Samsung Elect Ltd

Good morning. Thank you very much for joining our conference call. We will now start the 2020 fourth quarter earnings conference call of Samsung Electronics. This conference call will start with a presentation by the company, followed by a Q&A session. If you have a question, please press star 1 on your phone. Now we will start the presentation by Samsung Electronics. Good morning. This is Ben Seo from Investor Relations. Thank you for joining our earnings call for the fourth quarter of year 2020. Before we announce our fourth quarter results, I would like to invite President and CFO Yunho Choi to share details on our shareholder return policy regarding both the additional return for the period just ended last December as well as the new policy regarding the next term. Now, I would like to turn it over to our CFO. Good morning. This is Yunho Choi, CFO of Samsung Electronics. It's a pleasure to talk to our shareholders and market professionals in this call today. As always, thank you for your continued support for Samsung Electronics, and I wish you and your family good health. The Board of Directors and Executives are committed to enhancing shareholder value. With that, I would like to provide an update on two resolutions regarding our shareholder return policy that were approved by the BOD today. To fulfill our commitment for our shareholder return policy for year 2018 to 2020, the Board of Directors today approved a one-time special cash dividend of 10.7 trillion won. This was calculated by deducting the regular dividend of 28.9 trillion won from 50% of 79.2 trillion won, which is the total free cash flow for the previous three-year policy term. As a result of the joint efforts of our employees and stakeholders, including our partner companies Amid numerous difficulties, including COVID-19, we are able to deliver results that enable this special dividend. This special cash dividend of 10.7 trillion won or 1,578 won per share will be paid out to shareholders together with the year-end regular dividend of 354 won per common share and 355 won per preferred share. In April, Shareholders of record as of end of 2020 will receive 1,932 won per common share and 1,933 won per preferred share after approval in March at the annual general meeting of shareholders. Now I would move on to the shareholder return policy for the next term. When considering the direction for our new policy, the Board of Directors reviewed various factors in depth including ways to enhance shareholder value, the business environment, and our investment strategies and financial structure. As you are aware, the global business environment has been and is still mired in unprecedented macro uncertainties caused by global trade conflicts and the spread of COVID-19, significantly decreasing visibility for our outlook. Even under these circumstances, R&D investments as well as capital expenditures are expected to increase. This is due to intensifying competition, especially in foundry and increasing technology challenges. And considering the dynamic changes in the industry landscape, we need to ensure we have the resources to execute on M&A activities to seize opportunities for growth. For the period covering 2018 to 2020, we changed our shareholder return policy with a focus on dividend, significantly increasing the regular dividend amount to enhance the predictability on total shareholder return. For the next term, we will continue with this policy direction and have decided to increase the annual dividend to 9.8 trillion won. Regarding the shareholder return pool beyond the dividends, for the 2018 to 2020 term, uncertainty such as COVID-19 caused rapid changes in the external environment and kept us from executing on an early return. For this term, from 2021 to 2023, we kept the shareholder return pool at 50% of the free cash flow generated over the three-year period. But that said, we will make a regular announcement each year sharing the annual free cash flow to enhance clarity on the amount of additional expected return. Also, if a significant amount of expected return has been generated, we will actively consider executing a portion of it at the close of each year's results. Our board of directors and executives are well aware of shareholder concerns over our increasing cash levels over the last three years. For the 2021 to 23 periods, difficult business conditions and macro uncertainties are expected, but we believe there are opportunities as well. Market growth is accelerating with increasing digitalization and technology advances. Semiconductor display and mobile communication businesses will play crucial roles in such growth. We will further enhance our leadership in the market for our established businesses and at the same time strengthen the foundation for continued growth in emerging businesses. For this, we will leverage our resources to increase strategic capital expenditures and execute M&A opportunities. We ask for your support and understanding as we solidify our foundation for sustainable growth. The board of directors and executives firmly believe that the most effective and reliable way to enhance shareholder value is through continued growth of the company. Therefore, on top of increasing our business competitiveness, we will do our best to enhance shareholder value with global level achievements in ESG and compliance management that will enhance and grow our corporate value. As always, we deeply appreciate your trust and support, and we look forward to more engagement with our shareholders and active communication with the market. We hope that you and those close to you stay strong and in good health. Thank you. Yes. Thank you, Mr. Choi. We will now have a Q&A session about the shareholder return policy that was just announced. As you know, we also have our full fourth quarter earnings conference call left that needs to follow the Q&A session. So given the limited amount of time, we will only take three questions and each person will be limited to one question. The Q&A session will be consecutively interpreted.

Now, Q&A session will begin. Please press star 1, that is star N1 if you have any questions. Questions will be taken according to the order you have pressed, star N1. For cancellation, please press star 2, that is star N2 on your phone. The first question will be presented by Changwon Jung from Nomura.

Please go ahead with your question.