable, and present value of bonds payable discount.

(Compliance to bond management contract conditions)

The Company’s bonds are subject to conditions to protect investors such as constraint on collateral, constraint on disposal
of assets, etc., and the Company complies with these conditions.

5. Off-Balance Sheet Activities

- Refer to 『2. Notes to Consolidated Financial Statements』 in 『III. Financial Affairs』
6. Other information for investment decision making

A. Significant accounting policies and estimation

- The Company applied the following major amended and enacted standards for the annual period beginning on January 1,
2020:

Korean IFRS 1103 (revised), Business Combinations

The Company has applied Korean IFRS 1103, Business Combinations, for the first time for their annual reporting period
commencing January 1, 2020. In accordance with the transitional provisions in Korean IFRS 1103, comparative figures
have not been restated. The application impacts of Korean IFRS 1103 refer to 『2. Notes to Consolidated Financial
Statements』 in 『III. Financial Affairs』

B. Environment and employees

- Refer to 『5. Sanctions and others』 in 『XI. Other information』 for environmental sanctions or administrative actions.
- No significant changes in employee positions during this period.

C. Legal regulations

- Refer to 『5. Sanctions and others』 of 『XI. Other information』 for major legal regulations on the Company’s
businesses.

D. Derivatives and risk management policy

- To manage exchange rate risk, overseas companies enter into currency forwards which are denominated in the trading
currency of a foreign currency position as opposed to the companies’ reporting currencies. Overseas offices buy or sell
currency forwards to avert risk.

- Refer to 『8. Derivative Instruments and Put Options』 in 『II. Businesses Overview』 and 『3. Notes to Financial
Statements』 in 『III. Financial Affairs』 for Derivatives and risk management policy.