Notice of 68 th Annual General Meeting of Shareholders (Held on March 18, 2016)

Transcription

1 Notice of 68 th Annual General Meeting of Shareholders (Held on March 18, 2016) To our Shareholders: You are cordially invited to attend the 68 th Annual General Meeting of Shareholders ( the Meeting ) of SK hynix Inc. ( the Company ), which will be held on March 18, 2016 at 10:00 a.m. at Guest House of the Company s Head Office, located at 2091 GyeongChung-DaeRo, Bubal-eub, Icheon-si, Gyeonggi-do, for the following matters: Shareholders Meeting Agenda 1. Approval of the Financial Statements for the 68 th fiscal year ( ~ ) (Annual Cash dividend per share: KRW 500) 2. Election of Inside Director 2-1. Election of Inside Director (Candidate: Kim, Joon-Ho) 2-2. Election of Inside Director (Candidate: Park, Jung Ho) 3. Approval of the Ceiling Amount of Remuneration for Directors (Proposed Ceiling Amount of Remuneration for Directors is KRW 12 billion, which is same as last year) 4. Approval of the Amendment to the Company Regulation on Executive Officer Severance Payment These matters are described in detail in the Shareholders Meeting Agenda accompanying this notice. We note that this notice, the Shareholders Meeting Agenda and the attachments hereto (the Shareholders Materials ) are English-language translations of Korean-language materials that were already disclosed in Korea. We are providing the Shareholders Materials for your convenience and to facilitate the exercise of your voting rights with respect to the above-mentioned matters at the Meeting. Therefore, in the event of any discrepancy between this Shareholders Materials and the said Koreanlanguage materials, the Korean-language materials shall prevail. The original Korean-language materials have been disclosed to the Korea Exchange on February 24, 2016 and are available for your review. We

2 strongly encourage you to contact Hyang Yeon Song at (+82-31) , should you have any further questions with respect to these matters to be voted upon at the Meeting. Only holders of record as of December 31, 2015 are entitled to receive this notice and to vote at the Meeting. With respect to Global Depositary Shares, the record date is December 31, 2015 pursuant to the Deposit Agreement. Please keep in mind that your vote is very important. All shares that are properly represented prior to the Meeting will be voted at the Meeting in accordance with your instructions. By Order of the Board of Directors Park, Sung Wook President & CEO SK hynix Inc.

3 Shareholders Meeting Agenda Agenda 1. Approval of the Financial Statements for the 68 th fiscal year ( ~ ) (Annual Cash dividend per share: KRW 500) Audit Report with Independent Auditors opinion was disclosed in its Korean version on Feb 23, 2016 and was disclosed in its English version on Feb 29, These reports are available in the disclosure dated Feb 23, 2016 and on our website (links provided below). Audit Report filing (KRX Corporate Disclosure website in Korean): erhost=&viewerport= SK hynix website: (Please refer to our 68 th fiscal year financial statements provided in Attachment A.) Agenda 2. Election of Inside Director 2-1. Election of Inside Director (Candidate: Kim, Joon-Ho) 2-2. Election of Inside Director (Candidate: Park, Jung Ho) (For more details of this proposal, please refer to the Candidates for Inside Director provided in Attachment B.) Agenda 3. Approval of the Ceiling Amount of Remuneration for Directors The proposed Ceiling Amount of Remuneration for the members of the board of directors is KRW 12 billion for the year 2016, same as in previous year. Agenda 4. Approval of the Amendment to the Company Regulation on Executive Officer Severance Payment (For more details of this proposal, please refer to the Company Regulation on Executive Officer Severance Payment attached hereto as Attachment C.) 3

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6 Consolidated Financial Statements of the Company Consolidated Statements of Financial Position (As of Dec 31, 2015 and 2014, KRW in millions) ASSETS Current Assets: Cash & Cash Equivalents 1,175, ,761 Short-term Financial instruments 3,615,554 3,618,014 Inventories 1,923,376 1,497,563 Total Current Assets 9,760,030 10,363,514 Non-current Assets: Property, Plant and Equipment 16,966,252 14,090,334 Intangible Assets 1,704,896 1,336,680 Deferred tax assets 361, ,102 Total Non-current Assets 19,917,876 16,519,764 Total Assets 29,677,906 26,883,278 LIABILITIES Current Liabilities Borrowings 1,013,372 1,755,020 Total Current Liabilities 4,840,698 5,765,304 Non-Current Liabilities Borrowings 2,805,223 2,419,739 Total Non-Current Liabilities 3,449,505 3,081,671 Total Liabilities 8,290,203 8,846,975 EQUITY Capital Stock 3,657,652 3,657,652 Capital Surplus 4,143,736 4,143,736 Other Equity (771,913) (24) Accumulated Other Comprehensive Income (Loss) (1,600) (41,815) Retained Earnings 14,358,988 10,276,904 Total Equity attributable to owners of the Parent Company 21,386,863 18,036,453 Non-controlling interest 840 (150) Total Equity 21,387,703 18,036,303 Total Liabilities and Equity 29,677,906 26,883,278 6

7 Consolidated Statements of Comprehensive Income (Years ended Dec 31, 2015 and 2014, KRW in millions except EPS) Net Sales 18,797,998 17,125,566 Cost of Sales (10,515,353) (9,461,725) Gross Profit 8,282,645 7,663,841 Selling & Administrative Expenses (2,946,545) (2,554,375) Operating Income (Loss) 5,336,100 5,109,466 Financial income 846, ,570 Financial costs (829,913) (799,771) Share of profit of associates 24,642 23,145 Other non-operating income 40, ,684 Other non-operating expenses (148,939) (582,424) Profit (Loss) before Income Tax (benefit) 5,269,121 5,047,670 Income Tax expense (945,526) (852,501) Net Profit (Loss) for the year 4,323,595 4,195,169 Total Comprehensive income (loss) for the year 4,341,690 4,142,808 Basic EPS 6,002 5,842 Diluted EPS 6,002 5,842 Consolidated Statements of Cash Flows (Years ended Dec 31, 2015 and 2014, KRW in millions) Net cash generated from Operating Activities 9,319,520 5,866,691 Net cash provided by (used in) in Investing Activities (7,125,530) (6,087,827) Net cash provided by (used in) Financing Activities (1,462,257) 28,343 Effect of foreign exchange rates on Cash & Cash Equivalents 7,225 (2,313) Net increase (decrease) in Cash & Cash Equivalents 738,958 (195,106) Cash & Cash Equivalents at the Beginning of the Year 436, ,867 Cash & Cash Equivalents at the End of the Year 1,175, ,761 7

8 Consolidated Statements of Changes in Equity (Years ended Dec 31, 2015 and 2014, KRW in millions) Capital stock Capital surplus Attributable to owners of the Parent Company Other equity Accum. other comprehensive income (loss) Noncontrolling interest Total equity Balance at Jan 1, ,568,645 3,406,083 (108,807) 6,201,322 13,067,243 (384) 13,066,859 Comprehensive income: Net Profit ,195,456 4,195,456 (287) 4,195,169 Unrealized net changes in fair values of available-for-sale financial assets - - (7,824) - (7,824) - (7,824) Remeasurements of the net defined benefit liability (119,874) (119,874) - (119,874) Other comp. income(loss) from joint venture and associate - - 3,706-3,706-3,706 Foreign currency translation differences for foreign operations ,110-71, ,631 Total Comprehensive income ,992 4,075,582 4,142, ,142,808 Transactions with owners of the Parent Company: Issue of ordinary shares related to acquisition of a subsidiary 6,793 47,277 54,070 54,070 Exercise of conversion rights 82, , , ,590 Acquisition of treasury stocks (24) (24) (24) Total transactions with owners of the Parent Company 89, ,653 (24) , ,636 Balance at Dec 31, ,657,652 4,143,736 (24) (41,815) 10,276,904 18,036,453 (150) 18,036,303 Balance at Jan 1, ,657,652 4,143,736 (24) (41,815) 10,276,904 18,036,453 (150) 18,036,303 Comprehensive income: Net Profit ,322,356 4,322,356 1,239 4,323,595 Remeasurements of the net defined benefit liability (21,871) (21,871) - (21,871) Other comp. income(loss) from joint venture and associate ,487-6,487-6,487 Foreign currency translation differences for foreign operations ,728-33,728 (249) 33,479 Total Comprehensive income ,215 4,300,485 4,340, ,341,690 Transactions with owners of the Parent Company: Dividend payout (218,401) (218,401) - (218,401) Acquisition of treasury stocks - - (771,889) - - (771,889) - (771,889) Total transactions with owners of the Parent Company - - (771,889) - (218,401) (990,290) - (990,290) Balance at Dec 31, ,657,652 4,143,736 (771,913) (1,600) 14,358,988 21,386, ,387,703 Retained earnings Total 8

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11 Non-consolidated Financial Statements of the Company Non-consolidated Statements of Financial Position (As of Dec 31, 2015 and 2014, KRW in millions) ASSETS Current Assets: Cash & Cash Equivalents 1,014, ,078 Short-term Financial Instruments 2,808,102 3,172,173 Inventories 1,407,614 1,217,282 Total Current Assets 8,421,984 8,641,074 Non-current Assets: Property, Plant and Equipment 13,853,549 10,862,530 Intangible Assets 1,299, ,316 Deferred tax assets 187, ,595 Total Non-current Assets 20,320,214 16,707,826 Total Assets 28,742,198 25,348,900 LIABILITIES Current Liabilities Borrowings 743, ,049 Total Current Liabilities 4,750,892 4,812,528 Non-current Liabilities Borrowings 2,689,326 2,216,231 Total Non-current Liabilities 3,308,841 2,861,708 Total Liabilities 8,059,733 7,674,236 EQUITY Capital Stock 3,657,652 3,657,652 Capital Surplus 4,182,016 4,182,016 Other Equity (771,913) (24) Accumulated Other Comprehensive Income - - Retained Earnings 13,614,710 9,835,020 Total Equity 20,682,465 17,674,664 Total Liabilities and Equity 28,742,198 25,348,900 11

12 Non-consolidated Statements of Comprehensive Income (Years ended Dec 31, 2015 and 2014, KRW in millions) Net Sales 18,780,792 16,893,716 Cost of Sales (11,002,083) (9,502,113) Gross Profit 7,778,709 7,391,603 Selling & Administrative Expenses (2,702,202) (2,344,250) Operating Income (Loss) 5,076,507 5,047,353 Financial income 689, ,059 Financial costs (653,425) (685,897) Other non-operating income 59,081 34,638 Other non-operating expenses (169,539) (440,041) Profit (Loss) before Income Tax (benefit) 5,002,479 4,541,112 Income Tax expense (983,399) (769,351) Profit (Loss) for the year 4,019,080 3,771,761 Total Comprehensive Income (Loss) for the year 3,998,091 3,645,417 Basic EPS 5,581 5,252 Diluted EPS 5,581 5,252 Non-consolidated Statements of Cash Flows (Years ended Dec 31, 2015 and 2014, KRW in millions) Net cash generated from Operating Activities 7,747,769 5,100,398 Net cash provided by (used in) Investing Activities (6,171,944) (5,003,769) Net cash provided by (used in) Financing Activities (812,874) (215,748) Net increase (decrease) in Cash & Cash Equivalents 762,861 (119,126) Cash & Cash Equivalents at the Beginning of the Year 252, ,204 Cash & Cash Equivalents at the End of the Year 1,014, ,078 12

13 Non-consolidated Statements of Changes in Equity (Years ended Dec 31, 2015 and 2014, KRW in millions) Capital Stock Capital Surplus Other Equity Accum. other comprehensive income (loss) Retained earnings Balance at Jan 1, ,568,645 3,444,363 7,824 6,181,779 13,202,611 Comprehensive income: Net Profit ,771,761 3,771,761 Remeasurements of the net defined benefit liability (118,520) (118,520) Unrealized net changes in the fair values of available-for-sale financial assets - - (7,824) - (7,824) Total comprehensive income - - (7,824) 3,653,241 3,645,417 Transactions with owners of the Company: Issue of ordinary shares related to acquisition of a subsidiary 6,793 47,277 54,070 Exercise of conversion rights 82, , ,590 Acquisition of treasury shares (24) (24) Total transactions with owners of the Company 89, ,653 (24) ,636 Balance at Dec 31, ,657,652 4,182,016 (24) - 9,835,020 17,674,664 Balance at Jan 1, ,657,652 4,182,016 (24) - 9,835,020 17,674,664 Comprehensive income: Net Profit ,019,080 4,019,080 Remeasurements of the net defined benefit liability (20,989) (20,989) Total comprehensive income ,998,091 3,998,091 Transactions with owners of the Company: Dividend payout (218,401) (218,401) Acquisition of treasury shares - - (771,889) - - (771,889) Total transactions with owners of the Company - - (771,889) - (218,401) (990,290) Balance at Dec 31, ,657,652 4,182,016 (771,913) - 13,614,710 20,682,465 Total Equity 13

14 Statement of Appropriation of Retained Earnings (Years ended Dec 31, 2015 and 2014, KRW in millions) Retained Earnings before Appropriation 13,348,510 9,590,660 Unappropriated Retained Earnings carried over from prior year 9,350,419 5,937,418 Remeasurements of defined benefit liability (20,989) (118,519) Net income (loss) 4,019,080 3,771,761 Appropriation of Retained Earnings 388, ,241 Earned Surplus Reserve 35,300 21,840 Cash Dividend 353, ,401 Unappropriated Retained Earnings carried forward to subsequent year 12,960,209 9,350,419 * Annual Cash dividend of KRW 500 per share is proposed. 14

15 [Candidates for Inside Director] ATTACHMENT B Agenda 2-1. Kim, Joon-Ho 1) Educational Background Korea University, B.A. in Law 2) Professional Experiences President & Head of Corporate Support, SK hynix Inc. (current) Inside Director, SK hynix Inc. (current) President, Corporate Management Service, SK Energy, Co., Ltd. & Head of Ethics Management Divisional Group, SK Holdings, Co., Ltd. Executive Vice President, Ethics Management Office, SK Corporation Executive Officer and Chief Prosecutor, Ministry of Justice 3) His term shall be governed by Article 29 (1) of the Articles of Incorporation.* Agenda 2-2. Park, Jung Ho 1) Educational Background George Washington University, M.B.A. 2) Professional Experiences CEO of SK Holdings (current) Inside Director of SK Holdings (current) Head of SK Telecom Business Development Office 3) His term shall be governed by Article 29 (1) of the Articles of Incorporation.* *Article 29. Term of Office of Director (1) The term of office of a director shall expire upon the time of the closing of the third ordinary general meeting of shareholders to be convened after his/her inauguration. 15

16 ATTACHMENT C Approval of the Amendment to the Company Regulation on Executive Officer Severance Payment The proposed amendment is as follows: Current Article 4 (Severance Payment) 1. The amount of the severance payment to be paid by the Company to an Executive Officer shall be the amount equal to (i) the average salary* of such Executive Officer during the 3 month period prior to the retirement of such Executive Officer, multiplied by (ii) the Payment Rate applicable to the office held by such Executive Officer according to the Table of Payment Rate, and by (iii) the duration of the office held by such Executive Officer. Amendments (Proposed) Article 4 (Severance Payment) 1. The amount of the severance payment to be paid by the Company to an Executive Officer shall be the amount equal to (i) the average salary* of such Executive Officer during the 3 month period prior to the retirement of such Executive Officer, multiplied by (ii) the duration of the office held by such Executive Officer under each Grade, and by (iii) the Payment Rate applicable to the office held by such Executive Officer according to the Table of Payment Rate. 2. In the event that an Executive Officer retires after having served under two or more Position Grades, the amount of the severance payment to be paid by the Company to such Executive Officer shall be the sum of the amount equal to (i) the average salary* of such Executive Officer during the 3 month period prior to the retirement of such Executive Officer, multiplied by (ii) the Payment Rate applicable to each office held by such Executive Officer according to the Table of Payment Rate, and by (iii) the duration of such office held by such Executive Officer. * the average salary of such Executive Officer is calculated based on the annual salary contract of such Executive Officer Addenda Article 1 (Effective date) 1. The regulations shall become effective as of Mar 21, 2014 (the Effective Date ). However, for such Executive Officers appointed prior to the Effective Date and retiring after the Effective Date, the Payment Rate prior to the amendment shall be applied to the period of the term served prior to the Effective Date and the amended regulations shall be applied for the period of term starting from the Effective Date onwards. 2. In the event that an Executive Officer retires after having served under two or more Grades, the amount of the severance payment to be paid by the Company to such Executive Officer shall be the sum of the amount equal to (i) the average salary* of such Executive Officer during the 3 month period prior to the retirement of such Executive Officer, multiplied by (ii) the duration of the office held by such Executive Officer under each Grade, and by (iii) the Payment Rate applicable to each office held by such Executive Officer according to the Table of Payment Rate. * the average salary of such Executive Officer is calculated based on the annual salary contract of such Executive Officer Addenda Article 1 (Effective date) 1. The regulations shall become effective as of Mar 18, 2016 (the Effective Date ). 16

17 (Newly adopted) Addenda Article 2 (Transitional Application) For the duration of office held prior to the Effective Date, the Payment Rate according to the regulations prior to the amendment shall be applied. Table of Payment Rate Table of Payment Rate Position Grade Rate of Payment Position Grade Rate of Payment Chairman 6.0 D or above 4.0 Vice Chairman/E 5.5 C 3.5 D 4.0 B 3.5 C/B 3.5 A 2.5 * Payment Rate of 1 is applied to any Executive Officer not classified according to the table above A 2.5 * Payment Rate of 1.0 is applied to any Executive Officer not classified according to the table above 17