UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

Form CB/A

 

 

TENDER OFFER/RIGHTS OFFERING NOTIFICATION FORM

(Amendment No. 2)

Please place an X in the box(es) to designate the appropriate rule provision(s) relied upon to file this Form:

 

Securities Act Rule 801 (Rights Offering)

    

Securities Act Rule 802 (Exchange Offer)

    

Exchange Act Rule 13e-4(h)(8) (Issuer Tender Offer)

    

Exchange Act Rule 14d-1(c) (Third Party Tender Offer)

    

Exchange Act Rule 14e-2(d) (Subject Company Response)

    

Filed or submitted in paper if permitted by  Regulation S-T Rule 101(b)(8)

    

 

 

LG Display Co., Ltd.

(Name of Subject Company)

 

 

Not Applicable

(Translation of Subject Company’s Name into English (if applicable))

The Republic of Korea

(Jurisdiction of Subject Company’s Incorporation or Organization)

LG Display Co., Ltd.

(Name of Person(s) Furnishing Form)

American Depositary Shares, each representing one-half of one share of common stock of LG Display Co., Ltd.

(Title of Class of Subject Securities)

50186V102

(CUSIP Number of Class of Securities (if applicable))

Seunghyun Lee

LG Display Co., Ltd.

128 Yeoui-daero, Yeongdeungpo-gu

Seoul 07336, Republic of Korea

(Tel) +82-2-3777-1010

with a copy to:

Jinduk Han, Esq.

Cleary, Gottlieb, Steen & Hamilton LLP

Foreign Legal Consultant Office

19F, Ferrum Tower

19, Eulji-ro 5-gil, Jung-gu, Seoul 04539, Korea

(Tel) +82-2-6353-8020

(Name, Address (including zip code) and Telephone Number (including area code)

of Person(s) Authorized to Receive Notices and Communications on Behalf of Subject Company)

February 9, 2024

(Date Tender Offer/Rights Offering Commenced)

 

 

 


PART I – INFORMATION SENT TO SECURITY HOLDERS

 

Item 1.

Home Jurisdiction Documents

 

  (a)

The following document is attached as an exhibit to this Form CB/A:

 

Exhibit number

  

Description

99.1    Amendment No. 2 to Prospectus, dated March 4, 2024.*

 

  *

Further amends the Prospectus dated January 18, 2024 (which was originally furnished as Exhibit 99.1 to Form CB filed with the Securities and Exchange Commission (the “SEC”) on January 18, 2024), as previously amended by Amendment No. 1 to Prospectus dated January 24, 2024 (which was previously furnished as Exhibit 99.1 to Form CB/A filed with the SEC on January 24, 2024).

 

  (b)

Not applicable

 

Item 2.

Informational Legends

A legend in compliance with Rule 801(b) under the Securities Act of 1933, as amended, has been included in the documents attached as exhibits hereto.

PART II – INFORMATION NOT REQUIRED TO BE SENT TO SECURITY HOLDERS

 

  (1)

The following document is attached as an exhibit to this Form CB/A:

 

Exhibit number

  

Description

99.2    English translation of the “Notice of Definitive Subscription Price of New Shares to be Issued Pursuant to the Paid-in Capital Increase” filed by the Company with the Korea Exchange, dated March 4, 2024.**

 

  **

Incorporated by reference to the Company’s Report on Form 6-K furnished to the Securities and Exchange Commission on March 4, 2024.

 

  (2)

Not applicable

 

  (3)

Not applicable

PART III – CONSENT TO SERVICE OF PROCESS

 

  (1)

LG Display Co., Ltd. filed with the Securities and Exchange Commission a written irrevocable consent and power of attorney on Form F-X on January 18, 2024.

 

  (2)

Not Applicable

 

2


PART IV – SIGNATURES

After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

/s/ Kyu Dong Kim

 

(Signature)

Kyu Dong Kim, Vice President, Finance & Risk Management Division

 

(Name and Title)

LG Display Co., Ltd.

 

March 4, 2024

 

(Date)

 

3

Exhibit 99.1

 

 

IMPORTANT INFORMATION

 

This rights offering is made for the securities of a foreign company. The offer is subject to the disclosure requirements of a foreign country that are different from those of the United States. Financial statements included in the document, if any, have been prepared in accordance with foreign accounting standards that may not be comparable to the financial statements of United States companies.

 

It may be difficult for you to enforce your rights and any claim you may have arising under the federal securities laws, since the issuer is located in a foreign country, and some or all of its officers and directors may be residents of a foreign country. You may not be able to sue the foreign company or its officers or directors in a foreign court for violations of the U.S. securities laws. It may be difficult to compel a foreign company and its affiliates to subject themselves to a U.S. court’s judgment.

 

The following is an English translation of the original Korean language document. This English translation has been prepared solely for informational purposes only and has been furnished to the U.S. Securities and Exchange Commission in compliance with Rule 801 under the U.S. Securities Act of 1933, as amended (the “Securities Act”). This translation is not an offer or invitation to make an offer for the purchase of any securities. If there exist any discrepancies between the original Korean language document and this English translation, the original Korean language document will prevail.

 

The share rights and the common shares of LG Display Co., Ltd. (the “Company”) issuable upon the exercise of such share rights have not been registered under the Securities Act, or any state securities laws. No securities of the Company may be offered or sold in the United States or to, or for the benefit of, U.S. persons absent registration or an applicable exemption from such registration requirements. The Company is relying on applicable exemptions from registration requirements in connection with the transactions contemplated in this document. This document is neither an offer to sell nor a solicitation of an offer to buy any of the Company’s securities and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offer, solicitation or sale is unlawful.

 

Holders of American Depositary Shares (“ADSs”) representing ownership interest in the common shares of the Company, which are listed on the New York Stock Exchange, as of the Record Date (as defined below) will be afforded the opportunity to participate in the rights offering. Citibank, N.A., as the depositary of the Company’s ADS facility, will provide separate instructions in English to eligible ADS holders with detailed terms and conditions for the exercise of the ADS rights.

 

 


EXPLANATORY NOTE

This amendment (this “Amendment No. 2”) amends and restates the amended English translation dated January 24, 2024 (the “Original Prospectus Translation”) of the Korean Prospectus dated January 18, 2024, as amended on January 24, 2024, filed in Korea (the “Original Prospectus”) prepared in connection with to proposed capital increase of the Company.

The Original Prospectus Translation, which was furnished to the Securities and Exchange Commission through Exhibit 99.1 to Form CB/A on January 24, 2024, can be downloaded from the website of the Securities and Exchange Commission at www.sec.gov.

The purpose of this Amendment No. 2 is to amend the Original Prospectus Translation to reflect the corresponding amendment to the Original Prospectus dated March 4, 2024 filed in Korea (the “Prospectus Amendment No. 2”) reflecting certain changes made by the Company to the Original Prospectus following the determination of the Definitive Subscription Price (as such term is defined in the Original Prospectus Translation) to be Korean Won (“KRW”) 9,090 per share. The Prospectus Amendment No. 2 includes an amendment report dated March 4, 2024 (the “Amendment Report”) followed by an amended and restated Original Prospectus reflecting the amendments described in the Amendment Report.

This Amendment No. 2 will be furnished to the Securities and Exchange Commission through an amended Exhibit 99.1 to Form CB/A dated March 4, 2024, which may be downloaded from the Securities and Exchange Commission at www.sec.gov.

In case of inconsistencies between this Amendment No. 2 and the Original Prospectus Translation, the statements made in this Amendment No. 2 shall prevail.

March 4, 2024

AMENDMENT REPORT

 

  1.

Report Subject to Amendment: Prospectus

 

  2.

Date of Initial Submission of Report Subject to Amendment: January 18, 2024

 

  3.

Reasons for Amendment: determination of the Definitive Subscription Price

 

  4.

Details of Amendment: please see Items 1 through 7 as described below

Item 1

The following information set forth in page 25 of the Original Prospectus Translation under “PROSPECTUS (as amended by the Amendment Report)” is deleted in its entirety and replaced as follows (with changes italicized and underlined for emphasis):

Prior to amendment (and deleted pursuant to this Prospectus Amendment No. 2):

Total Offering or Sale Amount:    Korean Won (“KRW”) 1,431,795,901,000 (tentative)

As amended (and replaced with pursuant to this Prospectus Amendment No. 2):

Total Offering or Sale Amount:    Korean Won (“KRW”) 1,292,455,287,000

 

2


Item 2

The following information set forth on pages 41 to 44 of the Original Prospectus Translation under “Summary Information – 2. General Matters Regarding the Offering or Sale” is deleted in its entirety and replaced as follows (with changes italicized and underlined for emphasis):

Prior to amendment (and deleted pursuant to this Prospectus Amendment No. 2):

 

                   

(Unit: KRW, Shares)

 

Type of

Securities    

  Number of
Securities
    Par Value   Offering (or Sale)
Price per Share
  Total Offering (or Sale)
Amount
  Offering (or Sale)
Method

Common shares

    142,184,300     KRW 5,000   KRW 10,070   KRW 1,431,795,901,000   Rights offering to existing
shareholders,
followed by a public
offering of
unsubscribed shares,
if any

 

Whether underwritten (arranged)   

  

Whether public offering for listing of equity securities, etc. is done

Underwritten

   No    N/A    N/A

 

Underwriter (Manager)          

  Type of
Securities
   Number of
Securities
Underwritten
     Underwriting
Amount
    

Consideration for
Underwriting

   Underwriting
Method

Joint Lead Manager

  Korea Investment & Securities   Common
shares
     39,100,683        KRW 393,743,877,810      Underwriting Fee: 27.5% of the amount equal to 0.40% of the total offering amount    Stand-by
underwriting

Joint Lead Manager

  NH Investment & Securities   Common
shares
     39,100,683        KRW 393,743,877,810      Underwriting Fee: 27.5% of the amount equal to 0.40% of the total offering amount    Stand-by
underwriting

Joint Lead Manager

  KB Securities   Common
shares
     35,546,075        KRW 357,948,975,250      Underwriting Fee: 25.0% of the amount equal to 0.40% of the total offering amount    Stand-by
underwriting

Joint Lead Manager

  Daishin Securities   Common
shares
     28,436,859        KRW 286,359,170,130      Underwriting Fee: 20.0% of the amount equal to 0.40% of the total offering amount    Stand-by
underwriting

 

3


Subscription Date     

  

Payment Date

  

Date of Public

Notice of

Subscription

  

Date of Public

Notice of

Allocation

  

Record Date for

Allocating Share

Rights

March 6, 2024 – March 7, 2024    March 14, 2024    March 8, 2024    March 14, 2024    January 26, 2024

 

Short-Selling Transaction Period during which Subscription hereunder is Prohibited

Start date

   End date
December 19, 2023    February 29, 2024

 

Expected Use of Proceeds

Item

  

Amount

Working capital    KRW 622,247,901,000
Funds for debt repayment    KRW 393,648,000,000
Funds for facilities    KRW 415,900,000,000
Various expenses for issuance    KRW 10,223,740,064

 

Matters regarding Share Rights

Securities subject to preemptive rights

   Exercise
price
   Exercise
period

     

 

Matters regarding the Seller

Holder

  

Relationship with the
Company

  

Number of

securities held

prior to the sale

  

Number of

securities sold

  

Number of

securities held

after the sale

  

  

  

  

 

Redemption Request Right of General Public Subscribers

Reason for the grant of the
right

  

Investors entitled to exercise
the right

  

Number of securities for
which the right is
exercisable

  

Exercise period

  

Exercise price

  

  

  

  

 

[Report of a Material Event]    See Report of a Material Event (Resolution Regarding Paid-in Capital Increase) disclosed on December 18, 2023

Other Matters

  

1) The joint lead managers for the paid-in capital increase through general public offering of unsubscribed shares after allocation to existing shareholders of the Company are Korea Investment & Securities Co., Ltd., NH Investment & Securities Co., Ltd., KB Securities Co., Ltd. and Daishin Securities Co., Ltd.

 

2) The subject paid-in capital increase is on the “stand-by underwriting” basis, under which the joint lead managers shall subscribe for the unsubscribed shares resulting from general public offering of shares that remain unsubscribed after the Share Rights (as defined below) offering to existing shareholders. For details of the subscription method and subscription price, please refer to “Chapter 1. Matters Regarding the Offering or Sale – I. General Matters Regarding the Offering or Sale – 5. Matters Regarding Underwriting, etc.”

 

4


  

 

3) The above offering price and various expenses for issuance, which have been calculated based on the First Indicative Subscription Price (as defined below), may be subject to change in the future. The definitive amounts are scheduled to be determined three (3) trading days prior to the first date of subscription by existing shareholders.

 

4) The above subscription dates refer to the subscription dates for existing shareholders, and the subscription dates for the general public offering are March 11, 2024 and March 12, 2024 (two (2) business days). A public notice of subscription for general public offering is scheduled to be posted on the websites of the Company and the joint lead managers on March 8, 2024.

 

5) Subscription for the general public offering in Korea is available at the head office and branches of each of the joint lead managers (Korea Investment & Securities Co., Ltd., NH Investment & Securities Co., Ltd., KB Securities Co., Ltd. and Daishin Securities Co., Ltd.), as well as at their websites and HTS and MTS. However, under Article 9(2)7 of the Regulation on Securities Underwriting Business, Etc., if the total number of the shares to be allocated to high-yield and high-risk investment trusts and general public subscribers is not more than 5,000 shares (based on the par value per share of KRW 5,000), or if the total public offering amount is not more than KRW 100 million, the joint lead managers may subscribe therefor for their own account without allowing subscription through a general public offering.

 

6) Under Article 180-4 of the Financial Investment Services and Capital Markets Act and Article 208-4 (1) of the Enforcement Decree thereof, no person who engaged the short-selling of, or entrusted the short-selling of, any shares of the Company from December 19, 2023 to February 29, 2024 may subscribe in this proposed offering, and pursuant to Article 429-3(2) of the above act, a fine may be imposed for any acquisition of shares in violation thereof. However, acquisition of shares may be permitted as an exception if it falls under Article 208-4(2) of the Enforcement Decree thereof and Article 6-34 of the Regulation on Financial Investment Business and does not impede the establishment of a fair offering price.

 

  

7) In case of correction of descriptions herein due to a change in important matters in the course of examination of this public disclosure form by the Financial Supervisory Service (“FSS”), there may occur a change in the timetables described in this document.

 

8) The effectiveness of the related registration statement does not confirm that the descriptions herein are true or correct, or represent the government’s guarantee or approval of the value of the subject securities. Accordingly, the responsibility for the investment in the subject securities falls solely on the shareholders and investors.

 

9) The various expenses for issuance will be paid out of the funds of the Company.

 

5


As amended (and replaced with pursuant to this Prospectus Amendment No. 2):

 

Type of
Securities

   Number of
Securities
  

Par Value

  

Offering (or Sale)
Price per Share

  

Total Offering (or Sale)
Amount

  

Offering (or Sale)
Method

Common shares

   142,184,300    KRW 5,000    KRW 9,090    KRW 1,292,455,287,000    Rights offering to existing shareholders, followed by a public offering of unsubscribed shares, if any

 

Whether underwritten (arranged)   

  

Whether public offering for listing of equity securities, etc. is done

Underwritten

   No    N/A    N/A

 

Underwriter (Manager)          

  Type of
Securities
   Number of
Securities
Underwritten
     Underwriting
Amount
    

Consideration for
Underwriting

   Underwriting
Method

Joint Lead Manager

  Korea Investment & Securities   Common
shares
     39,100,683        KRW 355,425,208,470      Underwriting Fee: 27.5% of the amount equal to 0.40% of the total offering amount    Stand-by
underwriting

Joint Lead Manager

  NH Investment & Securities   Common
shares
     39,100,683        KRW 355,425,208,470      Underwriting Fee: 27.5% of the amount equal to 0.40% of the total offering amount    Stand-by
underwriting

Joint Lead Manager

  KB Securities   Common
shares
     35,546,075        KRW 323,113,821,750      Underwriting Fee: 25.0% of the amount equal to 0.40% of the total offering amount    Stand-by
underwriting

Joint Lead Manager

  Daishin Securities   Common
shares
     28,436,859        KRW 258,491,048,310      Underwriting Fee: 20.0% of the amount equal to 0.40% of the total offering amount    Stand-by
underwriting

 

Subscription Date     

  

Payment Date

  

Date of Public

Notice of

Subscription

  

Date of Public

Notice of

Allocation

  

Record Date for

Allocating Share

Rights

March 6, 2024 – March 7, 2024    March 14, 2024    March 8, 2024    March 14, 2024    January 26, 2024

 

Short-Selling Transaction Period during which Subscription hereunder is Prohibited

 

Start date

   End date  

December 19, 2023

     February 29, 2024  

 

6


Expected Use of Proceeds

Item

  

Amount

Working capital    KRW 482,907,287,000
Funds for debt repayment    KRW 393,648,000,000
Funds for facilities    KRW 415,900,000,000
Various expenses for issuance    KRW 9,641,296,298

 

Matters regarding Share Rights

Securities subject to preemptive rights

   Exercise
price
   Exercise
period

     

 

Matters regarding the Seller

Holder

  

Relationship with the
Company

  

Number of securities held
prior to the sale

  

Number of securities sold

  

Number of securities held
after the sale

  

  

  

  

 

Redemption Request Right of General Public Subscribers

Reason for the grant of the
right

  

Investors entitled to exercise
the right

  

Number of securities for
which the right is
exercisable

  

Exercise period

  

Exercise price

  

  

  

  

 

[Report of a Material Event]   See Amended Report of a Material Event (Resolution Regarding Paid-in Capital Increase) disclosed on March 4, 2024
Other Matters  

1) The joint lead managers for the paid-in capital increase through general public offering of unsubscribed shares after allocation to existing shareholders of the Company are Korea Investment & Securities Co., Ltd., NH Investment & Securities Co., Ltd., KB Securities Co., Ltd. and Daishin Securities Co., Ltd.

 

2) The subject paid-in capital increase is on the “stand-by underwriting” basis, under which the joint lead managers shall subscribe for the unsubscribed shares resulting from general public offering of shares that remain unsubscribed after the Share Rights (as defined below) offering to existing shareholders. For details of the subscription method and subscription price, please refer to “Chapter 1. Matters Regarding the Offering or Sale – I. General Matters Regarding the Offering or Sale – 5. Matters Regarding Underwriting, etc.”

 

3) The above offering price refers to the Definitive Subscription Price (as defined below).

 

4) The above subscription dates refer to the subscription dates for existing shareholders, and the subscription dates for the general public offering are March 11, 2024 and March 12, 2024 (two (2) business days). A public notice of subscription for general public offering is scheduled to be posted on the websites of the Company and the joint lead managers on March 8, 2024.

 

7


  

 

5) Subscription for the general public offering in Korea is available at the head office and branches of each of the joint lead managers (Korea Investment & Securities Co., Ltd., NH Investment & Securities Co., Ltd., KB Securities Co., Ltd. and Daishin Securities Co., Ltd.), as well as at their websites and HTS and MTS. However, under Article 9(2)7 of the Regulation on Securities Underwriting Business, Etc., if the total number of the shares to be allocated to high-yield and high-risk investment trusts and general public subscribers is not more than 5,000 shares (based on the par value per share of KRW 5,000), or if the total public offering amount is not more than KRW 100 million, the joint lead managers may subscribe therefor for their own account without allowing subscription through a general public offering.

 

6) Under Article 180-4 of the Financial Investment Services and Capital Markets Act and Article 208-4 (1) of the Enforcement Decree thereof, no person who engaged the short-selling of, or entrusted the short-selling of, any shares of the Company from December 19, 2023 to February 29, 2024 may subscribe in this proposed offering, and pursuant to Article 429-3(2) of the above act, a fine may be imposed for any acquisition of shares in violation thereof. However, acquisition of shares may be permitted as an exception if it falls under Article 208-4(2) of the Enforcement Decree thereof and Article 6-34 of the Regulation on Financial Investment Business and does not impede the establishment of a fair offering price.

  

 

7) In case of correction of descriptions herein due to a change in important matters in the course of examination of this public disclosure form by the Financial Supervisory Service (“FSS”), there may occur a change in the timetables described in this document.

 

8) The effectiveness of the related registration statement does not confirm that the descriptions herein are true or correct, or represent the government’s guarantee or approval of the value of the subject securities. Accordingly, the responsibility for the investment in the subject securities falls solely on the shareholders and investors.

 

9) The various expenses for issuance will be paid out of the funds of the Company.

Item 3

The following information set forth on pages 45 to 46 of the Original Prospectus Translation under “Chapter 1. Matters Regarding the Offering or Sale – 1. Overview of Public Offering – Information on the offering (or sale)” and “Chapter 1. Matters Regarding the Offering or Sale – 1. Overview of Public Offering – Basis for the calculation of the first indicative subscription price” is deleted in its entirety and replaced as follows (with changes italicized and underlined for emphasis):

 

8


Prior to amendment (and deleted pursuant to this Prospectus Amendment No. 2):

 

Information on the offering (or sale)

 

                                 (Unit: KRW, Shares)

Type of Shares  

   Number of
Shares
     Par
Value
     Offering (or Sale)
Price
     Total Offering
Amount
    

Offering (or Sale) Method

Registered common shares

     142,184,300        KRW 5,000        KRW 10,070        KRW 1,431,795,901,000      Rights offering to existing shareholders, followed by a public offering of unsubscribed shares, if any

Note 1) Date of the initial board of directors resolution: December 18, 2023

Note 2) The offering price per share and the total offering amount, which are scheduled amounts based on the First Indicative Subscription Price, are not the definitive amounts.

The subscription price can be freely determined due to the liberalization of, among other things, the applicable discount rate for capital increase through rights offering to existing shareholders under Article 5-18 (Determination of Issue Price for Paid-in Capital Increase) of the Regulation on Issuance, Public Disclosure, etc. of Securities, but the Company plans to calculate the subscription price by partially applying Article 57 of the former Regulation on Issuance, Public Disclosure, etc. of Securities.

 

Basis for the calculation of the first indicative subscription price

The first indicative subscription price per common share (the “First Indicative Subscription Price”) shall be calculated by using the formula set forth immediately below this paragraph. The First Indicative Subscription Price shall apply a 20% discount rate (the “Discount Rate”) to the first indicative base share price (the “First Indicative Base Share Price”), which shall be the lower of (a) the arithmetic mean of (x) the volume weighted average price of the Company’s common shares (“VWAP,” which is calculated by dividing the total value of the Company’s common shares traded on the KOSPI Market of the Korea Exchange during the relevant period by the total volume of the Company’s common shares so traded during the relevant period) for the one-month period ending January 23, 2024, which is the third trading date immediately preceding the Record Date, (y) the VWAP for the one-week period ending January 23, 2024 and (z) the closing price of the Company’s common shares on January 23, 2024, in each case calculated retroactively, and (b) the closing price of the Company’s common shares on January 23, 2024; provided, however, that (i) if the price determined as above is equal to or less than the par value of the Company’s common shares (i.e., KRW 5,000), the subscription price shall be the par value of the Company’s common shares, and (ii) if the price determined as described above includes an amount less than the quotation unit of the Company’s common shares, such amount shall be rounded up to the nearest quotation unit.

 

u   First Indicative Subscription Price (KRW 10,070) =

   First Indicative Base Share Price (KRW 13,587) x [1- Discount Rate (20%)]
   1+ [Ratio of paid-in capital increase (39.74%) x Discount Rate (20%)]

 

9


First Indicative Subscription Price Calculation Table (Dec. 26, 2023 – Jan. 23, 2024)

 

                          (Unit: KRW, Shares)  

Number of
Days   

   Date (year/month/date)      Closing Price      Trading Volume      Trading Value  

1

     2023/12/26        12,250        973,159        11,926,104,590  

2

     2023/12/27        12,390        686,404        8,441,737,930  

3

     2023/12/28        12,740        1,202,287        15,133,940,700  

4

     2024/01/02        13,350        2,652,264        35,017,434,200  

5

     2024/01/03        13,280        1,721,169        23,000,343,790  

6

     2024/01/04        13,050        964,004        12,544,167,360  

7

     2024/01/05        13,290        1,032,397        13,611,782,320  

8

     2024/01/08        14,170        6,359,468        89,462,766,900  

9

     2024/01/09        13,940        2,707,540        38,487,767,700  

10

     2024/01/10        13,400        1,583,144        21,529,287,750  

11

     2024/01/11        13,600        1,882,478        25,388,921,150  

12

     2024/01/12        13,260        783,335        10,468,018,000  

13

     2024/01/15        13,150        791,169        10,505,072,010  

14

     2024/01/16        12,870        1,382,888        17,836,042,920  

15

     2024/01/17        12,750        2,074,816        26,958,249,190  

16

     2024/01/18        13,180        1,617,410        21,420,625,950  

17

     2024/01/19        13,030        964,160        12,638,125,370  

18

     2024/01/22        13,340        1,356,328        18,123,066,900  

19

     2024/01/23        13,910        3,006,599        41,638,641,360  

One-month VWAP (A)

 

               13,459  

One-week VWAP (B)

 

               13,391  

Closing price on December 15, 2023 (C)

 

               13,910  

Arithmetic mean of A, B and C (D)

 

     13,587        [(A)+(B)+(C)]/3  

Estimated base share price [Min (C, D)]

 

     13,587        The lower of C and D  

Discount Rate

 

               20%  
First Indicative Subscription Price

 

     10,070       



First

Indicative
Subscription
Price = 

 

 
 
 

    
First Indicative Base Share Price x   
   [1- Discount Rate]
 
 
    
1+ [Ratio of capital increase x      
   Discount Rate]
 
 
     

 

Any amount less than the quotation unit of the Company’s common shares shall
be rounded up, and if the resulting amount is less than the par value, the par
value shall be the estimated subscription price.

 
 
 

As amended (and replaced with pursuant to this Prospectus Amendment No. 2):

 

Information on the offering (or sale)

 

                                 (Unit: KRW, Shares)

Type of Shares  

   Number of
Shares
     Par
Value
     Offering (or Sale)
Price
     Total Offering
Amount
    

Offering (or Sale) Method

Registered common shares

     142,184,300       
KRW
5,000
 
 
     KRW 9,090        KRW 1,292,455,287,000      Rights offering to existing shareholders, followed by a public offering of unsubscribed shares, if any

Note 1) Date of the initial board of directors resolution: December 18, 2023

Note 2) The offering price per share and the total offering amount are amounts based on the Definitive Subscription Price.

The subscription price can be freely determined due to the liberalization of, among other things, the applicable discount rate for capital increase through rights offering to existing shareholders under Article 5-18 (Determination of Issue Price for Paid-in Capital Increase) of the Regulation on Issuance, Public Disclosure, etc. of Securities, but the Company plans to calculate the subscription price by partially applying Article 57 of the former Regulation on Issuance, Public Disclosure, etc. of Securities.

 

10


Basis for the calculation of the first indicative subscription price

The first indicative subscription price per common share (the “First Indicative Subscription Price”) shall be calculated by using the formula set forth immediately below this paragraph. The First Indicative Subscription Price shall apply a 20% discount rate (the “Discount Rate”) to the first indicative base share price (the “First Indicative Base Share Price”), which shall be the lower of (a) the arithmetic mean of (x) the volume weighted average price of the Company’s common shares (“VWAP,” which is calculated by dividing the total value of the Company’s common shares traded on the KOSPI Market of the Korea Exchange during the relevant period by the total volume of the Company’s common shares so traded during the relevant period) for the one-month period ending January 23, 2024, which is the third trading date immediately preceding the Record Date, (y) the VWAP for the one-week period ending January 23, 2024 and (z) the closing price of the Company’s common shares on January 23, 2024, in each case calculated retroactively, and (b) the closing price of the Company’s common shares on January 23, 2024; provided, however, that (i) if the price determined as above is equal to or less than the par value of the Company’s common shares (i.e., KRW 5,000), the subscription price shall be the par value of the Company’s common shares, and (ii) if the price determined as described above includes an amount less than the quotation unit of the Company’s common shares, such amount shall be rounded up to the nearest quotation unit.

 

u   First Indicative Subscription Price (KRW 10,070) =

   First Indicative Base Share Price (KRW 13,587) x [1- Discount Rate (20%)]
   1+ [Ratio of paid-in capital increase (39.74%) x Discount Rate (20%)]

First Indicative Subscription Price Calculation Table (Dec. 26, 2023 – Jan. 23, 2024)

 

                          (Unit: KRW, Shares)  

Number of
Days

   Date (year/month/date)      Closing Price      Trading Volume      Trading Value  

1

     2023/12/26        12,250        973,159        11,926,104,590  

2

     2023/12/27        12,390        686,404        8,441,737,930  

3

     2023/12/28        12,740        1,202,287        15,133,940,700  

4

     2024/01/02        13,350        2,652,264        35,017,434,200  

5

     2024/01/03        13,280        1,721,169        23,000,343,790  

6

     2024/01/04        13,050        964,004        12,544,167,360  

7

     2024/01/05        13,290        1,032,397        13,611,782,320  

8

     2024/01/08        14,170        6,359,468        89,462,766,900  

9

     2024/01/09        13,940        2,707,540        38,487,767,700  

10

     2024/01/10        13,400        1,583,144        21,529,287,750  

11

     2024/01/11        13,600        1,882,478        25,388,921,150  

12

     2024/01/12        13,260        783,335        10,468,018,000  

13

     2024/01/15        13,150        791,169        10,505,072,010  

14

     2024/01/16        12,870        1,382,888        17,836,042,920  

15

     2024/01/17        12,750        2,074,816        26,958,249,190  

16

     2024/01/18        13,180        1,617,410        21,420,625,950  

17

     2024/01/19        13,030        964,160        12,638,125,370  

18

     2024/01/22        13,340        1,356,328        18,123,066,900  

19

     2024/01/23        13,910        3,006,599        41,638,641,360  
One-month VWAP (A)

 

        13,459  
One-week VWAP (B)

 

        13,391  
Closing price on January 23, 2024 (C)

 

        13,910  
Arithmetic mean of A, B and C (D)

 

     13,587       

[(A)+(B)+(C)]/3

 
Estimated base share price [Min (C, D)]

 

     13,587       

The lower of C and D

 
Discount Rate

 

               20%  
First Indicative Subscription Price

 

     10,070       


First
Indicative
Subscription
Price =
 
 
 
 
    
First Indicative Base Share Price x   
   [1- Discount Rate]
 
 
    

1+ [Ratio of capital increase x     

   Discount Rate]

 

 

       

Any amount less than the quotation unit of the Company’s common shares shall be
rounded up, and if the resulting amount is less than the par value, the par value
shall be the estimated subscription price.
 
 
 

 

11


Basis for the calculation of the second indicative subscription price

The second indicative subscription price per common share (the “Second Indicative Subscription Price”) shall be calculated by using the formula set forth immediately below this paragraph. The Second Indicative Subscription Price shall apply a 20% Discount Rate to the second indicative base share price (the “Second Indicative Base Share Price”), which shall be the lower of (a) the arithmetic mean of (x) the VWAP for the one-week period ending February 29, 2024, which is the third trading date immediately preceding March 6, 2024 (i.e., the first day of subscription by existing shareholders) and (y) the closing price of the Company’s common shares on February 29, 2024, each calculated retroactively, and (b) the closing price of the Company’s common shares on February 29, 2024; provided, however, that (i) if the price determined as above is equal to or less than the par value of the Company’s common shares (i.e., KRW 5,000), the subscription price shall be the par value of the Company’s common shares, and (ii) if the price determined as described above includes an amount less than the quotation unit of the Company’s common shares, such amount shall be rounded up to the nearest quotation unit.

u Second Indicative Subscription Price (KRW 9,090) = Second Indicative Base Share Price (KRW 11,354) x [1- Discount Rate (20%)]

Second Indicative Subscription Price Calculation Table (Feb. 23, 2024 – Feb. 29, 2024)

 

                          (Unit: KRW, Shares)  

Number of

Days

   Date (year/month/date)      Closing Price      Trading Volume      Trading Value  

1

     2024/2/23        11,550        1,246,301        14,394,674,750  

2

     2024/2/26        11,520        585,855        6,781,425,400  

3

     2024/2/27        11,130        1,403,272        15,832,408,340  

4

     2024/2/28        11,320        1,065,472        12,010,356,570  

5

     2024/2/29        11,380        2,850,393        31,987,134,210  

One-week VWAP (A)

 

     11,327  

Closing price on February 29, 2024 (B)

 

     11,380  

Arithmetic mean of A and B (C)

 

     11,354        [(A)+(B)]/2  

Estimated base share price [Min (B, C)]

 

     11,354        The lower of B and C  

Discount Rate

 

     20%  
Second Indicative Subscription Price         9,090       


Second
Indicative
Subscription
Price =
 
 
 
 
    

Second Indicative Base
Share Price x [1-
Discount Rate]
 
 
 
       

Any amount less than the quotation unit of the Company’s common
shares shall be rounded up, and if the resulting amount is less than
the par value, the par value shall be the estimated subscription price.
 
 
 

 

12


Basis for the calculation of the definitive subscription price

The definitive subscription price per common share (the “Definitive Subscription Price”) shall be the lower of the First Indicative Subscription Price and the Second Indicative Subscription Price; provided, however, that pursuant to Article 165-6 of the Financial Investment Services and Capital Markets Act of Korea and Article 5-15-2 of the Regulations on Issuance, Public Disclosure, etc. of Securities of Korea, if the lower of the First Indicative Subscription Price and the Second Indicative Subscription Price is less than the price obtained by applying a discount rate of 40% to the definitive base share price (the “Definitive Base Share Price”), which is equal to the VWAP for the period from February 27, 2024 (i.e., the fifth trading date immediately preceding the first day of subscription by existing shareholders) to February 29, 2024 (i.e., the third trading date immediately preceding the first day of subscription by existing shareholders), calculated retroactively, the Definitive Subscription Price will be the price calculated by applying a discount rate of 40% to the Definitive Base Share Price. Furthermore, (i) if the price determined as above is equal to or less than the par value of the Company’s common shares (i.e., KRW 5,000), the subscription price shall be the par value of the Company’s common shares, and (ii) if the price determined as described above includes an amount less than the quotation unit of the Company’s common shares, such amount shall be rounded up to the nearest quotation unit.

u Definitive Subscription Price = Max {Min [First Indicative Subscription Price per New Share, Second Indicative Subscription Price per New Share], 60% of the Definitive Base Share Price}

Definitive Subscription Price Calculation Table (Feb. 27, 2024 – Feb. 29, 2024)

(Unit: KRW, Shares)

 

Number of Days

   Date (year/
month/
date)
     Closing
Price
     Trading
Volume
     Trading Value  

1

     2024/2/27        11,130        1,403,272        15,832,408,340  

2

     2024/2/28        11,320        1,065,472        12,010,356,570  

3

     2024/2/29        11,380        2,850,393        31,987,134,210  

Three trading days VWAP

 

     11,248  

Discount Rate

 

     40%  

60% of the Definitive Base Share Price

 

     6,750  

 

Category

   Subscription Price

First Indicative Subscription Price

   10,070

Second Indicative Subscription Price

   9,090

60% of the Definitive Base Share Price

   6,750

Definitive Subscription Price = Max {Min [First Indicative Subscription Price per New Share, Second Indicative Subscription Price per New Share], 60% of the Definitive Base Share Price}

   9,090

Item 4

The following table set forth on page 53 of the Original Prospectus Translation under “Chapter 1. Matters Regarding the Offering or Sale – 4. Matters Regarding Offering (or Sale) Procedures, Etc. – A. Terms of offering or sale” is deleted in its entirety and replaced as follows (with changes italicized and underlined for emphasis):

 

13


Prior to amendment (and deleted pursuant to this Prospectus Amendment No. 2):

A. Terms of offering or sale

(Unit: KRW, Shares)

Category    Details
   
Number of shares offered or sold    142,184,300
     
Offering or sale price per share    Estimated    KRW 10,070
   Definitive   
     
Total offering or sale amount    Estimated    KRW 1,431,795,901,000
   Definitive   

As amended (and replaced with pursuant to this Prospectus Amendment No. 2):

A. Terms of offering or sale

(Unit: KRW, Shares)

Category    Details
   
Number of shares offered or sold    142,184,300
     
Offering or sale price per share    Estimated   
   Definitive    KRW 9,090
     
Total offering or sale amount    Estimated   
   Definitive    KRW 1,292,455,287,000

Item 5

The following information set forth on page 68 of the Original Prospectus Translation under “Chapter 1. Matters Regarding the Offering or Sale – 4. Matters Regarding Offering (or Sale) Procedures, Etc. – D. Other matters regarding offering or sale” is deleted in its entirety:

 

(5)

The estimated total offering price in this document is not definitive, and will be finalized as the definitive subscription price is computed three(3) trading days prior to the date of subscription. Also, please note that the estimated subscription price may be changed as and when the subscription price per share is determined later.

Item 6

The following table set forth on page 198 of the Original Prospectus Translation under “III. Investment Risk Factors – 3. Other Risks – C. Offering method and subscription procedure and risks of a decline in the share prices” is deleted in its entirety and replaced as follows (with changes italicized and underlined for emphasis):

 

14


Prior to amendment (and deleted pursuant to this Prospectus Amendment No. 2):

[Securities Offered under this Proposed Offering]

 

Type of Shares    Registered Common Shares    — 
Number of Offered Shares    142,184,300   
Currently Outstanding Shares    357,815,700   
First Indicative Subscription Price    KRW 10,070    Based on the applicable capital increase ratio and Discount Rate
Closing price on the Base Date    KRW 13,910    Closing price as of January 23, 2024

As amended (and replaced with pursuant to this Prospectus Amendment No. 2):

[Securities Offered under this Proposed Offering]

 

Type of Shares    Registered Common Shares    — 
Number of Offered Shares    142,184,300   
Currently Outstanding Shares    357,815,700   
Definitive Subscription Price    KRW 9,090    Based on the applicable capital increase ratio and Discount Rate
Closing price on the Base Date    KRW 11,380    Closing price as of February 29, 2024

Item 7

The following information set forth on page 214 of the Original Prospectus Translation under “V. Use of Proceeds – 1. Details of financing through offer or sale” and on pages 215 and 222 of the Original Prospectus Translation under certain portions of “V. Use of Proceeds – 2. Use of Proceeds” is deleted in its entirety and replaced as follows (with changes italicized and underlined for emphasis):

Prior to amendment (and deleted pursuant to this Prospectus Amendment No. 2):

1. Details of financing through offer or sale

A. Amount of proceeds

(Unit: KRW)

Category

   Amount  

Gross proceeds (A)

     1,431,795,901,000  

Offering expenses (B)

     10,223,740,064  

Net proceeds [A - B]

     1,421,572,160,936  

Note 1) The amounts above are calculated based on the First Indicative Subscription Price and may be subject to change upon the determination of the Definitive Subscription Price.

Note 2) Gross proceeds above will primarily be used in accordance with the expected use of proceeds described below.

Note 3) The offering expenses above may be subject to change based on the actual amount of proceeds raised in this offering and the extent of forfeited Share Rights. The Company will cover the offering expenses with its own funds.

 

15


B.

Breakdown of offering expenses

 

          (Unit: KRW)

Category

  Amount    

Basis of Calculation

Issue contribution

    257,723,260     0.018% of the total offering or sale amount (amounts below KRW 10 are rounded down)

Underwriting fee

    5,727,183,604     0.40% of the total offering or sale amount

Standard code issuance fee for Share Rights

    10,000     fixed amount

Listing fee

    80,000,000     KRW 53.97 million + KRW 30,000 per 1 billion over KRW 500 billion (maximum aggregate limit: KRW 80 million)

Issuance registration fee

    1,000,000     KRW 300 per 1,000 shares (separately for Share Rights and stock certificate; maximum limit in each case: KRW 500,000)

Registration tax

    2,843,686,000     0.40% of the increase in capital (Article 28 of the Local Tax Act, amounts below KRW 10 are rounded down)

Local education tax

    568,737,200     20% of the registration tax (Article 151 of the Local Tax Act, amounts below KRW 10 are rounded down)

Other expenses

    745,400,000     Printing and shipping cost of investment prospectus and new stock allocation notices, etc.
 

 

 

   

Total

    10,223,740,064    
 

 

 

   

Note 1) The amounts above are calculated based on the First Indicative Subscription Price.

Note 2) The offering expenses are generally calculated on the basis of the assumed gross proceeds amount and the closing price of the Company’s common shares on the KOSPI Market on the date immediately before the date of the listing application, and they may be subject to change due to changes in the rules and policies of relevant authorities.

Note 3) Other expenses are estimates only and remain subject to change.

Note 4) The underwriting fee is 0.4% of the total offering or sale amount (including the mandatory underwriting amount), and a separate performance incentive may be paid to the Joint Lead Managers within 0.05% of the total amount of funds raised in consideration of the results of the offering and the contributions of the Joint Lead Managers.

Note 5) The Company will cover the offering expenses with its own funds.

 

  2.

Use of Proceeds

 

A.

Use of Proceeds

The expected gross proceeds of KRW 1,431.8 billion from this proposed offering will be used as funds for facility investment, working capital and debt repayment as further described below. The Company will use its best efforts to use such proceeds in accordance with the stated use of proceeds in this prospectus and duly disclose their actual use and any changes therein in the Company’s periodic business reports, which are filed on a quarterly basis. With respect to the management and execution of funds, the Company implements stringent internal control measures to prevent funds-related incidents such as payments to fake accounts, irregularities in the execution of funds and payments of unauthorized amounts through clear separation of responsibilities between the working level personnel and the authorizing personnel, including requirements for the registration of trading lines and accounts, separation of authority between the requesting department and the executing department on the use of funds, and separation of authority between the requesting personnel and the approving personnel within the funds-related departments. In addition, such required activities are specified in the standards governing the execution of funds and are regularly monitored by a separate internal control department that is independent from the Company’s operational departments as well as by external auditors. The proceeds raised in this proposed offering will be segregated in a designated account with the Company’s principal bank and managed in short-term savings deposit and time deposit products with no loss in the principal amount until the time of actual execution of such funds.

 

16


(as of January 23, 2024)                           (Unit: KRW 1 million)  

Funds for

facility

investment

   Funds for
business
transfers
     Working
capital funds
     Funds for debt
repayment
     Funds for acquiring
securities of other
companies
     Others      Total  

415,900

     —         622,248        393,648        —         —         1,431,796  

 

B.

Detailed plans for use of proceeds

The expected gross proceeds of KRW 1,431.8 billion from this proposed offering will be used as funds for facility investment, working capital and debt repayment as described below, and the Company plan to execute the funds according to the following priorities. However, investors are advised that the actual amounts and timing of the use of such funds may change subject to future business conditions and other considerations.

 

         

(Unit: KRW 100 millions)

 

 

Priority

  

Use of funds

  

Details

   Timing      Amount  
1    Facility investment    Investment in facilities related to strengthening future business competitiveness of the Company’s small- and medium-sized OLED business      2024        4,159  
2    Working capital    Purchasing raw materials to expand OLED customer base and respond to needs relating to new products      2024        6,222  
3    Debt repayment    Strengthen financial stability      2024        3,936  
           

 

 

 
      Total         14,318  
           

 

 

 

Source: Company information

Note 1) As noted above, the use of funds for facility investment is based on information as of December 15, 2023, and the actual amount and timing of such use may change subject to future market conditions and other factors. The amount of facility funds used was prepared as of the day before the prospectus was submitted, and the amount of facility investment or use may change depending on future market conditions and other considerations.

Note 2) The Company plans to cover any shortage in funds with the its own funds.

[Note to translation: the intervening subsection “V. Use of Proceeds – 2. Use of Proceeds – (1) Detailed plans for use of funds for facility investment” set forth on pages 216 to 221 of the Original Prospectus Translation is omitted, as such disclosure is not amended by this Amendment Report.]

 

(2)

Detailed plans for use of the funds for working capital

The proportion of OLED products is expanding in each of the Company’s product segments by size (i.e., large-sized, mid-sized and small-sized). Beginning in 2024, the Company’s customer base is expected to expand in the large-sized panels segment and, with respect to mid-sized panels, the Company plans to start the mass production of OLED products for IT. The Company also expects an increase in production volume of small-sized panels in light of the Company’s production capacity expansion in 2023. Given such expectations, the volume of raw material purchases will likely also increase significantly. Accordingly, the Company plans to use KRW 622.2 billion of the proceeds of this proposed offering for the purchases of raw materials in order to expand the Company’s OLED customer base and to produce new products. More specifically, the Company plans to use such funds as working capital to purchase OLED organic materials, drive ICs, and PCB. The prices of raw materials and components used in OLED products are inherently higher than those used in LCD products, and as a result, the Company’s operating expenses in the ordinary course of business tend to be higher as the Company transitions into an OLED-focused business structure. In addition, the KRW 622.2 billion of the proceeds from this proposed offering that the Company plans to use for working capital purposes would be equivalent to 8.3% of its raw material purchases of approximately KRW 7.5 trillion in the first nine months of 2023, which represents a level that the Company can handle in the ordinary course of its business even if the Company’s production volume does not increase.

 

17


The Company plans to use its existing funds to meet any shortfall between its planned raw material purchases and the actual amount of funding raised from this proposed offering. The Company plans to use its own funds and future cash flow from sales to purchase raw materials.

[Note to translation: the table “[Detailed Plan for the Use of Funds for Working Capital]” under “V. Use of Proceeds - 2. Use of Proceeds - (2) Detailed plans for use of funds for working capital” set forth on page 222 and subsequent subsection “V. Use of Proceeds - 2. Use of Proceeds - (3) Detailed plans for use of funds for debt repayment” set forth on pages 222 to 223 of the Original Prospectus Translation are omitted, as such disclosure is not amended by this Amendment Report.]

As amended (and replaced with pursuant to this Prospectus Amendment No. 2):

 

  1.

Details of financing through offer or sale

 

A.

Amount of proceeds

 

     (Unit: KRW)  

Category

     Amount    

Gross proceeds (A)

     1,292,455,287,000  

Offering expenses (B)

     9,641,296,298  

Net proceeds [A - B]

     1,282,813,990,702  

Note 1) The amounts above are calculated based on the Definitive Subscription Price.

Note 2) Gross proceeds above will primarily be used in accordance with the expected use of proceeds described below.

Note 3) The offering expenses above may be subject to change based on the actual amount of proceeds raised in this offering and the extent of forfeited Share Rights. The Company will cover the offering expenses with its own funds.

 

18


B.

Breakdown of offering expenses

 

           

(Unit: KRW)

 

Category

   Amount     

Basis of Calculation

Issue contribution

     232,641,950      0.018% of the total offering or sale amount (amounts below KRW 10 are rounded down)

Underwriting fee

     5,169,821,148      0.40% of the total offering or sale amount

Standard code issuance fee for Share Rights

     10,000      fixed amount

Listing fee

     80,000,000      KRW 53.97 million + KRW 30,000 per 1 billion over KRW 500 billion (maximum aggregate limit: KRW 80 million)

Issuance registration fee

     1,000,000      KRW 300 per 1,000 shares (separately for Share Rights and stock certificate; maximum limit in each case: KRW 500,000)

Registration tax

     2,843,686,000      0.40% of the increase in capital (Article 28 of the Local Tax Act, amounts below KRW 10 are rounded down)

Local education tax

     568,737,200      20% of the registration tax (Article 151 of the Local Tax Act, amounts below KRW 10 are rounded down)

Other expenses

     745,400,000      Printing and shipping cost of investment prospectus and new stock allocation notices, etc.
  

 

 

    

Total

     9,641,296,298     
  

 

 

    

Note 1) The amounts above are calculated based on the Definitive Subscription Price.

Note 2) The offering expenses are generally calculated on the basis of the assumed gross proceeds amount and the closing price of the Company’s common shares on the KOSPI Market on the date immediately before the date of the listing application, and they may be subject to change due to changes in the rules and policies of relevant authorities.

Note 3) Other expenses are estimates only and remain subject to change.

Note 4) The underwriting fee is 0.4% of the total offering or sale amount (including the mandatory underwriting amount), and a separate performance incentive may be paid to the Joint Lead Managers within 0.05% of the total amount of funds raised in consideration of the results of the offering and the contributions of the Joint Lead Managers.

Note 5) The Company will cover the offering expenses with its own funds.

 

  2.

Use of Proceeds

 

A.

Use of Proceeds

The expected gross proceeds of KRW 1,292.5 billion from this proposed offering will be used as funds for facility investment, working capital and debt repayment as further described below. The Company will use its best efforts to use such proceeds in accordance with the stated use of proceeds in this prospectus and duly disclose their actual use and any changes therein in the Company’s periodic business reports, which are filed on a quarterly basis. With respect to the management and execution of funds, the Company implements stringent internal control measures to prevent funds-related incidents such as payments to fake accounts, irregularities in the execution of funds and payments of unauthorized amounts through clear separation of

 

19


responsibilities between the working level personnel and the authorizing personnel, including requirements for the registration of trading lines and accounts, separation of authority between the requesting department and the executing department on the use of funds, and separation of authority between the requesting personnel and the approving personnel within the funds-related departments. In addition, such required activities are specified in the standards governing the execution of funds and are regularly monitored by a separate internal control department that is independent from the Company’s operational departments as well as by external auditors. The proceeds raised in this proposed offering will be segregated in a designated account with the Company’s principal bank and managed in short-term savings deposit and time deposit products with no loss in the principal amount until the time of actual execution of such funds.

 

(as of February 29, 2024)                                  (Unit: KRW 1 million)  

Funds for facility
investment

   Funds for
business transfers
     Working
capital funds
     Funds for debt
repayment
     Funds for
acquiring securities
of other companies
     Others      Total  

415,900

     —         482,907        393,648        —         —         1,292,455  

 

B.

Detailed plans for use of proceeds

The expected gross proceeds of KRW 1,292.5 billion from this proposed offering will be used as funds for facility investment, working capital and debt repayment as described below, and the Company plan to execute the funds according to the following priorities. However, investors are advised that the actual amounts and timing of the use of such funds may change subject to future business conditions and other considerations.

 

         

(Unit: KRW 100 millions)

 

 

Priority

  

Use of funds

  

Details

   Timing      Amount  
1    Facility investment    Investment in facilities related to strengthening future business competitiveness of the Company’s small- and medium-sized OLED business      2024        4,159  
2    Working capital    Purchasing raw materials to expand OLED customer base and respond to needs relating to new products      2024        4,829  
3    Debt repayment    Strengthen financial stability      2024        3,936  
           

 

 

 
      Total         12,925  
           

 

 

 

Source: Company information

Note 1) As noted above, the use of funds for facility investment is based on information as of December 15, 2023, and the actual amount and timing of such use may change subject to future market conditions and other factors. The amount of facility funds used was prepared as of the day before the prospectus was submitted, and the amount of facility investment or use may change depending on future market conditions and other considerations.

Note 2) The Company plans to cover any shortage in funds with the its own funds.

[Note to translation: the intervening subsection “V. Use of Proceeds – 2. Use of Proceeds – (1) Detailed plans for use of funds for facility investment” set forth on pages 216 to 221 of the Original Prospectus Translation is omitted, as such disclosure is not amended by this Amendment Report.]

 

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(2)

Detailed plans for use of the funds for working capital

The proportion of OLED products is expanding in each of the Company’s product segments by size (i.e., large-sized, mid-sized and small-sized). Beginning in 2024, the Company’s customer base is expected to expand in the large-sized panels segment and, with respect to mid-sized panels, the Company plans to start the mass production of OLED products for IT. The Company also expects an increase in production volume of small-sized panels in light of the Company’s production capacity expansion in 2023. Given such expectations, the volume of raw material purchases will likely also increase significantly. Accordingly, the Company plans to use KRW 482.9 billion of the proceeds of this proposed offering for the purchases of raw materials in order to expand the Company’s OLED customer base and to produce new products. More specifically, the Company plans to use such funds as working capital to purchase OLED organic materials, drive ICs, and PCB. The prices of raw materials and components used in OLED products are inherently higher than those used in LCD products, and as a result, the Company’s operating expenses in the ordinary course of business tend to be higher as the Company transitions into an OLED-focused business structure. In addition, the KRW 482.9 billion of the proceeds from this proposed offering that the Company plans to use for working capital purposes would be equivalent to 6.4% of its raw material purchases of approximately KRW 7.5 trillion in the first nine months of 2023, which represents a level that the Company can handle in the ordinary course of its business even if the Company’s production volume does not increase.

The Company plans to use its existing funds to meet any shortfall between its planned raw material purchases and the actual amount of funding raised from this proposed offering. The Company plans to use its own funds and future cash flow from sales to purchase raw materials.

[Note to translation: the table “[Detailed Plan for the Use of Funds for Working Capital]” under “V. Use of Proceeds - 2. Use of Proceeds - (2) Detailed plans for use of funds for working capital” set forth on page 222 and subsequent subsection “V. Use of Proceeds - 2. Use of Proceeds - (3) Detailed plans for use of funds for debt repayment” set forth on pages 222 to 223 of the Original Prospectus Translation are omitted, as such disclosure is not amended by this Amendment Report.]

 

21


PROSPECTUS

(as amended by the Amendment Report)

January 18, 2024

 

Company Name:    LG Display Co., Ltd. (the “Company”)
Type and Number of Securities Offered or Sold:    142,184,300 registered common shares
Total Offering or Sale Amount:    Korean Won (“KRW”) 1,292,455,287,000
Subscription Period:   

Employee Stock Ownership Association: March 6, 2024

Existing Shareholders: March 6, 2024 – March 7, 2024

General Subscription: March 11, 2024 – March 12, 2024

Payment Date:    March 14, 2024
Registration Statement and Prospectus Are Available at:   

A. Registration Statement

 

E-Document: Data Analysis, Retrieval and Transfer System of the Financial Services Commission (Financial Supervisory Service) g http://dart.fss.or.kr

 

B. Prospectus

 

E-Document: Data Analysis, Retrieval and Transfer System of the Financial Services Commission (Financial Supervisory Service) g http://dart.fss.or.kr

 

Physical Document:

 

LG Display Co., Ltd. g LG Twin Towers, 128 Yeouidae-ro, Youngdeungpo-gu, Seoul, Korea

 

Korea Investment & Securities Co., Ltd. g 88 Euisadangdae-ro, Youngdeungpo-gu, Seoul, Korea

 

NH Investment & Securities Co., Ltd. g 108 Yeouidae-ro, Youngdeungpo-gu, Seoul Korea

 

KB Securities Co., Ltd. g 50 Yeouinaru-ro, Youngdeungpo-gu, Seoul, Korea

 

Daishin Securities Co., Ltd. g 343 Samildae-ro, Jung-gu, Seoul, Korea

Stabilization or Market-Making Activities:    Not applicable (“N/A”)

Joint Lead Managers

Korea Investment & Securities Co., Ltd.

NH Investment & Securities Co., Ltd.

KB Securities Co., Ltd.

Daishin Securities Co., Ltd.

 

 

The effectiveness of this prospectus does not constitute an acknowledgment by the government that the statements in this prospectus are true or accurate, nor does it endorse or approve the value of these securities, and the statements are subject to change prior to the subscription date.

 

 

22


[Confirmation by the Representative Director, etc.]

Confirmation Certificate

We, as the Representative Director and the Reporting Officer of LG Display Co., Ltd. (the “Company”), have carefully examined and verified the contents of the Prospectus. As a result, we confirm that there is no omission or false representation of material information and the content does not contain any statements or representations that may cause a significant misunderstanding for those who rely on the information provided in this Prospectus.

Furthermore, we confirm that the Company has established and operates an internal accounting management system in accordance with the provisions of Article 8 of the Act on External Audit of Stock Companies.

(This confirmation is applicable only to corporations subject to external audits under Article 4 of the Act on External Audit of Stock Companies)

January 18, 2024

LG Display Co., Ltd.

 

   Representative Director    Jung Ho Young (signature)
   Reporting Officer    Kim Sung Hyun (signature)

 

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SUMMARY INFORMATION

 

1.

Key Investment Risks

 

The key investment risks below represent a concise summary of material items of the investment risk factors described in the main body of the prospectus. For detailed investment risk factors, please refer to the portion of the main body of the registration statement, entitled “Chapter 1. Matters Regarding the Offering or Sale – III. Investment Risk Factors.”

 

Category

  

Details

Business risks:   

A. Risk of increasing uncertainty due to economic fluctuations in Korea and abroad

 

Countries around the world have seen solid growth in their private spending since the end of the COVID-19 pandemic thanks to the reopening of China and considerable job creations in major advanced economies. Nonetheless, such growth has been slowing down due to, among other things, increasing financial instability, geopolitical risks and undermined investment sentiment caused by monetary tightening, and the possibility of further considerable delay in economic recovery in Korea and abroad in the future cannot be ruled out. In the display industry in which the Company is engaged, the product demand in downstream industries is affected by consumer sentiment depending on economic fluctuations. The Company’s overseas sales accounted for approximately 96.8% of its total sales in the first nine months of 2023. As the Company is heavily dependent on exports given the nature of the industry in which the Company is engaged, global economic fluctuations in the future will have considerable effects on the sales and profitability of the Company. There are uncertainties in trend in the recovery of global and domestic economies, which are exposed to various downside risks, such as uncertainties in the monetary policies of central banks around the world, continuing inflation and geopolitical divisions. As further delays in the economic recovery in Korea and abroad may have negative effects on the sales performance of the Company, which is heavily dependent on overseas sales, investors are advised to make their investment decision after engaging in an ongoing monitoring of market conditions and volatility in the financial markets in Korea and abroad.

 

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B. Risks involved in the slowdown in the growth of downstream industries (including the television, IT and mobile industries)

 

The display panel business in which the Company is engaged is directly affected by the business conditions of the industries of electronic products, including televisions, laptops, monitors and smartphones, which constitute downstream industries of such business. Demands for IT products, such as televisions and smartphones, increased after the emergence of the COVID-19 pandemic in 2020. However, the global demand for televisions began to decline in the second half of 2021 when COVID-19 preventive measures were relaxed. The sales volume in the global television markets, which continually grown since 2017, decreased by approximately 5.3% in 2021 from the previous year and further decreased in 2022 by approximately 5% from the previous year due to the extension of the replacement cycle of electronic products following the pandemic-created demand for such products. In 2023, the sales volume in the global television markets is expected to continue to decrease slightly from the previous year due to factors such as a decrease in the demand for televisions in Europe caused by the protracted war between Russia and Ukraine and uncertainties in the global economy. Recently, OLED panels have been replacing LCD panels in the display industry, leading to the expansion of the OLED-panel market and the emergence of new demands mainly for small-and mid-sized OLED panels. However, the growth of the display industry has been slowing down following a decrease in the demands for downstream products caused by global economic recession. In addition, given that electronic products, such as televisions and smartphones, have already been significantly popularized around the world, a failure to release new products applying new technologies in the market may result in a continued decrease in the demands for downstream industries. Investors are advised to note that, in such case, there is a possibility that the growth of the display panel industry in which the Company is engaged may slow down, leading to decreases in the Company’s revenue and operating profits, among others. Due to a delay in the demand recovery in downstream industries as a result of such prolonged global economic downturn, the Company has experienced a decline in revenue and operating losses for six consecutive quarters from the second quarter of 2022 through the third quarter of 2023. The cumulative operating loss on a consolidated basis for the last six quarters amounted to approximately KRW 4.8 trillion, and as the Company cannot predict the timing of demand recovery in the downstream industries at this point, the Company cannot assure you that the trend of weak profitability will not continue.

 

C. LCD panel price fluctuation risk

 

In the display panel industry, prices of LCD panels fluctuate periodically depending on various factors affecting their supply and demand, which directly impacts the change in the profitability of the display panel manufacturer. The prevalence of non-face-to-face activities, including remote working and online education, caused by the COVID-19 pandemic from 2020 has helped increase the demands for IT devices, such as laptops, and an increase in the sales volume of large-sized and high-resolution televisions prompted by a surge in the hours spent on indoor activities, among other factors, has led to an increase in the demand for display panels and a dramatic increase in their prices. However, due to an increase in the supply following aggressive facility expansions by Chinese manufacturers along with a decline in the demands for IT products, the prices of LCD panels began to drop. While there have been signs of a recovery in the industry in the first half of 2023 when major suppliers adjusted their capacity utilization rates and the demand for television manufacturers increased, a delay in the global economic recovery has undermined the recovery of the overall demand, leading to a decrease in the prices of LCD panels from October 2023 with the expectation that the prices would continue to drop in the future. Such fluctuations in the prices of LCD panels caused by various factors affecting the supply and demand in the market and decreased demand due to a delay in the global economic recovery may have negative effects on the profitability of the Company.

 

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D. Risks of intensifying competition following Chinese manufacturers’ supply expansion

 

While Korean manufacturers, including the Company, are enjoying large market shares in the global display panel market, a rapid increase in the market shares of Chinese manufacturers has been intensifying competition in the display panel market. Korean manufacturers currently achieve higher profitability than their Chinese competitors by producing high value-added display products, including OLED display panels. However, Chinese manufacturers are investing heavily in small- and medium-sized OLED display panels with the support of the Chinese government. In the smartphone OLED market, the ongoing trade dispute between the United States and China has led to a wave of “patriotic consumption” in China, which has led to an increase in the sales of smartphones manufactured in China and adoption of OLED panels for such smartphones. As such, Chinese panel manufacturers are expected to expand their supplies through support by the Chinese government, among other factors, which is likely to further intensify competition in the display panel industry and result in an oversupply. This may have negative effects of the profitability of the Company by causing a drop in its selling prices and its market share of display panels.

 

E. Risks related to exchange rate fluctuations

 

As the Company’s overseas sales account for a high proportion of its total sales, its business structure is closely tied to exchange rate fluctuations and global economic trends. As exchange rate fluctuations affect foreign currency-related gains and losses, if the exchange rate volatility increases due to factors such as monetary policies of major economies and global economic uncertainties, such increased volatility may have negative effects on the profitability of the Company. In addition, due to the nature of the Company’s business, in which sales are primarily conducted in U.S. dollars, a sharp increase in the exchange rate (a depreciation in the value of the Korean won) may increase the Company’s sales in Korean won, but may weaken the Company’s price competitiveness compared to overseas companies and ultimately reduce the Company’s export volume. The Company recorded a loss of approximately KRW 379.8 billion in foreign currency-related gains and losses included in accumulated financial profit and losses and other non-operating income and expenses as of September 30, 2023. The volatility of the Company’s foreign currency-related gains and losses may increase as global financial markets and exchange rates become more volatile due to inflation and the direction of monetary policy in the United States, among other reasons. In connection with currency risk management, the Company adopts policies to ensure that its net exposure is kept to a manageable level by buying or selling foreign currencies at spot rates when it is necessary to address short-term imbalances. In respect of monetary assets and liabilities denominated in foreign currencies, the Company manages currency risks by continually managing its foreign currency positions and measuring the currency risks and, if necessary, using derivatives such as currency forwards and currency swaps. However, despite the Company’s such efforts, there remain possibilities of sudden exchange rate fluctuations caused by an unexpected change in the global economic trend, the modification of the domestic monetary policy, favorable and unfavorable circumstances in Korea and abroad, among others. Investors are advised to take into consideration that a sudden exchange rate fluctuation caused by such factors may lead to difficulties in the Company’s ability to manage its currency risks.

 

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F. Risks of new investment relating to the OLED industry

 

In 2022, the size of the global OLED panel market (based on the sales amount) recorded USD 42.4 billion and is expected to decrease by approximately 4.2% to record USD 40.6 billion in 2023. However, by 2024, the size of the global OLED panel market is expected to grow by 7.9% to record USD 43.8 billion, due to the gradual recovery and diversifying application of OLED panels in IT and automotive products, in addition to televisions and smartphones. In the long term, the OLED panel market is expected to grow to record approximately USD 52.9 billion by 2027, and the large-sized OLED market for which the Company has market dominance is also expected to continue growing to record approximately USD 14.4 billion by 2027. The Company is proceeding with investments in small- and mid-sized and large OLED manufacturing facilities to meet the demand in the high value-added OLED market. Given the nature of the display industry that requires large costs at the initial stage, it is difficult for new participants to enter the market and accordingly, market-leading companies such as the Company are at an advantage to have a competitive edge based on their advanced technology and the stabilization of its yield rate over their competitors. However, in the short term, such new investments may increase the burden of depreciation costs on the Company and have negative effects on its profitability until initial stage productions become stabilized. In addition, the sales of the Company may decrease temporarily as it reduces its production of LCD television panels due to the restructuring of its business structure, and the increase in profits of the Company against the costs for new investments may be delayed depending on the penetration rate of OLED and the growing pace of the OLED market. In particular, as the Company had recorded operating losses for six consecutive quarters from the second quarter of 2022 to the third quarter of 2023, it has increasingly relied on external financing for its capital investment activities. As of the date of submission of this prospectus, the Company does not have any additional plans for large-scale financing activities other than this proposed offering and the syndicated loan. The Company intends to manage its liquidity and total borrowings at a level of refinancing such borrowings at their maturity, and as a result, the amount of the Company’s total borrowings is not expected to deviate significantly from the current level. However, investors should consider that if the Company’s profitability continues to decline in the future due to, among other reasons, a slowdown in demand in the downstream industries, the Company may continue to engage in additional external financing, which may affect the Company’s financial stability.

 

G. Risks related to new technology and research and development (“R&D”) personnel

 

The electronic parts industry is an advanced technology-based industry requiring sophisticated technological capabilities. Therefore, it is necessary to secure technological superiority and pioneer advantage in the new market through continued R&D activities and aggressive investment. If the Company fails to timely respond to technological changes in the industry, it may lose its competitiveness in the market. The Company has already secured a number of key personnel with outstanding experience in the display industry, and it protects its core technologies by keeping certain know-hows that could be copied by competitors as trade secrets and registering other core technologies as patents. The Company’s consolidated R&D expenditures in the first nine months of 2023 were approximately KRW 1,828 billion, which is 1.3% lower compared to the figures for the same period in the previous year, and the ratio of the Company’s R&D expenditures to its revenue was approximately 13.1%. The Company intends to continue its R&D activities to the extent that it does not materially impair the financial stability of the Company. However, R&D expenses may increase further in the future in order for the Company to maintain its business competitiveness. Although the Company expects to increase its revenue and profitability in the mid-to-long term through continued R&D activities, investors should take into consideration that R&D activities may not directly lead to profitability.

 

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H. Risks related to the environment and safety management

 

The Company has installed and operates various types of prevention facilities to minimize the emission of environmental pollutants generated in its production process. With respect to air and water pollutants, the Company sets and manages its internal standard lower than the permitted levels under the regulatory emission standards. However, despite such company-wide efforts to prevent environmental pollution, stricter environmental regulations may cause the Company to fail to comply with environmental regulations in the future. If environmental laws and regulations become stricter, the Company may have to implement additional measures such as the need to purchase additional pollution prevention equipment, which may result in significant legal and regulatory compliance costs. In the case of any violation of laws or regulations relating to safety and health or environmental protection, or any spreading perception that the Company has failed to properly respond to the public’s increasing concerns about safety and health or environment, the Company’s operating activities and financial position, among others, may be adversely affected.

 

I. Risks related to changes in domestic market demand due to government policy

 

Display panels, which represent a core competitiveness that drives the innovation of the information and communication technology (“ICT”) market, are playing increasingly important roles, and accordingly, competitors from various countries have been making increasingly aggressive efforts to foster capabilities in this sector. As such, the Ministry of Trade, Industry and Energy (“MOTIE”) announced in May 2023 an “Innovation Strategy for Display Industry,” which aims to facilitate the development of new super-gap technologies in order to reclaim Korea’s global top position in the global display market by 2027 through joint efforts by the private and public sectors. Under the draft amendment to the Enforcement Decree of the Act on Restriction on Special Cases Concerning Taxation, which currently classifies semiconductors, rechargeable batteries and vaccines as national strategic technologies, the Korean government will add display technology to such list and provide tax benefits to manufacturers of display panels. However, in the event of a delay in such government support policies, a decrease in the size of government support notwithstanding the Korean government’s current plan or an unexpected economic recession despite such government support policies, the Company’s R&D and investment activities may not expand.

 

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J. Risks related to making timely product delivery and meeting customer requirements

 

The Company’s principal business consists of the R&D, manufacturing and sales of products utilizing display technologies including OLED and TFT-LCD. As the Company’s products are supplied to customers on a project-to-project basis under the Company’s order-based business model, the Company’s sales fluctuate depending on the Company’s ability to provide timely supply of its products. The Company has historically prioritized enhancing the quality of its products and making timely product deliveries, and it has been able to maintain a stable cooperative relationship with its customers by meeting their timing requirements and product specifications. However, if the Company is unable to meet the level of the timing and quality requirements of its customers, the contractual volume of future customer orders may decrease, which in turn could adversely affect the Company’s sales. In addition, investors should consider that the Company’s profitability may be adversely affected due to rising costs as a result of, among other things, increased costs related to quality improvement, facility investment and R&D expenses, as well as increased burden of fixed costs due to lower utilization rates.

Company risks:   

A. Risks related to the Company’s revenue and profitability

 

In the first nine months of 2023, the Company recorded consolidated revenue of approximately KRW 13,934.9 billion, with its operating loss at approximately KRW 2,641.9 billion and its net loss at approximately KRW 2,627.3 billion. The Company’s revenue decreased by 26.1% compared to the same period of the previous year, while its operating loss and net loss increased by 118.5% and 138.5%, respectively. Such changes were primarily due to a delay in the improvement of the downstream demand, which in turn reflected, among other things, a continued economic slowdown and increased geopolitical risks, such as those from the Russia-Ukraine war and the Israel-Palestine dispute. As a result, the Company has recorded operating losses for six consecutive quarters from the second quarter of 2022 to the third quarter of 2023, and the Company may continue to experience weak profitability as it is unable to predict at this time as to when demand from downstream industries will recover in light of the global economic downturn. In addition, the Company generates a significant portion of its sales from a limited number of customers, and accordingly, any changes in the product strategies of such customers may significantly impact the Company’s sales. The Company intends to diversify its customer base by acquiring new customers through continued technology development. Despite the Company’s efforts at expanding its profitability through product and cost competitiveness, the Company’s sales and operating results may deteriorate in case of decreasing display panel prices or a decrease in its market share due to, among others, a delay in the recovery of the global economy and the demand in the downstream industries or intensifying competition among global competitors.

 

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B. Risks related to selling and administrative expenses, R&D expenses and non-operating income and expenses

 

The Company’s consolidated selling and administrative expenses and R&D expenses in the first nine months of 2023 were KRW 2,123.2 billion, down by 9.8% compared to the corresponding period of the previous year, and the proportion of such expenses to the Company’s revenue increased to 15.2% in the first nine months of 2023 from 12.5% in the corresponding period of the previous year. If competition in the LCD and OLED display markets further intensify, such expenses may further increase due to, among other reasons, aggressive marketing. The Company also cannot assure you that R&D expenses may significantly increase due to changes in external factors, such as new products and technological trends. Furthermore, the Company holds large amounts of foreign currency-denominated assets and liabilities, which is an important factor for non-operating income and expenses (such as foreign currency gains and losses) and net profit of the Company. Investors should note that the Company’s profitability may be adversely affected by external factors that cannot be controlled by the Company. Meanwhile, in December 2022, the Company ceased the production of LCD television panels in Korea and classified its large OLED panel division as a separate cash-generating unit. For such separate cash-generating unit, the Company caused an evaluation of any sign of impairment in asset value. By reflecting conservative market prospects, such as sluggish downstream demand, the Company recognized an impairment loss of KRW 1,330.5 billion as other non-operating expenses. If, there is a material change in the future in the Company’s business portfolio, such as complete withdrawal from the LCD panel business, additional impairment loss relating to such development may be recognized.

 

C. Risks related to the Company’s financial stability

 

On a consolidated basis, the total borrowings of the Company as of September 30, 2023 amounted to KRW 17,556.4 billion, representing a 16.5% increase from December 31, 2022. The continued operating loss weakened the Company’s cash generating abilities. Due to sluggish demand for panels from the global economic slowdown and the Company’s investments to maintain its competitiveness in the area of small- and mid-sized OLEDs, among other factors, the Company’s liabilities-to-equity ratio as of September 30, 2023 was 322.2%, which was 106.9 percentage points higher than as of December 31, 2022. In particular, the Company’s liabilities-to-equity ratio as of December 31, 2022 was approximately five times higher than the industry average of 44.4% for the electronics, audiovisual, and communication equipment industry according to the Bank of Korea’s Corporate Management Analysis (2022), and the Company’s current ratio and total borrowings-to-assets ratio were also inferior compared to the industry average of 151.0% and 11.7%, respectively. Such figures primarily reflected the increase in the Company’s external borrowings for investments related to OLED panels due to a deterioration in its liquidity position caused by a decline in the profitability of the Company’s operations, as well as the continued high interest rate environment. However, the Company’s capacity to repay its borrowings is expected to be maintained at an adequate level, considering, among other factors, its superior technological capabilities and market leadership position, its cash generating power based on its profitability-focused product portfolio, and its creditworthiness. Meanwhile, the Company is making further strategic investments, such as the expansion of its existing production lines and construction of new production facilities, in order to increase its production capacity for large-sized OLED panels and small- and mid-sized OLED panels and development of new technologies. Due to the characteristics of the Company’s business sector, the Company faces pressures to make further investments in technological advances and the strengthening of its competitiveness. Accordingly, if the Company’s profitability deteriorates as a result of intensifying competition, the Company’s cash flow and financial stability could be negatively affected.

 

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D. Risks related to the Company’s cash flows

 

The Company has continued to make investments for the purpose of constructing new production facilities and developing new technologies, among others, in order to proactively respond to technological changes in the display industry and maintain a leading market share and a competitive advantage of its products over its competitors. On a consolidated basis, the Company’s acquisition of property, plant and equipment in the first nine months of 2023 amounted to KRW 2,765.3 billion, which represented a 28.1% decrease from KRW 3,845.1 billion for the first nine months of 2022. While the level of the Company’s capital investment has decreased as it primarily focused on making essential investments in the ordinary course of business and investments for the Company’s transition to an order-based business model, the Company’s acquisition of property, plant and equipment may increase again in the future, as the Company is expected to make continued investments in production facilities to secure competitive advantage in light of the characteristics of the display panel industry. The Company’s total cash flows from operating activities on a consolidated basis increased in 2021, but has since continually declined until the third quarter of 2023. The Company recorded a negative cash flow of KRW 316.3 billion from its operating activities on a consolidated basis in the first nine months of 2023, as the Company’s profit-generating power weakened. In order to improve its financial stability, the Company aims to enhance its profitability by increasing the sales volume of small- and medium-sized OLED panels, minimizing inventory by adjusting utilization rates and reducing the scale of its capital expenditures. However, it may be difficult to reduce borrowings to a meaningful level in the short term due to the Company’s ongoing large-scale capital expenditures that exceed its operating cash flow levels. Accordingly, liquidity risks may materialize if improvement in the Company’s cash flows is delayed. Despite fluctuations in its profitability resulting from deteriorations in the market conditions, from 2020 to the third quarter of 2023, the Company has maintained approximately KRW 3.1 trillion in cash and cash equivalents at on average as of the end of each period, through its financing activities and execution of appropriate levels of capital investment while leveraging its solid cash-generating power. Nevertheless, if the level of competition further intensifies and/or the market prices further decline due to mismatches in supply and demand conditions in the display panel market, such events may cause a deterioration in the Company’s cash-generating power and further pressures to make additional investments, which in turn may have an adverse effect on the Company’s cash flows and financial stability.

 

E. Risks of a decline in credit rating due to a deterioration in financial stability

 

Korea Ratings Co., Ltd. (“KR”), Korea Investors Service Inc. (“KIS”) and NICE Investors Service Co., Ltd. (“NICE”) revised the credit rating of the Company from A+/Negative to A0/Stable on May 11, 2023, May 18, 2023 and May 19, 2023 respectively. Main grounds for such credit rating revisions were (i) the weakening of the Company’s capacity to generate profits due to a continued slowdown in the display panel industry, (ii) a decline in the Company’s financial stability following its conversion into an OLED-oriented business structure, in part due to its capital investment requirements and (iii) the expectation that it would be challenging to improve the Company’s business performance and substantially reduce its borrowings in the short term. If the Company’s ability to generate operating cash continues to be weaker, or if the Company’s financial indicators such as the EBITDA margin and net borrowings-to-assets ratio continue to worsen, the Company’s credit ratings may further be downgraded. A downgrading of the Company’s credit ratings may have negative effects on its financial stability, including an increase in its financing costs and the weakening of its ability to procure additional financing. Investors are advised to continually monitor the Company’s credit ratings before making an investment.

 

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F. Risks related to inventory

 

The lifecycle of products in the industries of electronics products and IT devices, which constitute primary downstream industries of the Company’s business, is continuing to decrease due to rapid technological advancements. Furthermore, depending on changes in the demand in the downstream industries, the resulting impact on the demand for relevant components tends to be amplified by two to three times. As of September 30, 2023, the Company’s inventory on a consolidated basis amounted to KRW 3,348.5 billion, an increase of 16.6% compared to December 31, 2022, which was mainly attributable to the Company’s proactive expansion of its inventory levels to meet the year-end demand. The Company’s inventory turnover ratio was 10.2 times, 8.9 times, 8.0 times and 6.2 times in 2020, 2021, 2022 and the first nine months of 2023, respectively, which was lower than the industry average inventory asset turnover ratio of 8.9 times in 2022, mainly due to decreased sales as a result of slowdown in downstream industries. The Company seeks to manage its inventory levels efficiently by strengthening its global supply chain management and engaging in production based on the expected customer order levels. The Company is transitioning its business structure to an order-based business model, and accordingly, it plans to align its production levels with the production plans for downstream products of its major customers in order to prevent overinvestment in inventory. However, sudden changes in the downstream industries resulting in differences between planned and actual production volumes may nevertheless lead to an increase in the Company’s inventory levels and a further decline in the Company’s inventory turnover ratio, as well as a delay in the improvement of the Company’s profitability. Investors are advised to consider that an increase in the Company’s inventory levels may cause, among other things, an increase in the cost of managing such inventories and a reduction in the value of inventory over time, which in turn may negatively affect the Company’s profitability due to higher cost of sales as a result of the recognition of inventory valuation losses.

 

32


 

 

G. Risk of deterioration of profitability and financial stability due to delayed collection of trade accounts and notes receivable

 

The Company’s revenue increased from KRW 24.3 trillion in 2020 to KRW 29.9 trillion in 2021, and its trade accounts and notes receivable increased from KRW 3.5 trillion as of December 31, 2020 to KRW 4.6 trillion as of December 31, 2021. In 2022, the Company’s revenue decreased to KRW 26.2 trillion and its trade accounts and notes receivable also decreased to KRW 2.4 trillion as of December 31, 2022. For the nine months ended 2023, the Company’s revenue decreased to KRW 13.9 trillion, representing a 26.1% decrease compared to the nine months ended 2022, mainly due to the prolonged sluggishness in demand from downstream industries and extended replacement cycles for IT devices, while the amount of trade accounts and notes receivable decreased by 17.9% to KRW 2.4 trillion as of September 30, 2023. The ratio of the Company’s allowance for impairment of trade accounts and notes receivable was 0.03% in 2020, 0.03% in 2021 and 0.04% in 2022. As of September 30, 2023, the Company’s trade accounts and notes receivable decreased compared to as of December 31, 2022 due to lower revenue, but the ratio of the Company’s allowance for impairment of trade accounts and notes receivable remained constant at 0.04%. While the Company has had superior trade accounts and notes receivable turnover ratios compared to its peers in the past, investors are cautioned that the Company’s cash flows may be adversely affected in the future if the collection of its trade accounts and notes receivable does not proceed as planned due to reasons such as deteriorations in the business environment of customers or in the Company’s business relationships with key customers, or if trade accounts and notes receivable remain outstanding for a prolonged period due to a deterioration of customers’ ability to pay, which in turn could adversely affect the Company’s profitability and financial stability.

 

H. Risks related to fluctuations in exchange rate and interest rate

 

The Company’s overseas sales accounted for approximately 96.8% of its total consolidated revenue in the first nine months of 2023. The Company possesses assets and liabilities denominated in foreign currencies due to its consistent overseas sales transactions and is exposed to currency risks on sales, purchases and borrowings denominated in currencies other than in KRW, the Company’s functional currency. In order to hedge against the risks of interest rate fluctuations and exchange rate fluctuations on foreign currency denominated borrowings and bonds, the Company has entered into an aggregate of USD 2,065 million and CNY 345 million cross currency swap agreements with KB Kookmin Bank and others as of September 30, 2023. The Company’s exposure to interest rate risks relates primarily to its floating rate long term loan obligations. In order to hedge against the risk of interest rate fluctuations on foreign currency denominated borrowings with floating interest rates, the Company has entered into an aggregate of USD 1,565 million (equivalent to KRW 2,104.6 billion) in cross currency interest swap agreements and an aggregate of KRW 990 billion in interest rate swap agreements as of September 30, 2023. The Company regularly monitors, assesses and manages its risks relating to exchange rates and interest rates, and internally measures currency risks related to exchange rate fluctuations of major currencies in an effort to manage such risks. Nevertheless, drastic changes in exchange rates in the future caused by external factors beyond the Company’s control may adversely affect the Company’s net profit or loss by causing the Company to incur foreign currency-related losses. Furthermore, a decline in exchange rates (an appreciation of the KRW) may have an adverse effect on the sales of the Company by causing an increase in the prices of the Company’s products and thereby weaken their price competitiveness. In addition, due to the nature of the Company’s business, in which sales are primarily conducted in USD, any increase in the Company’s foreign currency assets could have a significant impact on the Company’s financial condition. Investors should be aware of such risks.

 

33


 

I. Risks related to related party transactions

 

In the first nine months of 2023, the Company’s sales to its related parties, including LG Electronics, amounted to approximately KRW 2,317.7 billion, approximately 16.6% of the Company’s total revenue of KRW 13,934.9 billion. Accordingly, the Company’s overall sales may be affected if the Company’s sales to related parties, including LG Electronics, decline due to adverse business conditions in the downstream industries. A future deterioration in the financial performance of the Company’s related parties or a change in the terms and conditions of transactions with related parties that is unfavorable to the Company may adversely affect the Company’s financial performance. In addition, the Company has close business relationships with some of its related parties, and accordingly, any risks relating to the Company’s affiliates may have an adverse impact on the Company’s business environment and profitability. Therefore, investors are advised to continually monitor the status of the Company’s transactions with its related parties before making their investment decision.

 

J. Risks relating to the business group status

 

The Company is a member company of the LG Group, which ranks as the fourth-largest business group in Korea as designated by the Korea Fair Trade Commission (the “KFTC”) in April 2023. As of December 31, 2023, the LG Group consisted of a total of 63 domestic affiliates engaged in electronics, chemical, telecommunications, service and other businesses. The LG Group is organized as a holding company, with Chairman Koo Kwang-mo and his specially related persons holding 41.7% stake as of September 30, 2023, and has stable control of its major direct and indirect subsidiaries. LG Electronics, the largest shareholder of the Company, is the top-tier affiliate of the electronics business division of the LG Group and owned approximately 37.9% (135,625,000 shares) of the Company’s shares as of the business day immediately preceding the date of this prospectus, and the Company’s management control is expected to remain stable. However, pursuant to the regulations relating to large business groups, the Company may be subject to certain restrictions on its business activities, such as providing debt guarantees and conducting mutual investments among affiliated companies, and approvals of board of directors are required for large-scale related party transactions.

 

K. Risks related to intellectual property disputes and litigation

 

Considering the characteristics of the display industry, in which R&D capabilities are directly linked to a company’s competitiveness, intellectual property rights and patented technologies play a very important role in the display industry. As of September 30, 2023, the Company has accumulated 27,275 domestic registered patents and 33,662 overseas registered patents, and in the first nine months of 2023, the Company has obtained 1,782 domestic patents and 1,662 overseas patents. However, even if the Company promptly applies the output of its R&D efforts (i.e., its newly developed technology) to the Company’s products, the Company cannot guarantee whether such output will be accepted by the market. In addition, no assurance can be given that the Company’s current measures will be sufficient to prevent misappropriation of its intellectual property rights or that the Company’s competitors will not independently develop alternative technologies that are equivalent to or superior to the technology developed by the Company based on its intellectual property rights. Investors are advised to note the potential risk of losses to the Company’s business in the event of infringements in intellectual property rights if such rights are not systematically managed.

 

34


 

L. Status of lawsuits, sanctions and contingent liabilities

 

As of September 30, 2023, the Company is a defendant in various lawsuits, including those filed against it and certain other LCD panel manufacturers for damages relating to alleged anticompetitive behavior of the defendants, but the final outcome of these lawsuits cannot be reasonably predicted. The Company has agreements with Korea Development Bank and several other banks for accounts receivable sales negotiating facilities of up to an aggregate of USD 1,000 million (KRW 1,344,800 million) in connection with the Company’s export sales transactions with its subsidiaries. The Company believes that its contingent liabilities are unlikely to materialize in the near term and thereby result in changes that would adversely affect its financial position. However, as future materialization of the Company’s contingent liabilities could have an adverse effect on the Company’s financial position, such events should be continually monitored. In addition, the relevant authorities’ sanctions against the Company may have an adverse effect on the Company’s business and reputation.

 

M. Risks related to review and audit of financial statements

 

On December 26, 2023, the FSS selected the Company as a target for the review of the Company’s financial statements as of and for the year ended December 31, 2022 pursuant to Article 23, Paragraphs 1 through 3 of the Regulations on External Audit and Accounting, etc., and such review is currently ongoing. The FSS conducts its review and audit processes in accordance with the Act on External Audit of Stock Companies and the Regulations on External Audit and Accounting, etc. The Company is in the process of submitting relevant materials and responding diligently to the FSS’ review process. Although the target processing period for the ongoing FSS review is expected to be approximately three months, the actual processing period may be extended if any violations of accounting standards are identified, issues related to the interpretation of accounting standards arise or other unavoidable circumstances occur, and the outcome of such review cannot be predicted at this time. While the FSS review may conclude with no further actions required, the FSS may proceed to order a formal audit if it identifies any intentional or grossly negligent violation of accounting standards or if the Company fails to implement the recommendations by the FSS to correct a violation of accounting standards. Investors should note that if the FSS review is converted to an audit, the result of such audit may include no further actions or regulatory sanctions including the imposition of fines, which could adversely affect the Company’s reputation and business.

 

35


Other investment risks   

A. Risk of change in shareholding ratio as a result of the largest shareholder’s subscription participation rate

 

As of the business day immediately preceding the submission date of this prospectus, the largest shareholder of the Company’s common shares is LG Electronics, which (together with its specially related persons) held 37.91% of the Company’s shares. On December 19, 2023, LG Electronics, the Company’s largest shareholder, announced its participation in the proposed offering to subscribe for 120% of the new shares allocated to it, including 20% in oversubscribed shares. If LG Electronics is allocated with the maximum number of its oversubscribed shares, it will be allocated with an aggregate of 51,737,236 new shares in this proposed offering. However, the actual allocation of oversubscribed shares may change depending on the actual results of subscription. LG Electronics’ shareholding in the Company is estimated to decrease by 0.43 percentage points to 37.47% after the completion of this proposed offering. Depending on the number of new shares the largest shareholder and its specially related persons will subscribe to in this proposed offering, the shareholding of the largest shareholder and its specially related persons may change.

 

B. Restriction on the liquidity of new shares and risk of loss due to stock price fluctuations

 

If investors participate in this proposed offering subscription and subscribe to new shares, there will be constraints on the liquidity of the new shares, and there is a possibility of loss of principal if the market price declines between the subscription date and the additional listing date. Investors are advised to be aware of such constraints.

 

C. Offering method and subscription procedures and risks of a decline in the share prices

 

Upon the completion of this proposed offering, 142,184,300 new shares, representing 39.74% of the 357,815,700 common shares of the Company that are currently outstanding, are expected to be newly issued and listed. This proposed offering will be conducted as an offering of Share Rights to existing shareholders followed by a general public offering of unsubscribed shares, if any. Since it is possible for existing shareholders to oversubscribe in the Rights Offering, investors are advised to maintain an accurate understanding of the offering method and subscription procedure before making any investment decision. In particular, given the significant scale of this proposed offering, which is equivalent to approximately 30% of the Company’s market capitalization of approximately KRW 4.6 trillion as of one day prior to the submission of this prospectus, there is a possibility that the stock price may decrease due to the withdrawal of the increased number of shares and share price dilution. In addition, if the new shares are not fully subscribed even after the general public offering, the Joint Lead Managers will subscribe for their own accounts. If the Joint Lead Managers sell a large amount of such shares they subscribed to in the near term, the market price of the Company’s common shares may decline due to the temporary increase in the volume of the Company’s shares released for sale. Even if the Joint Lead Managers hold their subscribed shares for some time, their subscribed volume will exist as being potentially available for sale, which will likely act as a constraint on the market price of the Company’s common shares.

 

36


  

D. Risk of decrease in the aggregate offering proceeds due to stock price decline

 

A significant decrease in the aggregate proceeds of this proposed offering due to a material deterioration of the stock market may have an adverse effect on the Company’s funding plans, which in turn may negatively impact the Company’s financial stability. Investors are advised to consider such possibility.

 

E. Risk of changes in the offering timetable

 

This prospectus may be amended during the disclosure review process, and if the main contents closely related to investment judgment are changed, the schedule may be delayed or postponed due to correction orders from supervisory agencies. In addition, the schedule may be changed based on the working progress with the related institutions. Investors are advised to consider such possibility.

 

F. Limitations of analytical information and risks related to investment decisions

 

The value of the Company’s shares acquired through this offering may decrease. The effectiveness of this prospectus does not constitute an acknowledgment by the government that the statements in this prospectus are true or accurate, nor does it endorse or approve the value of these securities, and the statements are subject to change prior to the subscription date. In addition, this prospectus contains forward-looking information. Investors should not make investment decisions solely based on the information described in the investment risk factors described in this prospectus but should make their own judgment through careful review from various perspectives.

 

G. Risks of stricter regulatory standards for listed companies

 

Recently, the applicable regulatory standards for listed companies have been becoming stricter. Non-compliance with such regulatory standards may result in various regulatory sanctions, including the Company’s listed securities becoming subject to trading suspensions, inclusion in the watchlist of the stock exchange administrator, review for potential delisting, and actual delisting.

 

H. Risk of class action lawsuits

 

If the Company causes damage to its shareholders by providing misleading information or engaging in insufficient audits, class action lawsuits may be filed by certain shareholders. Investors should consider such risk.

 

I. Risks of withdrawal of offering

 

This proposed offering may be withdrawn at the discretion of the Company or the Joint Lead Managers due to events that may materially affect the offering process. If this proposed offering is withdrawn before the payment of the subscription price, no losses will be incurred by the reason of making such subscription. However, depending on the time of such withdrawal, losses may be incurred due to, among other things, a decrease in the market price of the Company’s common shares due to ex-rights or the trading of the Share Rights. Investors should consider such risk.

 

37


  

J. Risks related to restriction on participation by persons engaged in leveraged short sales

 

Pursuant to the applicable amendment to the Enforcement Decree of the Financial Investment Services and Capital Markets Act by the Financial Services Commission in connection with a regulatory reform of short-selling procedures, persons who have engaged in the short sale of a listed company’s shares during the period between the date of the announcement of such company’s paid-in capital increase and the last day of the trading period for calculating the definitive subscription price for such paid-in capital increase are restricted from participating in such paid-in capital increase, except in limited circumstances (See Article 180(4) of the Financial Investment and Capital Markets Act.)

 

2.

General Matters Regarding the Offering or Sale

 

                       

(Unit: KRW, Shares)

 

Type of

Securities    

   Number of
Securities
     Par Value    Offering (or Sale)
Price per Share
   Total Offering (or Sale)
Amount
 

Offering (or Sale)

Method

Common shares

     142,184,300      KRW 5,000    KRW 9,090    KRW 1,292,455,287,000   Rights offering to existing shareholders, followed by a public offering of unsubscribed shares, if any

 

Whether underwritten (arranged)   

  

Whether public offering for listing of equity securities, etc. is done

Underwritten

   No    N/A    N/A

 

Underwriter (Manager)          

  Type of
Securities
   Number of
Securities
Underwritten
     Underwriting
Amount
    

Consideration for
Underwriting

   Underwriting
Method

Joint Lead Manager

  Korea Investment & Securities   Common
shares
     39,100,683        KRW 355,425,208,470      Underwriting Fee: 27.5% of the amount equal to 0.40% of the total offering amount    Stand-by
underwriting

Joint Lead Manager

  NH Investment & Securities   Common
shares
     39,100,683        KRW 355,425,208,470      Underwriting Fee: 27.5% of the amount equal to 0.40% of the total offering amount    Stand-by
underwriting

Joint Lead Manager

  KB Securities   Common
shares
     35,546,075        KRW 323,113,821,750      Underwriting Fee: 25.0% of the amount equal to 0.40% of the total offering amount    Stand-by
underwriting

Joint Lead Manager

  Daishin Securities   Common
shares
     28,436,859        KRW 258,491,048,310      Underwriting Fee: 20.0% of the amount equal to 0.40% of the total offering amount    Stand-by
underwriting

 

38


Subscription Date     

  

Payment Date

  

Date of Public

Notice of

Subscription

  

Date of Public

Notice of

Allocation

  

Record Date for

Allocating Share

Rights

March 6, 2024 – March 7, 2024    March 14, 2024    March 8, 2024    March 14, 2024    January 26, 2024

 

Short-Selling Transaction Period during which Subscription hereunder is Prohibited

Start date

   End date
December 19, 2023    February 29, 2024

 

Expected Use of Proceeds

Item

  

Amount

Working capital    KRW 482,907,287,000
Funds for debt repayment    KRW 393,648,000,000
Funds for facilities    KRW 415,900,000,000
Various expenses for issuance    KRW 9,641,296,298

 

Matters regarding Share Rights

Securities subject to preemptive rights

   Exercise price    Exercise period

     

 

Matters regarding the Seller

Holder

  

Relationship with

the Company

  

Number of

securities held

prior to the sale

  

Number of

securities sold

  

Number of

securities held

after the sale

  

  

  

  

 

Redemption Request Right of General Public Subscribers

Reason for the

grant of the right

  

Investors entitled

to exercise the

right

  

Number of

securities for

which the right is

exercisable

  

Exercise period

  

Exercise price

  

  

  

  

 

39


[Report of a Material Event]   See Amended Report of a Material Event (Resolution Regarding Paid-in Capital Increase) disclosed on March 4, 2024
Other Matters  

1) The joint lead managers for the paid-in capital increase through general public offering of unsubscribed shares after allocation to existing shareholders of the Company are Korea Investment & Securities Co., Ltd., NH Investment & Securities Co., Ltd., KB Securities Co., Ltd. and Daishin Securities Co., Ltd.

 

2) The subject paid-in capital increase is on the “stand-by underwriting” basis, under which the joint lead managers shall subscribe for the unsubscribed shares resulting from general public offering of shares that remain unsubscribed after the Share Rights (as defined below) offering to existing shareholders. For details of the subscription method and subscription price, please refer to “Chapter 1. Matters Regarding the Offering or Sale – I. General Matters Regarding the Offering or Sale – 5. Matters Regarding Underwriting, etc.”

 

3) The above offering price refers to the Definitive Subscription Price (as defined below).

 

4) The above subscription dates refer to the subscription dates for existing shareholders, and the subscription dates for the general public offering are March 11, 2024 and March 12, 2024 (two (2) business days). A public notice of subscription for general public offering is scheduled to be posted on the websites of the Company and the joint lead managers on March 8, 2024.

 

5) Subscription for the general public offering in Korea is available at the head office and branches of each of the joint lead managers (Korea Investment & Securities Co., Ltd., NH Investment & Securities Co., Ltd., KB Securities Co., Ltd. and Daishin Securities Co., Ltd.), as well as at their websites and HTS and MTS. However, under Article 9(2)7 of the Regulation on Securities Underwriting Business, Etc., if the total number of the shares to be allocated to high-yield and high-risk investment trusts and general public subscribers is not more than 5,000 shares (based on the par value per share of KRW 5,000), or if the total public offering amount is not more than KRW 100 million, the joint lead managers may subscribe therefor for their own account without allowing subscription through a general public offering.

 

6) Under Article 180-4 of the Financial Investment Services and Capital Markets Act and Article 208-4 (1) of the Enforcement Decree thereof, no person who engaged the short-selling of, or entrusted the short-selling of, any shares of the Company from December 19, 2023 to February 29, 2024 may subscribe in this proposed offering, and pursuant to Article 429-3(2) of the above act, a fine may be imposed for any acquisition of shares in violation thereof. However, acquisition of shares may be permitted as an exception if it falls under Article 208-4(2) of the Enforcement Decree thereof and Article 6-34 of the Regulation on Financial Investment Business and does not impede the establishment of a fair offering price.

 

40


  

7) In case of correction of descriptions herein due to a change in important matters in the course of examination of this public disclosure form by the Financial Supervisory Service (“FSS”), there may occur a change in the timetables described in this document.

 

8) The effectiveness of the related registration statement does not confirm that the descriptions herein are true or correct, or represent the government’s guarantee or approval of the value of the subject securities. Accordingly, the responsibility for the investment in the subject securities falls solely on the shareholders and investors.

 

9) The various expenses for issuance will be paid out of the funds of the Company.

 

41


Chapter 1. Matters Regarding the Offering or Sale

I. General Matters Regarding the Offering or Sale

 

  1.

Overview of Public Offering

Pursuant to Article 2(1) of the Financial Investment Services and Capital Markets Act, by a resolution of its board of directors, the Company decided to enter into an agreement with Korea Investment & Securities Co., Ltd., NH Investment & Securities Co., Ltd., KB Securities Co., Ltd. and Daishin Securities Co., Ltd. (collectively, the “Joint Lead Managers”) with respect to their subscription of unsubscribed shares after allocation to existing shareholders of the Company. The Company determined to issue 142,184,300 registered common shares (the “new shares”), which shall initially be allocated to existing shareholders of the Company through an offering of rights to subscribe to new shares of the Company (the “Share Rights”) and any unsubscribed shares resulting therefrom shall then be made available for subscription through public offering. Any unsubscribed shares after such public offering shall be subscribed by the Joint Lead Managers. An overview of the subject securities is provided below.

 

Information on the offering (or sale)

 

                                 (Unit: KRW, Shares)

Type of Shares  

   Number of
Shares
     Par
Value
     Offering (or Sale)
Price
     Total Offering
Amount
    

Offering (or Sale) Method

Registered common shares

     142,184,300        KRW 5,000        KRW 9,090        KRW 1,292,455,287,000      Rights offering to existing shareholders, followed by a public offering of unsubscribed shares, if any

Note 1) Date of the initial board of directors resolution: December 18, 2023

Note 2) The offering price per share and the total offering amount are amounts based on the Definitive Subscription Price.

The subscription price can be freely determined due to the liberalization of, among other things, the applicable discount rate for capital increase through rights offering to existing shareholders under Article 5-18 (Determination of Issue Price for Paid-in Capital Increase) of the Regulation on Issuance, Public Disclosure, etc. of Securities, but the Company plans to calculate the subscription price by partially applying Article 57 of the former Regulation on Issuance, Public Disclosure, etc. of Securities.

 

Basis for the calculation of the first indicative subscription price

The first indicative subscription price per common share (the “First Indicative Subscription Price”) shall be calculated by using the formula set forth immediately below this paragraph. The First Indicative Subscription Price shall apply a 20% discount rate (the “Discount Rate”) to the first indicative base share price (the “First Indicative Base Share Price”), which shall be the lower of (a) the arithmetic mean of (x) the volume weighted average price of the Company’s common shares (“VWAP,” which is calculated by dividing the total value of the Company’s common shares traded on the KOSPI Market of the Korea Exchange during the relevant period by the total volume of the Company’s common shares so traded during the relevant period) for the one-month period ending January 23, 2024, which is the third trading date immediately preceding the Record Date, (y) the VWAP for the one-week period ending January 23, 2024 and (z) the closing price of the Company’s common shares on January 23, 2024, in each case calculated retroactively, and (b) the closing price of the Company’s common shares on January 23, 2024; provided, however, that (i) if the price determined as above is equal to or less than the par value of the Company’s common shares (i.e., KRW 5,000), the subscription price shall be the par value of the Company’s common shares, and (ii) if the price determined as described above includes an amount less than the quotation unit of the Company’s common shares, such amount shall be rounded up to the nearest quotation unit.

 

42


u   First Indicative Subscription Price (KRW 10,070) =

   First Indicative Base Share Price (KRW 13,587) x [1- Discount Rate (20%)]
   1+ [Ratio of paid-in capital increase (39.74%) x Discount Rate (20%)]

First Indicative Subscription Price Calculation Table (Dec. 26, 2023 – Jan. 23, 2024)

                          (Unit: KRW, Shares)  

Number of
Days   

   Date (year/month/date)      Closing Price      Trading Volume      Trading Value  

1

     2023/12/26        12,250        973,159        11,926,104,590  

2

     2023/12/27        12,390        686,404        8,441,737,930  

3

     2023/12/28        12,740        1,202,287        15,133,940,700  

4

     2024/01/02        13,350        2,652,264        35,017,434,200  

5

     2024/01/03        13,280        1,721,169        23,000,343,790  

6

     2024/01/04        13,050        964,004        12,544,167,360  

7

     2024/01/05        13,290        1,032,397        13,611,782,320  

8

     2024/01/08        14,170        6,359,468        89,462,766,900  

9

     2024/01/09        13,940        2,707,540        38,487,767,700  

10

     2024/01/10        13,400        1,583,144        21,529,287,750  

11

     2024/01/11        13,600        1,882,478        25,388,921,150  

12

     2024/01/12        13,260        783,335        10,468,018,000  

13

     2024/01/15        13,150        791,169        10,505,072,010  

14

     2024/01/16        12,870        1,382,888        17,836,042,920  

15

     2024/01/17        12,750        2,074,816        26,958,249,190  

16

     2024/01/18        13,180        1,617,410        21,420,625,950  

17

     2024/01/19        13,030        964,160        12,638,125,370  

18

     2024/01/22        13,340        1,356,328        18,123,066,900  

19

     2024/01/23        13,910        3,006,599        41,638,641,360  
One-month VWAP (A)

 

                13,459  
One-week VWAP (B)

 

                13,391  
Closing price on January 23, 2024 (C)

 

                13,910  
Arithmetic mean of A, B and C (D)

 

     13,587        [(A)+(B)+(C)]/3  
Estimated base share price [Min (C, D)]

 

     13,587        The lower of C and D  
Discount Rate

 

                 20%  

First Indicative Subscription Price

 

     10,070       


First
Indicative
Subscription
Price = 
 
 
 
 
    
First Indicative Base Share Price x   
   [1- Discount Rate]
 
 
    
1+ [Ratio of capital increase x      
   Discount Rate]
 
 
  

 

 

 

Any amount less than the quotation unit of the Company’s common shares shall
be rounded up, and if the resulting amount is less than the par value, the par value
shall be the estimated subscription price.

 

 
 
 

 

Basis for the calculation of the second indicative subscription price

The second indicative subscription price per common share (the “Second Indicative Subscription Price”) shall be calculated by using the formula set forth immediately below this paragraph. The Second Indicative Subscription Price shall apply a 20% Discount Rate to the second indicative base share price (the “Second Indicative Base Share Price”), which shall be the lower of (a) the arithmetic mean of (x) the VWAP for the one-week period ending February 29, 2024, which is the third trading date immediately preceding March 6, 2024 (i.e., the first day of subscription by existing shareholders) and (y) the closing price of the Company’s common shares on February 29, 2024, each calculated retroactively, and (b) the closing price of the Company’s common shares on February 29, 2024; provided, however, that (i) if the price determined as above is equal to or less than the par value of the Company’s common shares (i.e., KRW 5,000), the subscription price shall be the par value of the Company’s common shares, and (ii) if the price determined as described above includes an amount less than the quotation unit of the Company’s common shares, such amount shall be rounded up to the nearest quotation unit.

 

43


u Second Indicative Subscription Price (KRW 9,090) = Second Indicative Base Share Price (KRW 11,354) x [1- Discount Rate (20%)]

Second Indicative Subscription Price Calculation Table (Feb. 23, 2024 – Feb. 29, 2024)

 

 

                          (Unit: KRW, Shares)  

Number of
Days   

   Date (year/month/date)      Closing Price      Trading Volume      Trading Value  

1

     2024/2/23        11,550        1,246,301        14,394,674,750  

2

     2024/2/26        11,520        585,855        6,781,425,400  

3

     2024/2/27        11,130        1,403,272        15,832,408,340  

4

     2024/2/28        11,320        1,065,472        12,010,356,570  

5

     2024/2/29        11,380        2,850,393        31,987,134,210  
One-week VWAP (A)

 

        11,327  
Closing price on February 29, 2024 (B)

 

        11,380  
Arithmetic mean of A and B (C)

 

     11,354        [(A)+(B)]/2  
Estimated base share price [Min (B, C)]

 

     11,354        The lower of B and C  
Discount Rate

 

        20%  
Second Indicative Subscription Price

 

     9,090       
Second Indicative
Subscription Price =
 
 
    
Second Indicative Base Share
Price x [1- Discount Rate]
 
 
  

 

 

 

Any amount less than the quotation unit of the Company’s common shares
shall be rounded up, and if the resulting amount is less than the par value, the
par value shall be the estimated subscription price.

 

 
 
 

 

Basis for the calculation of the definitive subscription price

The definitive subscription price per common share (the “Definitive Subscription Price”) shall be the lower of the First Indicative Subscription Price and the Second Indicative Subscription Price; provided, however, that pursuant to Article 165-6 of the Financial Investment Services and Capital Markets Act of Korea and Article 5-15-2 of the Regulations on Issuance, Public Disclosure, etc. of Securities of Korea, if the lower of the First Indicative Subscription Price and the Second Indicative Subscription Price is less than the price obtained by applying a discount rate of 40% to the definitive base share price (the “Definitive Base Share Price”), which is equal to the VWAP for the period from February 27, 2024 (i.e., the fifth trading date immediately preceding the first day of subscription by existing shareholders) to February 29, 2024 (i.e., the third trading date immediately preceding the first day of subscription by existing shareholders), calculated retroactively, the Definitive Subscription Price will be the price calculated by applying a discount rate of 40% to the Definitive Base Share Price. Furthermore, (i) if the price determined as above is equal to or less than the par value of the Company’s common shares (i.e., KRW 5,000), the subscription price shall be the par value of the Company’s common shares, and (ii) if the price determined as described above includes an amount less than the quotation unit of the Company’s common shares, such amount shall be rounded up to the nearest quotation unit.

u Definitive Subscription Price = Max {Min [First Indicative Subscription Price per New Share, Second Indicative Subscription Price per New Share], 60% of the Definitive Base Share Price}

Definitive Subscription Price Calculation Table (Feb. 27, 2024 – Feb. 29, 2024)

 

                         (Unit: KRW, Shares)  

Number of
Days  

   Date (year/month/date)      Closing Price      Trading Volume     Trading Value  

1

     2024/2/27        11,130        1,403,272       15,832,408,340  

2

     2024/2/28        11,320        1,065,472       12,010,356,570  

3

     2024/2/29        11,380        2,850,393       31,987,134,210  

Three trading days VWAP

 

        11,248    

Discount Rate

 

        40  

60% of the Definitive Base Share Price

 

        6,750    

 

Category

   Subscription Price  

First Indicative Subscription Price

     10,070  

Second Indicative Subscription Price

     9,090  

60% of the Definitive Base Share Price

     6,750  

Definitive Subscription Price = Max {Min [First Indicative Subscription Price per New Share, Second Indicative Subscription Price per New Share], 60% of the Definitive Base Share Price}

     9,090  

 

44


Offering timetable

[Key Dates]

 

Date

(yyyy.mm.dd)

  

Scheduled event

  

Remarks

2023.12.18

   Board of directors resolution   

2023.12.18

   Initial submission of registration statement (preliminary prospectus)   

2023.12.18

   Public notice of issuance of new shares and the record date for allocation of Share Rights (the “Record Date”)    Website of the Company (http://www.lgdisplay.com)

2024.01.23

   Determination of the First Indicative Subscription Price (as defined below)    Three (3) trading days prior to the record date for allocation of Share Rights to existing shareholders

2024.01.25

   Ex-rights   

2024.01.26

   Record Date (conclusive determination of shareholders)   

2024.02.08

   Notice of allocation of Share Rights   

2024.02.19

   Date of listing of Share Rights    Trading for five (5) or more trading days (February 19, 2024 – February 23, 2024)

2024.02.26

   Delisting of Share Rights    To be de-listed at least five (5) trading days prior to the commencement date for subscription by existing shareholders

2024.02.29

   Calculation of the Definitive Subscription Price (as defined below)    Three (3) trading days prior to the commencement date for subscription by existing shareholders

2024.03.04

   Public notice of the Definitive Subscription Price   

Website of the Company

(http://www.lgdisplay.com)

2024.03.06

   Subscription by the Company’s employee stock ownership association (the “ESOA”)   

2024.03.06 - 2024.03.07

   Subscription by existing shareholders   

2024.03.08

   Public notice of subscription for general public offering   

Website of the Company (http://www.lgdisplay.com)

 

Website of Korea Investment & Securities Co., Ltd.

(http://securities.koreainvestment.com)

 

Website of NH Investment & Securities Co., Ltd.

(http://www.nhqv.com)

 

Website of KB Securities Co., Ltd.

(http://www.kbsec.com)

 

Website of Daishin Securities Co., Ltd.

(http://www.daishin.com)

2024.03.11 - 2024.03.12

   Subscription for general public offering   

2024.03.14

   Share subscription price payment/refund/public notice of allocation   

2024.03.26

   Scheduled date of listing of new shares   

 

45


Note 1) In case where the FSS, in the course of its examination of the related registration statement, requests correction of descriptions or other measures to be taken in respect of the related registration statement, the timetables described herein may be changed. The effectiveness of the related registration statement does not confirm that the descriptions herein are true or correct, or represent the government’s guarantee or approval of the value of the subject securities. Accordingly, the responsibility for the investment in the subject securities falls solely on the shareholders and investors.

Note 2) The above schedule may be changed depending upon consultation with relevant parties.

 

  2.

Method of Public Offering

[Method of public offering: an offering of Share Rights to existing shareholders followed by a general public offering of unsubscribed shares, if any]

 

Subscription

  

Number of shares (%)

  

Remarks

Subscription by the ESOA    28,436,860 shares (20.0%)   

–   Allocation pursuant to Article 165-7(1)2 of the Financial Investment Services and Capital Markets Act and Article 38(1) of the Framework Act on Labor Welfare

 

–   Subscription date for the ESOA: March 6, 2024 (one (1) day)

Subscription by existing shareholders (subscription by holders of Share Rights)    113,747,440 shares (80.0%)   

–   Ratio of allocation of new shares per one (1) existing share held (the “Per Share Allocation Ratio”): 0.3178939325 share

 

–   Record date for allocation of Share Rights: January 26, 2024

 

–   Date for subscription by existing shareholders: March 6 – March 7, 2024 (two (2) days)

 

–   Subscription will be available up to the number of the Share Rights held by existing shareholders. For each share owned by any existing shareholder listed in the shareholders’ registry as of the Record Date, Share Rights for one (1) share, multiplied by the Per Share Allocation Ratio, will be allocated to such existing shareholder.

Oversubscription      

–   Oversubscription under Article 165-6(2) of the Financial Investment Services and Capital Markets Act

 

–   Oversubscription ratio: 0.2 share per one (1) allocated new share

 

–   Oversubscription is also available for a person who holds Share Rights as a result of purchasing the Share Rights.

Subscription through public offering (including subscription by high-yield and high-risk investment trusts, etc.)      

–   This subscription is available with respect to fractional shares and unsubscribed shares following subscriptions by the ESOA and by existing shareholders.

 

–   Subscription date for public offering of unsubscribed shares: March 11, 2024 – March 12, 2024 (two (2) days)

  

 

  
Total    142,184,300 shares (100.0%)   
  

 

  

Note 1) This paid-in capital increase will proceed by way of rights offering to existing shareholders, followed by a public offering of unsubscribed shares, if any. Any fractional shares and unsubscribed shares following subscriptions by members of the ESOA and existing shareholders will be preferentially allocated to persons making oversubscription. Any subsequent unsubscribed shares resulting thereafter will be offered to general public for subscription.

 

46


Note 2) 28,436,860 shares, representing 20% of the total number of new shares scheduled to be issued (142,184,300 shares), will be preferentially offered to the ESOA, pursuant to Article 165-7 (Special Cases concerning Allocation of Stocks to Members of Employee Stock Ownership Associations) of the Financial Investment Services and Capital Markets Act and Article 38(1) of the Framework Act on Labor Welfare. However, any fraction of less than one (1) full share shall be rounded down.

Note 3) The individual subscription limit for an existing shareholder shall be calculated by multiplying (x) the number of shares held of record by such shareholder as listed in the shareholders’ registry as of the Record Date for allocation of new shares by (y) the Per Share Allocation Ratio (0.3178939325); provided that any fraction of less than one (1) full share shall be rounded down. However, such Per Share Allocation Ratio may be subject to change as a result of any change in the number of treasury shares held directly by the Company or indirectly through a trust prior to the Record Date.

Note 4) Any holder of Share Rights (i) may make a subscription up to the number of Share Rights held by such holder and (ii) may make an oversubscription up to the maximum limit equal to the number of shares multiplied by the oversubscription ratio (20%). However, any fraction of less than one (1) full share shall be rounded down.

 

  (i)

Maximum number of shares available for subscription = Maximum number of shares available for subscription with Share Rights + Maximum number of shares available for oversubscription

 

  (ii)

Maximum number of shares available for subscription with Share Rights = Number of Share Rights in possession

 

  (iii)

Maximum number of shares available for oversubscription = Maximum number of shares available for subscription with Share Rights x Oversubscription ratio (i.e., 20%)

Note 5) The unsubscribed shares and fractional shares resulting from subscription by the ESOA and subscription by existing shareholders (including oversubscription) shall be offered to the general public in Korea as follows; provided that, pursuant to Article 9(2)3 of the Regulation on Securities Underwriting Business, Etc., 5% of the publicly offered shares will be allocated to high-yield and high-risk investment trusts, etc. and the remaining 95% of such shares will be allocated to individual subscribers and institutional investors without distinction. However, in case of shares not being fully subscribed, the remainder thereof is to be allocated to a group that subscribed in excess.

 

  (i)

Stage 1: In case where, as a result of subscription for public offering, the number of shares subscribed in the public offering is in excess of number of shares allocated for the public offering, if the number of shares to be allocated to a subscriber under the subscription competition ratio for the public offering is a decimal number, the figure in the first decimal place is rounded down if it is 5 or lower, and is rounded up if it is 6 or higher, so that the number of remaining shares after the allocation can be minimized under the pro-rata allocation. However, a subscription competition rate and allocation for such 5% of the publicly offered shares with respect to a high-yield and high-risk investment trust and such remaining 95% of the publicly offered shares for individual investors and institutional investors (including a collective investment manager) are separately calculated and allocated. In such case, if shares are not being fully subscribed, the remainder of which is to be allocated to a group that subscribed in excess.

 

  (ii)

Stage 2: After allocation at stage 1 above, the unsubscribed shares are allocated consecutively from the largest subscriber, but if the number of shares subscribed by the largest subscribers of the same rank is greater than the number of unsubscribed shares, the Joint Lead Managers will randomly allocate them through a lottery method.

Note 6) Any shares remaining unsubscribed after the public offering and allocation thereunder will be subscribed by the individual Joint Lead Managers (for their own accounts) in the number of shares for mandatory individual subscription, up to the maximum mandatory number of subscription shares of each of them.

Note 7) However, under Article 9(2)5 of the Regulation on Securities Underwriting Business, Etc., if the total number of the shares to be allocated to high-yield and high-risk investment trusts and individual subscribers is not more than 5,000 shares (based on the par value per share of KRW 5,000), or if the total public offering amount is not more than KRW 100 million, the Joint Lead Managers may subscribe therefor for their own accounts in accordance with their respective subscription ratios without allocating the same to general public subscribers.

 

LOGO Article 165-7 (Special Cases concerning Allocation of Stocks to Members of Employee Stock Ownership Associations) of the Financial Investment Services and Capital Markets Act

 

47


  (1)

Where a stock-listed corporation prescribed by Presidential Decree or a corporation intending to list its stock certificates on the securities market prescribed by Presidential Decree (hereafter in this Article referred to as “relevant corporation”) intends to publicly offer or sell its stocks, it shall allocate 20 percent of the total number of stocks subject to the public offering or sale to members of an employee stock ownership association (referring to members of an employee stock ownership association established under the Framework Act on Labor Welfare; hereinafter the same shall apply) of the relevant corporation, notwithstanding Article 418 of the Commercial Act: Provided, That this shall not apply in any of the following cases: <Amended on Jun. 8, 2010; Apr. 5, 2013; May 28, 2013>

 

 

  1.

Where a corporation prescribed by Presidential Decree, from among foreign-capital invested companies as defined in the Foreign Investment Promotion Act, issues stocks;

 

 

  2.

Other cases prescribed by Presidential Decree where it is impracticable for the relevant corporation to preferentially allocate its stocks to members of an employee stock ownership association.

 

 

  (2)

Paragraph (1) shall not apply where the number of stocks held by members of an employee stock ownership association exceeds 20 percent of the total number of stocks that have been issued and are newly issued.

 

 

  (3)

Where new stocks are issued in the manner provided for in Article 165-6 (1)1, Article 419(1) through (3) of the Commercial Act shall not apply to the portion allocated to members of an employee stock ownership association pursuant to paragraph (1). <Newly Inserted on May 28, 2013>

 

 

  (4)

The Financial Services Commission may determine and publicly notify standards necessary for the allocation of stocks to members of an employee stock ownership association under paragraph (1) and the disposal thereof, etc. <Amended on May 28, 2013>

 

[This Article newly inserted on February 3, 2009] [Title to the Article amended on April 5, 2013]

LOGO Article 176-9 (Exceptions, etc. to Special Cases concerning Allocation of Stocks to Members of Employee Stock Ownership Association) of the Enforcement Decree of the Financial Investment Services and Capital Markets Act

 

  (1)

“Stock-listed corporation prescribed by Presidential Decree” in the main clause, with the exception of the subparagraphs, of Article 165-7(1) of the Act means a corporation whose stock certificates are listed on a securities market established by the Korea Exchange for the trading of securities prescribed in the subparagraphs of Article 4(2) of the Act and determined and publicly notified by the Financial Services Commission (hereinafter referred to as “marketable securities market”). <Newly Inserted on Aug. 27, 2013>

 

 

  (2)

“Securities market prescribed by Presidential Decree” in the main clause, with the exception of the subparagraphs, of Article 165-7(1) of the Act means a marketable securities market. <Newly Inserted on Aug. 27, 2013>

 

 

  (3)

“Cases prescribed by Presidential Decree” in Article 165-7 (1)2 of the Act means any of the following cases: <Amended on Dec. 7, 2010, and Aug. 27, 2013>

 

 

  1.

Where a stock-listed corporation (referring to a corporation whose stock certificates are listed on a marketable securities market) makes a public offering of new or outstanding stocks and the aggregate of the subscription price of a member of the employee stock ownership association (referring to the member of an employee stock ownership association established under the Framework Act on Labor Welfare; hereafter the same shall apply in this Article) and the acquisition value (if the acquisition value falls below its par value, referring to the par value; hereafter the same shall apply in this Article) of stocks of that corporation acquired for 12 months before the subscription pursuant to the main clause, with the exception of the subparagraphs, of Article 165-7(1) of the Act exceeds the total amount of wages (referring to wages subject to income tax) paid for 12 months immediately before the subscription from the corporation;

 

 

48


  2.

Where all of the following requirements are met:

 

 

  (a)

It shall be impracticable for a member of an employee stock ownership association to subscribe to up to 20/100 of the total number of stocks, in light of the size of stocks publicly offered or sold, the ability of members of an employee stock ownership association to pay the stocks, and other grounds determined and publicly notified by the Financial Services Commission;

 

 

  (b)

It shall announce in writing to the corporation pursuant to the main clause, with the exception of the subparagraphs, of Article 165-7(1) of the Act, the intent that an employee stock ownership association under the Framework Act on Labor Welfare intends to acquire stocks subscribed or sold at less than the ratio specified in item (a) according to a resolution adopted at the general meeting of employee stock ownership association members;

 

 

  (c)

The corporation referred to in the main clause, with the exception of the subparagraphs, of Article 165-7 (1) of the Act, shall give written consent to the allocation of stocks in accordance with the allocation rate indicated under item (b) of this subparagraph.

 

 

  (4)

The number of stocks held by members of an employee stock ownership association under Article 165-7 (2) of the Act shall be calculated based on the stocks, the entry of which has been changed in the name of the representative of the employee stock ownership association on the register of shareholders on the day immediately preceding the date the registration statement of public offering or sale of securities is filed with the Financial Services Commission pursuant to Article 119(1) of the Act (if the registration statement is not filed because a universal shelf registration statement referred to in the former part of Article 119(2) of the Act has been filed, the date the resolution of the general meeting of shareholders or the board of directors is made): Provided, That in cases of stocks electronically registered (referring to electronic registration under subparagraph 2 of Article 2 of the Act on Electronic Registration of Stocks and Bonds; hereinafter the same shall apply) via a trustee referred to in Article 43(1) of the Framework Act on Labor Welfare (hereafter in this paragraph referred to as “trustee”) and stocks deposited to the Securities Depository by a trust company referred to in Article 43(1) of the Framework Act on Labor Welfare, the number shall be calculated based on the investors’ account book under Article 310(1) of the Act. <Amended on Dec. 7, 2010; Aug. 27, 2013; Jun. 25, 2019>

 

[This Article newly inserted on February 3, 2009] [Title to the Article amended on July 5, 2013]

 

Basis for the calculation of Per Share Allocation Ratio

 

Category    

   Details  

A. Common shares

     357,815,700 shares  

B. Preferred shares

     —   

C. Total number of shares issued (A + B)

     357,815,700 shares  

D. Treasury shares + treasury share trust

     —   

E. Total number of shares issued excluding treasury shares (C – D)

     357,815,700 shares  

F. Number of new shares issued in the paid-in capital increase

     142,184,300 shares  

G. Capital increase ratio (F / C)

     39.74

H. Number of shares allocated to ESOA (F × 20%)

     28,436,860 shares  

I. Number of shares allocated to existing shareholders (F – H)

     113,747,440 shares  

J. Number of shares allocated per one (1) share held by existing shareholders (I / E)

     0.3178939325 share  

 

49


  3.

Method of Determination of Public Offering Price

Due to the abolishment of the procedures for determining the subscription price for shares offered through a rights offering to existing shareholders under Article 5-18 of the Regulations on Issuance, Public Disclosure, etc. of Securities of Korea, the Company may determine the subscription price per share in any manner at its discretion. However, due to concerns of market disruption and in consideration of existing practices, the Company has elected to determine the subscription price per common share for the Capital Increase by partially applying Article 57 of the Regulations on Issuance, Public Disclosure, etc. of Securities of Korea.

 

  (1)

Estimated Subscription Price. The Estimated Subscription Price shall be calculated by using the formula set forth immediately below this paragraph. The Estimated Subscription Price shall apply the Discount Rate of 20% to the Estimated Base Share Price, comprising the lower of (a) the arithmetic mean of (x) VWAP for the one-month period ending December 15, 2023, which is the trading date immediately preceding the date of the resolution of the Company’s Board of Directors to approve the Capital Increase, (y) the VWAP for the one-week period ending December 15, 2023 and (z) the closing price of the Company’s common shares on December 15, 2023, in each case calculated retroactively, and (b) the closing price of the Company’s common shares on December 15, 2023; provided, however, that (i) if the price determined as described above includes an amount less than the quotation unit of the Company’s common shares, such amount shall be rounded up to the nearest quotation unit, and (ii) if the price determined as above is equal to or less than the par value of the Company’s common shares, the subscription price shall be the par value of the Company’s common shares.

 

  *

Estimated Subscription Price = [Estimated Base Share Price x (1 – Discount Rate)] / [1 + (Capital Increase Ratio** x Discount Rate)]

 

  **

Capital Increase Ratio = number of new shares to be issued / total number of issued and outstanding shares prior to the capital increase

 

  (2)

First Indicative Subscription Price: The first indicative subscription price per common share (the “First Indicative Subscription Price”) shall be calculated by using the formula set forth immediately below this paragraph and applying the Discount Rate of 20% to the first indicative base share price (the “First Indicative Base Share Price”), which shall be the lower of (a) the arithmetic mean of (x) the VWAP for the one-month period ending January 23, 2024, which is the third trading date immediately preceding the Record Date, (y) the VWAP for the one-week period ending January 23, 2024, and (z) and the closing price of the Company’s common shares on January 23, 2024, in each case calculated retroactively, and (b) the closing price of the Company’s common shares on January 23, 2024; provided, however, that (i) if the price determined as described above includes an amount less than the quotation unit of the Company’s common shares, such amount shall be rounded up to the nearest quotation unit, and (ii) if the price determined as above is equal to or less than the par value of the Company’s common shares, the subscription price shall be the par value of the Company’s common shares.

 

  *

First Indicative Subscription Price = [First Indicative Base Share Price x (1 – Discount Rate)] / [1 + (Capital Increase Ratio x Discount Rate)]

 

  (3)

Second Indicative Subscription Price: The second indicative subscription price per common share (the “Second Indicative Subscription Price”) shall be calculated by using the formula set forth immediately below this paragraph and applying the Discount Rate of 20% to the second indicative base share price (the “Second Indicative Base Share Price”), which shall be the lower of (a) the arithmetic mean of (x) the VWAP for the one-week period ending the third trading date immediately preceding the first day of subscription by existing shareholders and (y) the closing price of the Company’s common shares on the third trading date immediately preceding the first day of subscription by existing shareholders, each calculated retroactively, and (b) the closing price of the Company’s common shares on the third trading date immediately preceding the first day of subscription by existing shareholders; provided, however, that (i) if the price determined as described above includes an amount less than the quotation unit of the Company’s common shares, such amount shall be rounded up to the nearest quotation unit, and (ii) if the price determined as above is equal to or less than the par value of the Company’s common shares, the subscription price shall be the par value of the Company’s common shares.

 

50


  *

Second Indicative Subscription Price = Second Indicative Base Share Price x (1 – Discount Rate)

 

  (4)

Definitive Subscription Price: The definitive subscription price per common share (the “Definitive Subscription Price”) shall be the lower of the First Indicative Subscription Price and the Second Indicative Subscription Price; provided, however, that pursuant to Article 165-6 of the Financial Investment Services and Capital Markets Act of Korea and Article 5-15-2 of the Regulations on Issuance, Public Disclosure, etc. of Securities of Korea, if the lower of the First Indicative Subscription Price and the Second Indicative Subscription Price is less than the price obtained by applying a discount rate of 40% to the definitive base share price (the “Definitive Base Share Price”), which is equal to the VWAP for the period from the fifth trading date immediately preceding the first day of subscription by existing shareholders to the third trading date immediately preceding the first day of subscription by existing shareholders, calculated retroactively, the Definitive Subscription Price will be the price calculated by applying a discount rate of 40% to the Definitive Base Share Price. Furthermore, (i) if the price determined as described above includes an amount less than the quotation unit of the Company’s common shares, such amount shall be rounded up to the nearest quotation unit, and (ii) if the price determined as above is equal to or less than the par value of the Company’s common shares, the subscription price shall be the par value of the Company’s common shares.

 

  *

Definitive Subscription Price = Max {Min [First Indicative Subscription Price per New Share, Second Indicative Subscription Price per New Share], 60% of the Definitive Base Share Price}

Note: the subscription price for the subsequent public offering in Korea of shares that were not subscribed pursuant to the Share Rights offering will be the same as the Definitive Subscription Price.

 

  4.

Matters Regarding Offering (or Sale) Procedures, Etc.

A. Terms of offering or sale

 

         (Unit: KRW, Shares)
   
Category      Details
Number of shares offered or sold   142,184,300
Offering or sale price per share    Estimated  

   Definitive   KRW 9,090
Total offering or sale amount    Estimated  

   Definitive   KRW 1,292,455,287,000

 

51


Units of subscription   

1) ESOA: The subscription unit for members of the ESOA is one (1) share. The individual subscription limit for members of the ESOA is the number of shares allocated to the ESOA.

 

2) Existing shareholders (holders of the Share Rights): The subscription unit for each such person is one (1) share. The individual subscription limit for an existing shareholder shall be the sum of (i) the Share Rights held, and (ii) shares available for the oversubscription (0.2 share for each unit of the Share Rights held) (to be rounded down for fractions of less than one share).

 

3) Public offering: The minimum subscription unit for general public subscribers is ten (10) shares, and subscription of more than 10 shares shall be subject to the table below. The subscription limit for general public subscribers is up to 100% of the “shares allocated for public offering”, and there shall be deemed to have been no subscription for any shares that exceed the subscription limit.

 

 

 

 

   Range   

Units of

subscription

 
   From (including) 10 shares    To (including) 100 shares      10 shares  
   From (not including) 100 shares    To (including) 500 shares      50 shares  
   From (not including) 500 shares    To (including) 1,000 shares      100 shares  
   From (not including) 1,000 shares    To (including) 5,000 shares      500 shares  
   From (not including) 5,000 shares    To (including) 10,000 shares      1,000 shares  
   From (not including) 10,000 shares    To (including) 50,000 shares      5,000 shares  
   From (not including) 50,000 shares    To (including) 100,000 shares      10,000 shares  
   From (not including) 100,000 shares    To (including) 500,000 shares      50,000 shares  
   From (not including) 500,000 shares    To (including) 1,000,000 shares      100,000 shares  
   From (not including) 1,000,000 shares    To (including) 5,000,000 shares      500,000 shares  
   From (not including) 5,000,000 shares    To (including) 10,000,000 shares      1,000,000 shares  
   From (not including) 10,000,000 shares    To (including) 50,000,000 shares      2,000,000 shares  
   For more than 50,000,000 shares      5,000,000 shares  
                    
Subscription period    ESOA    Start date      March 6, 2024  
   End date      March 6, 2024  
   Existing shareholders (holders of Share Rights)    Start date      March 6, 2024  
   End date      March 7, 2024  
   General public offering or sale    Start date      March 11, 2024  
   End date      March 12, 2024  
Deposit for subscription    ESOA     

100% of the
subscribed
amount
 
 
 
   Existing shareholders (holders of Share Rights)     

100% of the
subscribed
amount
 
 
 
   Oversubscription     

100% of the
subscribed
amount
 
 
 
   General public offering or sale     

100% of the
subscribed
amount
 
 
 
Payment due (refund) date      March 14, 2024  
Base date regarding distributions on new shares (date of settlement of accounts)      January 1, 2024  

Note 1) In case where the FSS, in the course of its examination of the related registration statement, requests correction of descriptions or other measures to be taken in respect of the related registration statement, the timetables described herein may be changed. The effectiveness of the related registration statement does not confirm that the descriptions herein are true or correct, or represent the government’s guarantee or approval of the value of the subject securities. Accordingly, the responsibility for the investment in the subject securities falls solely on the shareholders and investors.

Note 2) The above timetable may be changed depending upon consultation with relevant parties.

 

52


B. Procedure for offering or sale

 

(1)

Date and method of public notice

 

Category   

  

Date of public notice

  

Method of public notice

Public notice of issuance of new shares and Record Date    December 18, 2023   

Website of the Company

(http://www.lgdisplay.com)

Public notice of Definitive Subscription Price    March 4, 2024   

Website of the Company

(http://www.lgdisplay.com)

Public notice of subscription for general public offering of unsubscribed shares    March 8, 2024   

Website of the Company

(http://www.lgdisplay.com)

Website of Korea Investment & Securities Co., Ltd.

(http://securities.koreainvestment.com)

Website of NH Investment & Securities Co., Ltd.

(http://www.nhqv.com)

Website of KB Securities Co., Ltd.

(http://www.kbsec.com)

Website of Daishin Securities Co., Ltd.

(http://www.daishin.com)

Public notice of allocation for general public offering of unsubscribed shares    March 14, 2024   

Website of the Company

(http://www.lgdisplay.com)

Website of Korea Investment & Securities Co., Ltd.

(http://securities.koreainvestment.com)

Website of NH Investment & Securities Co., Ltd.

(http://www.nhqv.com)

Website of KB Securities Co., Ltd.

(http://www.kbsec.com)

Website of Daishin Securities Co., Ltd.

(http://www.daishin.com)

Note) With respect to refund of excess deposit after the subscription, a notice thereof will be posted at the websites of the Joint Lead Managers in lieu of an individual notice thereof.

 

(2)

Subscription method

 

 

All subscriptions by members of the ESOA shall be made at the head office or branches of Daishin Securities Co., Ltd., one of the Joint Lead Managers, in the name of the head of the ESOA.

 

 

Subscription by existing shareholders (subscription by holders of Share Rights): An existing shareholder who deposited its share certificates with a securities company (i.e., an existing “beneficial shareholder”; hereinafter to be referred to as a “general shareholder”) may make its subscription of new shares at the head office or any branch of such securities company or of any of the Joint Lead Managers. On the other hand, an existing shareholder who holds share certificates in special accounts of the Company’s transfer agent without having deposited them with a securities company (i.e., a “registered shareholder”; hereinafter to be referred to as a “special account holder”), may subscribe at the head office or branches of each Joint Lead Manager upon submitting a personal identification, together with the new share allocation notice. At the time of subscription, each subscriber shall complete two copies of subscription form by filling in all required information, and submit it together with the deposit for subscription.

 

53


The electronic securities system has been implemented in Korea since September 16, 2019, and listed shares of listed corporations, for which conversion into electronic securities was mandatory, were converted into electronic securities on the effective date of the electronic securities system. Before the implementation of the electronic securities system, shares of beneficial shareholders were deposited in a securities company, but after the enforcement of such system, such shares were collectively converted into electronic securities in the accounts of the securities company, and shares held by existing registered shareholders are now issued in special accounts opened by the transfer agent and managed for each holder.

 

For this capital increase, the Share Rights will be issued as electronic securities. Share Rights allotted for shares held by shareholders in a securities company brokerage account (i.e., shares held by existing “beneficial shareholders”) are issued and received in the account of the relevant securities companies, and Share Rights allocated for shares managed in a special account of the transfer agent (i.e., shares held by “registered shareholders”) are issued to each holder in a special account within the transfer agent.

 

Once “special account holders” (i.e., existing “registered shareholders”) apply to the transfer agent for the transfer of Share Rights from a “special account” to a “general electronic registration account (i.e., a securities company brokerage account)”, then they are able to participate in the subscription for this capital increase or trade the Share Rights.

 

“Special account holders” (i.e., existing “registered shareholders”) can also subscribe for this capital increase by directly subscribing at the head office or branches of the Joint Lead Managers without transferring Share Rights to the “general electronic registration account” (i.e., a securities company brokerage account). However, please note that the purchase and sale of Share Rights is only possible after applying to the transfer agent for the transfer of Share Rights from a “special account” to a “general electronic registration account” (i.e., a securities company brokerage account).

 

Act on Electronic Registration of Stocks and Bonds

 

Article 29 (Establishment and Management of Special Accounts)

 

(1)   Where an issuer electronically registers stocks, etc. for which certificates are already issued pursuant to Articles 25 through 27, he/she shall, before applying for new electronic registration under Article 25(1), establish an electronic registration account (hereinafter referred to as “special account”) in a transfer agent or an institution prescribed by Presidential Decree (hereafter referred to as “transfer agent, etc.”), in the name of the holders or pledgees of the stocks, etc. entered in the stockholders’ register as at the business day immediately before the base date, for the holders or pledgees of the stocks, etc. who fails to announce it under Article 27(1)2 or to submit stock certificates, etc.

 

54


(2)   The stocks, etc. electronically registered in the electronic registration account book prepared pursuant to Article 22(2) or 23(2) (hereafter referred to as “special account book” in this Article) shall not be electronically registered under Articles 30 through 32 when a special account is established pursuant to paragraph (1); provided that in any of the following cases, this shall not apply:

 

1. Where a person who is not a title holder of the relevant special account already becomes a holder or pledgee of stocks, etc. before the stocks, etc. are electronically registered in the special account book, submits (referring to submission of original copy and certified copy of judgment for nullification of the relevant stocks, etc. if it is impracticable to submit stock certificates, etc.; hereafter the same shall apply in subparagraph 2 or 3) stock certificates, etc., on which right to the stocks, etc. is indicated, to the issuer and intends to make electronic registration of the stocks, etc. in an electronic registration account in his/her name by transfer between accounts pursuant to Article 30 (where a pledge is established over the relevant stocks, etc., limited to any of the following cases);

 

(a) Where pledge established over the relevant stocks, etc. is canceled;

 

(b) Where a pledgee of the relevant stocks, etc. agrees to the transfer of the stocks, etc. to another electronic registration account in the name of the holder other than the special account;

 

2. Where a holder who is the title holder of the relevant special account submits stock certificates, etc. on which a right to electronically registered stocks, etc. is indicated and intends to transfer the stocks, etc. to another electronic registration account in his/her name other than the special account pursuant to Article 30 (where pledge is established on the relevant stocks, etc., limited to cases falling under subparagraph 1);

 

3. Where a pledgee who is the title holder of the relevant special account submits stock certificates, etc. to the issuer, and intends to transfer the stocks, etc. to an electronic registration account in his/her name other than the special account pursuant to Article 30;

 

4. Other cases prescribed by Presidential Decree where no damage is likely to be inflicted on the interest of a right holder of stocks, etc. that are electronically registered in the special account.

 

(3)   No one shall apply for electronic registration of transfer between accounts under Article 30 in order to transfer stocks, etc. to a special account; provided that this shall not apply where an issuer who establishes a special account pursuant to paragraph (1) files an application due to a reason prescribed by Presidential Decree.

 

(4)   Where a transfer agent, etc. establish a special account on behalf of an issuer pursuant to paragraph (1), the transfer agent, etc. need not ascertain the real name of the person to be electronically registered in the special account book as a holder or pledgee, notwithstanding Article 3 of the Act on Real Name Financial Transactions and Confidentiality.

 

Oversubscription: Only those who have subscribed for new shares by exercising their Share Rights may subscribe additionally for 20% of the maximum number of the shares that may be subscribed for pursuant to their Share Rights. However, in such case, any fraction of less than a full share shall not be available for subscription.

 

  a.

Maximum number of shares available for subscription (“oversubscription limit”) = Maximum number of shares available for subscription with Share Rights + Maximum number of shares available for oversubscription

 

  b.

Maximum number of shares available for subscription with Share Rights = Number of Share Rights in possession

 

  c.

Maximum number of shares available for oversubscription = Maximum number of shares available for subscription with Share Rights x oversubscription ratio (i.e., 20%)

 

55


A subscriber for public offering shall be a person subscribing with his or her legal name in accordance with the Act on Real Name Financial Transactions and Confidentiality, and shall subscribe by presenting a personal identification, and submitting a prescribed subscription form and subscription deposits, to the relevant subscription location. In the case of a subscriber for public offering, multiple subscriptions at the respective subscription locations are permissible, but double subscriptions at one subscription location are not permitted. With respect to subscribers which are collective investment vehicles, other than a collective investment vehicle managed by a different management entity, multiple subscriptions at one subscription location are not permissible. With respect to subscription by a high-yield and high-risk investment trust, it shall, at the time of subscription, submit, to the relevant subscription location, documents confirming that it satisfies the requirements under Article 2, subparagraph 18, of the Regulation on Securities Underwriting Business, Etc. and does not fall under Article 9(4) thereof, together with documents showing its total assets.

 

Subscription shall be made in the unit of the subscribed shares. There shall be deemed to have been no subscription for the portion of the shares that exceeds the oversubscription limit per person, and the relevant officer responsible for the handling of subscription matters shall return the difference to the relevant subscriber by the payment due date, with no interest payable for the period from receipt of the subscription price.

 

Investors who wish to subscribe to the proposed capital increase (except for professional investors as set forth in Article 9(5) of the Financial Investment Services and Capital Markets Act and those to whom the issuer is exempted from delivering the prospectus pursuant to Article 132 of the Enforcement Decree thereof) shall be provided with the prospectus and sign a document confirming the same.

 

Subscription limit

 

  a.

The subscription unit for members of the ESOA is one (1) share, and the subscription limit for them is the number of shares allocated to the ESOA.

 

  b.

The individual subscription limit for an existing shareholder (i.e., a holder of the Share Rights) shall be the sum (to be rounded down for fractions of less than one share) of (i) the number of Share Rights (to be rounded down for fractions of less than one share) calculated by multiplying (a) the number of shares registered in the shareholders’ registry as of the Record Date by (b) the Per Share Allocation Ratio (0.3178939325), and (ii) the number of shares available for the oversubscription (0.2 share for each unit of the Share Rights held) (to be rounded down for fractions of less than one share). However, the Per Share Allocation Ratio may be subject to change as a result of any change in the number of treasury shares held directly by the Company or indirectly through a trust prior to the Record Date.

 

  c.

The subscription limit applicable to subscribers for general public offering shall be within the total number of shares allocated for the general public offering in Korea, and there shall be deemed to have been no subscription for any shares that exceed the subscription limit.

 

Other matters

 

  a.

When a subscriber makes multiple subscriptions in the allocation for public offering, the subscriber will be deemed not to have subscribed for any of the subscriptions. However, if an existing shareholder participates in public offering after subscribing for the number of shares allocated in accordance with the Per Share Allocation Ratio, it will not be deemed to be a prohibited multiple subscription.

 

  b.

For the portion of the subscription that exceeds the subscription limit per person, it is considered that there is no subscription.

 

  c.

Any subscriber must subscribe with his or her legal name in accordance with the Act on Real Name Financial Transactions and Confidentiality.

 

56


  d.

Under Article 180-4 of the Financial Investment Services and Capital Markets Act and Article 208-4(1) of the Enforcement Decree of the Financial Investment Services and Capital Markets Act, if a person conducts a short sale of shares issued by the Company or entrusts such short sale from December 19, 2023 to February 29, 2024, such person may not subscribe in the present offering (or sale), and any acquisition of shares in violation thereof shall be subject to penalty pursuant to Article 429-3(2) of the Financial Investment Services and Capital Markets Act. However, acquisition of shares may be permitted as an exception if it falls under Article 208-4(2) of the Enforcement Decree of the Financial Investment Services and Capital Markets Act and Article 6-34 of the Regulation on Financial Investment Business and does not impede the establishment of a fair offering (or sale) price.

 

As exception, acquisition of shares through offering (sale) shall be permitted in any of the following cases:

 

①   During the short sale period in which the acquisition of shares through offering (sale) is prohibited, a larger number of shares than the total number of shares ordered for short sale is purchased in the form of a transaction by price competition (limited to those purchased during the trading hours of the regular market as of the date of the execution of a sale and purchase agreement).

 

②   A short sale of a particular stock is conducted or an order for a short sale is entrusted for the purpose of liquidity providing and market making as defined under the Securities Market Business Regulation or the Derivatives Market Business Regulation of the Korea Exchange.

 

③   An independent trading unit* (within the same entity) which has not participated in a short sale or entrusted a short sale order during a short sale period in which the acquisition of shares through offering (sale) was prohibited is acquiring shares through an offering (sale).

 

*   A trading unit that satisfies requirements of making its own independent decisions and using different securities account pursuant to Article 6-30(5) of the Regulation on Financial Investment Business.

 

(3)

Subscription locations

 

Subscription by   

  

Subscription locations

  

Subscription date

ESOA    Head office or branches of Daishin Securities Co., Ltd., one of the Joint Lead Managers    March 6, 2024
Existing shareholders (holders of Share Rights)    Special account holders (existing “registered shareholders”)    Head offices or branches of the Joint Lead Managers    March 6, 2024 to March 7, 2024
   General shareholders (existing “beneficial shareholders”)    1) Head office or branches of the relevant securities company in which the shares of LG Display Co., Ltd. are on deposit as of the Record Date; or 2) head offices or branches of the Joint Lead Managers
Subscription for public offering (including subscription by high-yield and high-risk investment trusts)    Head offices or branches of the Joint Lead Managers    March 11, 2024 to March 12, 2024

 

(4)

Method of allocation based on subscription results

 

ESOA

28,436,860 shares, representing 20% of the total number of new shares scheduled to be issued (142,184,300 shares), will be preferentially offered to the ESOA, pursuant to Article 165-7 of the Financial Investment Services and Capital Markets Act.

 

57


Existing shareholders

The number of shares (i.e., subscription limit) to be allocated to any shareholder registered in the Company’s shareholders’ registry as of 18:00 of the Record Date (scheduled to be January 26, 2024) (any such shareholder, “existing shareholder”) shall be the number calculated by multiplying the number of shares held by existing shareholder by 0.3178939325 share (provided that any fraction of less than one (1) full share resulting therefrom shall be rounded down). The number of shares subscribed for will be allocated within the above subscription limit. However, the Per Share Allocation Ratio may be subject to change as a result of any change in the number of treasury shares held directly by the Company or indirectly through a trust prior to the Record Date.

 

Allocation for oversubscription

In case of unsubscribed shares following the subscriptions by the ESOA and existing shareholders (holders of the Share Rights), such unsubscribed shares shall be allocated in proportion to the numbers of shares for which oversubscription was made (oversubscription ratio: 0.2 share per allocated new share) by the existing shareholders (holders of Share Rights); provided, however, that any fraction of less than one (1) full share resulting therefrom shall be rounded down and will not be allocated, and provided, further, that 100% will be allocated if the number of shares for which oversubscription was made is less than the number of unsubscribed shares.

 

  a.

Maximum number of shares available for subscription (i.e., oversubscription limit) = Maximum number of shares available for subscription with Share Rights + Maximum number of shares available for oversubscription

 

  b.

Maximum number of shares available for subscription with Share Rights = Number of Share Rights in possession

 

  c.

Maximum number of shares available for oversubscription = Maximum number of shares available for subscription with Share Rights x oversubscription ratio (i.e., 20%)

 

Subscription for public offering in Korea

The unsubscribed shares and fractional shares arising as a result of subscription by the ESOA, subscription by existing shareholders, and oversubscription, as noted above, will be offered by the Joint Lead Manager to the general public in Korea as follows; provided that, pursuant to Article 9(2)3 of the Regulation on Securities Underwriting Business, Etc., 5% of the publicly offered shares will be allocated to high-yield and high-risk investment trusts, with the remaining 95% of such shares being allocated to individual subscribers and institutional investors without distinction. A subscription competition rate and allocation for such 5% of the publicly offered shares for high-yield and high-risk investment trusts and such remaining 95% thereof for individual subscribers and institutional investor shall be separately calculated and allocated. However, pursuant to Article 9(3) of the Regulation on Securities Underwriting Business, Etc., in case of shares not being fully subscribed, the remainder thereof shall be allocated to a group that subscribed in excess.

 

  (i)

When calculating the allocation amount for the public offering in Korea, in relation to the subscription amount of the Joint Lead Managers (which is the number of subscribed shares for which subscriptions were received under the public offering method at the respective subscription locations of the Joint Lead Managers and is calculated individually for the Joint Lead Managers), Joint Lead Managers will apply the “integrated competition ratio” (equal to the total sum of the subscription amounts applied for by the subscribers to the Joint Lead Managers under the public offering method divided by the number of shares allocated for the public offering) to allocate respective amount to the subscribers (“combined allocation”)

 

58


  (ii)

At the time of allocation under public offering, in case where the total subscription amount of the Joint Lead Managers exceeds the number of shares allocated for the public offering, if the number of shares to be allocated to a subscriber under the subscription competition ratio for the public offering is a decimal number, the figure in the first decimal place is rounded down if it is 5 or lower, and is rounded up if it is 6 or higher, so that the number of remaining shares after the allocation can be minimized under the pro-rata allocation. Thereafter, the final remaining shares are allocated consecutively from the largest subscriber, but if the number of shares subscribed by the largest subscribers of the same rank is greater than the final remaining shares, the Joint Lead Managers will randomly allocate them through a lottery method.

 

  (iii)

In the event that the total subscription amount of the Joint Lead Managers is less than the number of shares allocated for the public offering, each of the Joint Lead Managers shall acquire, for its own account, the number of shares mandatory individual subscription. Under Article 2(4) of the stand-by underwriting agreement, the short-subscribed manager’s number of shares for mandatory individual subscription (wherein the “short-subscribed manager” means a company whose subscription amount is less than its maximum number of shares for mandatory individual subscription) is calculated by dividing the number of shares allocated for public offering by the underwriting ratio of the Joint Lead Managers concerned, and the number of shares for which the short-subscribed company is exempt from mandatory individual subscription shall be calculated by distributing the surplus-subscribed manager’s surplus-subscription amount (meaning the portion of its subscription amount in excess of its maximum number of shares for mandatory individual subscription; provided that it shall be at least zero) to the short-subscribed manager. For the purpose of the above, the “surplus-subscribed manager” means a manager whose subscription amount is more than its maximum number of shares for mandatory individual subscription.

 

  (iv)

However, under Article 9(2) of the Regulation on Securities Underwriting Business, Etc., if the total number of the shares to be allocated to high-yield and high-risk investment trusts and general public subscribers is not more than 5,000 shares (based on the par value per share of KRW 5,000), or if the total public offering amount is not more than KRW 100 million, the shares may not be allocated to general public subscribers.

 

(5)

Distribution of the prospectus

 

   

Under Article 124 of the Financial Investment Services and Capital Markets Act, the Company and the Joint Lead Managers have the obligation to deliver the prospectus for the subscription of shares, and all investors who participate in this subscription for paid-in capital increase must receive the prospectus.

 

   

Investors (except for professional investors as set out in Article 9(5) of the Financial Investment Services and Capital Markets Act and those to whom the issuer is exempted from distributing prospectus pursuant to Article 132 of the Enforcement Decree of the Financial Investment Services and Capital Markets Act) who wish to subscribe to the paid-in capital increase must note that they would not be able to participate in the subscription of this paid-in capital increase unless they take steps for confirmation of receipt of the prospectus, etc.

 

   

Investors may express intent to refuse to receive the prospectus in writing, by telephone, telegraph, facsimile, e-mails or similar telecommunications, or other methods prescribed and publicly notified by the Financial Services Commission.

 

59


① Method and date of distribution of prospectus

 

Category                   

  

Distribution Method

  

Distribution Date

Subscribers who are members of the ESOA    Distribution exempted under Article 132 of the Enforcement Decree of the Financial Investment Services and Capital Markets Act    N/A
Subscribers who are existing shareholders   

Distributed through methods 1), 2) and 3) below:

 

1)  by mail delivery

 

2)  Distributed at the head office and branches of each of Korea Investment & Securities Co., Ltd., NH Investment & Securities Co., Ltd., KB Securities Co., Ltd., and Daishin Securities Co., Ltd.

 

3)  Distributed through the website or HTS/MTS of each of Korea Investment & Securities Co., Ltd., NH Investment & Securities Co., Ltd., KB Securities Co., Ltd., and Daishin Securities Co., Ltd.

  

1)  By mail delivery: Can be received prior to the first date of the existing shareholders’ subscription (March 6, 2024)

 

2)  Distribution at the head office and branches of each Korea Investment & Securities Co., Ltd., NH Investment & Securities Co., Ltd., KB Securities Co., Ltd., and Daishin Securities Co., Ltd.: until the last date of subscription (March 7, 2024)

 

3)  Distribution through the website or HTS/MTS of each of Korea Investment & Securities Co., Ltd., NH Investment & Securities Co., Ltd., KB Securities Co., Ltd., and Daishin Securities Co., Ltd.: until the last date of subscription (March 7, 2024)

General public subscribers (including high-yield and high-risk investment trusts)   

Distributed through methods 1) and 2):

 

1)  Distributed at the head office and branches of each of Korea Investment & Securities Co., Ltd., NH Investment & Securities Co., Ltd., KB Securities Co., Ltd., and Daishin Securities Co., Ltd.

 

2)  Distributed through the website or HTS/MTS of each of Korea Investment & Securities Co., Ltd., NH Investment & Securities Co., Ltd., KB Securities Co., Ltd., and Daishin Securities Co., Ltd.

  

1)  Distribution at the head office and branches of each Korea Investment & Securities Co., Ltd., NH Investment & Securities Co., Ltd., KB Securities Co., Ltd., and Daishin Securities Co., Ltd.: until the last date of subscription (March 12, 2024)

 

2)  Distribution through the website or HTS/MTS of each of Korea Investment & Securities Co., Ltd., NH Investment & Securities Co., Ltd., KB Securities Co., Ltd., and Daishin Securities Co., Ltd.: until the last date of subscription (March 12, 2024)

 

ø

Please note that investors would be unable to participate in the subscription of this paid-in capital increase unless they take steps for confirmation of receipt of the prospectus, etc.

 

Procedure for confirmation

 

  a.

Subscriber who receives the prospectus by mail delivery

 

   

In case of a visit to a branch of Joint Lead Manager to subscribe, please fill out a form confirming the receipt of the prospectus before proceeding with the subscription.

 

   

In case of subscription through HTS or MTS, please check the box confirming the download and receipt of the prospectus on the subscription screen before you can proceed with the subscription.

 

   

In the case of subscription by participating in the Share Rights offering to existing shareholders, the existing shareholder can subscribe via phone. Please confirm the existing shareholder’s identity via phone and confirm the receipt of the prospectus before proceeding with the subscription.

 

60


  b.

Subscriber who receives the prospectus by visiting a branch of Joint Lead Manager

 

Please fill out a form confirming the receipt of the prospectus before proceeding with the subscription.

 

  c.

Subscriber who receives the prospectus through the website or HTS/MTS

 

Please put a check in the box confirming the download and receipt of the prospectus on the subscription screen before proceeding with the subscription.

 

Others

 

  a.

For this paid-in capital increase, the prospectus will be mailed to the shareholders registered in the shareholders’ registry after the related registration statement becomes effective. Investors who have not received the prospectus due to a mail return or other reasons can receive the prospectus through a branch visit. Also, the prospectus can be downloaded in the form of an electronic document from the websites of Korea Investment & Securities Co., Ltd., NH Investment & Securities Co., Ltd., KB Securities Co., Ltd. and Daishin Securities Co., Ltd. However, in case of receiving the prospectus in the form of an electronic document, the subscription is permitted only when all the of the requirements Article 124(1) of the Financial Investment Services and Capital Markets Act are satisfied.

 

  b.

Subscription method through a securities company other than Korea Investment & Securities Co., Ltd., NH Investment & Securities Co., Ltd., KB Securities Co., Ltd. and Daishin Securities Co., Ltd. for the Share Rights offering to existing shareholders: Please proceed with the subscription in accordance with subscription methods and regulations of the applicable security company. However, please note that an investor will not be able to participate in the subscription of this paid-in capital increase unless an investor performs procedures for confirmation of receipt of the prospectus, etc.

 

ø

An investor may not participate in the subscription of this paid-in capital increase unless an investor receives the prospectus or expresses the intent to refuse to receive the same in writing or acceptable manner.

 

  ø

Relevant Laws and Regulations

 

Financial Investment Services and Capital Markets Act

Article 9 (Other Definitions)

 

  (5)

The term “professional investor” in this Act means any of the following entities who has an ability to take risks accompanying an investment in light of expertise held in connection with financial investment instruments, the scale of assets owned, etc.: Provided, That when a professional investor prescribed by Presidential Decree gives written notice to a financial investment business entity of its intention to be treated as an ordinary investor, the financial investment business entity shall give consent to the professional investor, unless good cause exists, and the professional investor shall be treated as an ordinary investor if consent is given by the financial investment business entity: <Amended on Feb. 3, 2009>

 

1. The State;

2. The Bank of Korea;

3. Financial institutions prescribed by Presidential Decree;

4. Stock-listed corporations: Provided, That where a stock-listed corporation trades over-the-counter derivatives with a financial investment business entity, it shall be deemed a professional investor where it gives written notice to the financial investment business entity of its intention to be treated as a professional investor;

5. Other entities prescribed by Presidential Decree.

 

61


Article 124 (Fair Use of Investment Prospectus)

 

  (1)

No one shall allow any other person to acquire securities or sell securities to any other person, unless an investment prospectus (referring to a short-form investment prospectus under paragraph (2) 3, if any investor in collective investment securities fails to separately request the delivery of an investment prospectus under Article 123; hereafter in this paragraph and Article 132 the same shall apply) prepared in conformity with Article 123 is delivered to the person (excluding professional investors and those prescribed by Presidential Decree) who intends to acquire the securities after the relevant registration statement becomes effective. In such cases, it shall be deemed that the investment prospectus is delivered at the time the following requirements are fully satisfied, if the investment prospectus is delivered by means of an electronic document under Article 436: <Amended on May 28, 2013>

 

1. The person to whom the electronic document is addressed (hereinafter referred to as “addressee of the electronic document”) shall consent to the delivery of the investment prospectus by means of an electronic document;

2. The addressee of the electronic document shall designate the kind of electronic transmission medium and the place for receiving the electronic document;

3. The addressee of the electronic document shall confirm his or her receipt of the electronic document;

4. The contents of the electronic document shall be identical with those of the investment prospectus in writing.

Enforcement Decree of the Financial Investment Services and Capital Markets Act

Article 11 (Public Offering and Public Sale of Securities)

 

  (1)

In calculating 50 persons pursuant to Article 9 (7) and (9) of the Act, the number of persons who have been invited to subscribe for securities of the same class as the securities in the instant case in any manner other than by public offering or public sale within six months before the public invitation to subscribe shall be aggregated: Provided, That any of the following persons are excluded from such aggregation: <Amended on Oct. 1, 2009; Dec. 7, 2010; Jun. 21, 2013; Aug. 27, 2013; Jun. 28, 2016; Jul. 28, 2016>

 

1. Any of the following professionals:

(a) A professional investor;

(b) Deleted; <Jun. 28, 2016>

(c) An accounting firm established under the Certified Public Accountant Act;

(d) A credit rating company (referring to a company authorized to engage in credit rating business under Article 335-3 of the Act; hereinafter the same shall apply);

(e) A person who provides accounting, advisory services or similar services to the issuer with an officially recognized qualification, such as a certified public accountant, appraiser, attorney-at-law, patent attorney or tax accountant;

(f) Any other person determined and publicly notified by the Financial Services Commission from among professionals who are in a position to have good knowledge of financial standing, business affairs, etc. of the issuer;

 

62


2. Any of the following related persons:

(a) The largest shareholder (referring to the largest shareholder defined in subparagraph 6 of Article 2 of the Act on Corporate Governance of Financial Companies. In this regard, “finance company” shall be construed as “corporation”, and “outstanding stocks (including equity shares; hereinafter the same shall apply)” as “outstanding stocks”; hereinafter the same shall apply) of the issuer and shareholders who hold not less than 5/100 of the total number of outstanding stocks;

(b) Executive officers (including a person referred to in each subparagraph of Article 401-2(1) of the Commercial Act; hereafter the same shall apply in this subparagraph) of the issuer and members of the employee stock ownership association established under the Framework Act on Labor Welfare;

(c) Affiliated companies of the issuer and their executive officers;

(d) Shareholders of an unlisted stock corporation (excluding a corporation that has ever publicly offered or sold its stocks) where the issuer is an unlisted stock corporation;

(e) Executive officers and/or employees of a domestic affiliated company of the issuer, where the issuer is a foreign enterprise established pursuant to the statutes of a foreign country, and sells its stocks to executive officers and/or employees of the domestic affiliated company in accordance with a stock option plan, etc. for improving the welfare of employees;

(f) Promoters of a company, if the company is incorporated by the issuer;

(g) Other related persons, determined and publicly notified by the Financial Services Commission among those who are in a position to have good knowledge of financial standing, business affairs, etc. of the issuer.

Article 132 (Persons Exempt from Issuing Investment Prospectus)

“Those prescribed by Presidential Decree” in the former part of Article 124 (1), with the exception of the subparagraphs, of the Act means persons falling under any of the following subparagraphs: <Amended on Sep. 21, 2013; Sep. 5, 2021; Jan. 5, 2021>

 

  1.

Persons falling under any provision of Article 11(1)1(c) through (f) and items of Article 11(1)2;

 

 

  1-2.

Persons falling under Article 11(2)2 or 3;

 

 

  2.

Persons who expressed their intent to refuse to receive an investment prospectus in writing, by phone, cable, facsimile, e-mails or similar telecommunications, or other methods determined and publicly notified by the Financial Services Commission;

 

 

  3.

Persons who intend to acquire additional collective investment securities equivalent to those already acquired: Provided, That it shall be limited to where the investment prospectus of the relevant collective investment securities provide the same details as the investment prospectus issued immediately before.

 

 

(6)

Matters regarding the delivery of new shares

 

   

Commencement date (scheduled) for delivery of new shares: March 26, 2024 (As the electronic securities system was implemented on September 16, 2019, shares are registered and issued to share accounts held by each shareholder on the listing date without issuing physical certificates and can be distributed from the listing date. However, please be advised that the above timing may change subject to business discussions with relevant parties.)

 

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(7)

Matters regarding replacement, return, etc. of subscription deposits

The subscription deposit shall be 100% of the subscribed amount and shall be counted toward the share subscription price on the share subscription price payment due date. The subscription deposits shall bear no interest.

 

(8)

Place for payment of share subscription price: KEB Hana Bank, Twin Tower Branch

C. Matters regarding Share Rights

 

Record Date    

  

Financial investment business entity for trading of Share Rights

  

Company name

  

Company identification number

January 26, 2024

   Korea Investment & Securities Co., Ltd.    00160144

January 26, 2024

   NH Investment & Securities Co., Ltd    00120182

January 26, 2024

   KB Securities Co., Ltd.    00164876

January 26, 2024

   Daishin Securities Co., Ltd.    00110893

 

(1)

In this paid-in capital increase by way of a rights offering to existing shareholders, the Share Rights, which represent the right of existing shareholders to subscribe for new shares in proportion to their respective shareholdings, will be issued to them by the Company pursuant to Article 165-6(3) of the Financial Investment Services and Capital Markets Act and Article 5-19 of the Regulation on Issuance, Public Disclosure, etc. of Securities.

 

(2)

In this paid-in capital increase, Share Rights, which will be issued and listed after the enforcement date of the electronic securities system (which is September 16, 2019), will be issued as electronic securities. Share Rights allocated for the shares held by a shareholder in a securities company brokerage account (i.e., the shares of existing “beneficial shareholders”) will be issued and received in the account of the relevant securities company, and the Share Rights allocated for the shares managed in a special account of the transfer agent (i.e., the shares of existing “registered shareholders”) will be issued to each owner in the special account within the transfer agent.

 

(3)

The securities companies that will broker the sale and purchase of the Share Rights are Korea Investment & Securities Co., Ltd., NH Investment & Securities Co., Ltd., KB Securities Co., Ltd. and Daishin Securities Co., Ltd.

 

(4)

Sale and purchase, etc. of the Share Rights

Shareholders who wish to sell or purchase Share Rights shall, together with documents proving the sale and purchase of such Share Rights, request the securities company in which the Share Rights are on deposit to transfer such Share Rights to the account of such securities company under the name of the counterparty. A person who purchases any Share Rights through such securities company’s account may subscribe up to 100% of the quantity of the Share Rights, and the right and effect under the Share Rights will cease to exist if the subscription is not made within the subscription period.

 

(5)

Subscription method for an investor who purchased the Share Eights

The transferee whose Share Rights are on deposit in a securities company may subscribe for up to 100% of the quantity stated in the relevant Share Rights (or the quantity reflecting the oversubscription, if any), through offices of the relevant securities company and the head office and branches of each of the Joint Lead Managers (namely, Korea Investment & Securities Co., Ltd., NH Investment & Securities Co., Ltd., KB Securities Co., Ltd. and Daishin Securities Co., Ltd.), and the right and effect under the Share Rights will cease to exist if the subscription is not made within the subscription period.

 

64


(6)

Listing of the Share Rights

The Company is planning to apply to the Korea Exchange for a listing of the Share Rights in relation to this paid-in capital increase involving public offering of unsubscribed shares. If the Share Rights are listed, the listing period is scheduled to be five (5) trading days from February 19, 2024 to February 23, 2024, and during the period, the listed Share Rights can be traded on the Korea Exchange. The Share Rights are scheduled to be delisted on February 26, 2024. (Under Article 150 (Initial Listing) of the KOSPI Market Listing Regulation, the Share Rights must be listed for at least five (5) trading days, and in accordance with the criteria for delisting of the Share Rights under Article 152 thereof, the Share Rights must be delisted no later than five (5) trading days prior to the commencement of shareholder subscription.)

 

(7)

Adiditional details on the transaction of the Share Rights

The Company plans to apply for listing of the Share Rights for this paid-in capital increase, and all transaction details related to the listing of the Share Rights, which have been confirmed through consultation with relevant parties so far, are as follows:

① Listing method: all Share Rights registered and issued electronically will be listed.

② General shareholder’s transaction of the Share Rights

 

Category     

  

Listed transaction method

  

Account transfer transaction method

Method    Shareholder’s Share Rights are issued electronically to be listed. Anyone who purchases the Share Rights through an on-exchange transaction and holds them in a securities company’s account may subscribe for that amount, and if the subscription is not made within the subscription period, such right and effect will cease to exist. Since the shareholder’s Share Rights are registered and issued electronically, no physical certificate is issued.    Shareholders who wish to sell or purchase Share Rights shall, together with documents proving the sale and purchase of such Share Rights, request the securities company in which the Share Rights are on deposit to transfer such Share Rights to the account of such securities company under the name of the counterparty. A person who purchases any Share Rights through such securities company’s account may subscribe up to 100% of the quantity of the Share Rights, and the right and effect under the Share Rights will cease to exist if the subscription is not made within the subscription period.
Period    From February 19, 2024 to February 23, 2024 (5 trading days)    From the date of notice of allocation of Share Rights (scheduled to be February 8, 2024) to the second (2nd) business day (February 27, 2024) following the last day on which the Share Rights are traded while listed

Note 1) Listed transactions: From February 19, 2024 to February 23, 2024 (5 trading days)

Note 2) Account transfer transaction: From February 8, 2024 (scheduled), which is the date of notice of allocation of Share Rights, to February 27, 2024

 

  g

A book-entry transfer of account (over-the-counter transaction) is possible until February 27, 2024, which is the last settlement date for the listed transaction of the Share Rights, and thereafter, a book-entry transfer of account (over-the-counter transaction) will be restricted as the details of the subscription rights of the Share Rights are confirmed.

Note 3) Since the Share Rights are registered and issued electronically, no physical certificates thereof are issued.

 

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③ Special account holders’ transaction of the Share Rights

 

  a.

Once “special account holders (i.e., existing “registered shareholders”)” apply to the transfer agent for the transfer of their Share Rights from a “special account” to a “general electronic registration account (i.e., a securities company brokerage account)”, then they may participate in the subscription for this paid-in capital increase or trade the Share Rights.

 

  b.

The “special account holders (i.e., existing “registered shareholders”)” can also subscribe to this paid-in capital increase by directly subscribing at the head office or branches of each of the Joint Lead Managers (namely, Korea Investment & Securities Co., Ltd., NH Investment & Securities Co., Ltd., KB Securities Co., Ltd. and Daishin Securities Co., Ltd.), without transferring their Share Rights to a “general electronic registration account (i.e., a securities company brokerage account).” However, please note that the purchase and sale of any Share Rights is only possible after applying to the transfer agent for the transfer of such Share Rights from a “special account” to a “general electronic registration account (i.e., a securities company brokerage account).”

D. Other matters regarding offering or sale

 

(1)

Investors should note that certain details in this document may be corrected in the course of examination by the FSS, and a change in key details closely related to investment judgment may cause a change in the contemplated timetables herein. Changes in the contemplated timetable may also occur as a result of discussions with relevant parties.

 

(2)

Pursuant to Article 120(3) of the Financial Investment Services and Capital Markets Act, the effectiveness of the related registration statement does not confirm that the descriptions herein are true or correct, or represent the government’s guarantee or approval of the value of the subject securities. Accordingly, the responsibility for the investment in the subject securities falls solely on the shareholders and investors.

 

(3)

The details contained in this document are as of the date of submission hereof. Except as described herein, there is nothing which materially affects or changes the assets, liabilities, cash flows, or earnings of the Company. Therefore, no matters that shareholders and investors should take note of in making their investment decision are missing from this document.

 

(4)

Data Analysis, Retrieval and Transfer System (“DART,” available at http://dart.fss.or.kr), which is the electronic disclosure system of the website of the FSS, contains the Company’s business reports, semi-annual reports, quarterly reports, audit reports and other periodic public disclosures, as well as non-periodic public disclosures. Please consider such documents in connection with your investment decision.

 

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  5.

Matters Regarding Underwriting, etc.

[Underwriting method: Stand-by underwriting]

 

Underwriter

  

Type and number of underwritten shares

  

Consideration for underwriting

Joint Lead Manager    Korea Investment & Securities Co., Ltd.   

-   Type of underwritten shares: Registered common shares

 

-   Number of underwritten shares: 27.5% x Maximum number of shares for mandatory individual subscription

   Underwriting fee: 27.5% of the amount equal to 0.40% of the total offering amount
Joint Lead Manager    NH Investment & Securities Co., Ltd.   

-   Type of underwritten shares: Registered common shares

 

-   Number of underwritten shares: 27.5% x Maximum number of shares for mandatory individual subscription

   Underwriting fee: 27.5% of the amount equal to 0.40% of the total offering amount
Joint Lead Manager    KB Securities Co., Ltd.   

-   Type of underwritten shares: Registered common shares

 

-   Number of underwritten shares: 25.0% x Maximum number of shares for mandatory individual subscription

   Underwriting fee: 25.0% of the amount equal to 0.40% of the total offering amount
Joint Lead Manager    Daishin Securities Co., Ltd.   

-   Type of underwritten shares: Registered common shares

 

-   Number of underwritten shares: 20.0% x Maximum number of shares for mandatory individual subscription

   Underwriting fee: 20.0% of the amount equal to 0.40% of the total offering amount

Note 1) Total offering amount: Definitive Subscription Price x total number of shares to be issued

Note 2) The maximum number of shares for mandatory individual subscription is as of prior to the public offering, and the actual number of shares to be acquired as stand-by underwriting by each underwriter may vary depending upon the numbers of shares subscribed in the public offering, which will be tabulated for each underwriter. If there remain any unsubscribed or under-subscribed residual shares after the allocation under public offering, the Joint Lead Managers shall acquire all such shares in stand-by underwriting for their own accounts.

Note 3) Under Article 9(2)7 of the Regulation on Securities Underwriting Business, Etc., if the total number of the shares to be allocated to high-yield and high-risk investment trusts and general public subscribers is not more than 5,000 shares (based on the par value per share of KRW 5,000), or if the total public offering amount is not more than KRW 100 million, the Joint Lead Managers may acquire such shares for their own accounts without allocating them to subscribers.

 

67


II. Details on Key Rights to Securities

 

ø

Excerpts from the Articles of the Incorporation of the Company

 

 

1.

Par value

 

 

Article 7 (Face Value)

The face value per share to be issued by the Company is 5,000 Won.

 

2.

Matters related to the issuance and allocation of new shares

 

 

Article 6 (Total Number of Authorized Shares)

The total number of shares authorized to be issued by the Company shall be 500,000,000 shares.

Article 8 (Electronic Registration of Shares and Rights that would otherwise be Indicated on Certificates of Preemptive Rights)

In lieu of issuing share certificates or certificates of preemptive rights, the Company shall electronically register the shares and rights that would otherwise be indicated on certificates of preemptive rights on an electronic registry of an electronic registration institution.

Article 9 (Classes of Shares)

All shares to be issued by the Company shall be common shares in non-bearer form and preferred shares in non-bearer form.

Article 9-2 (Number and Characteristics of Preferred Shares)

(1) Preferred shares to be issued by the Company shall be non-voting and the number thereof shall be 40,000,000.

(2) The dividend on a preferred share shall be not less than one percent (1%) per annum but not more than ten percent (10%) per annum of the par value of the share as determined by the Board of Directors at the time of issuance.

(3) In case the dividend ratio of the common shares exceeds that of the preferred shares, the additional dividend on preferred shares shall be declared by participating in distribution of dividend at same ratio of dividend on common shares with respect to such excess, at the time of distribution of dividend on common shares.

(4) If dividends on preferred shares for a fiscal year are not paid as prescribed above, such unpaid and accumulated amount shall be preferentially paid to the holders of preferred shares at the time of distribution of dividends for the following fiscal year.

(5) Preferred shares may be issued, by a resolution of the Board of Directors at the time of issuance, as convertible to common shares (“convertible preferred shares”). The conversion price shall be determined by the Board of Directors at the time of issuance, and shall not be lower than the par value of the shares nor higher than the issue price of the convertible preferred shares. If a conversion period or a duration of the convertible preferred shares (upon expiration of which convertible preferred shares are automatically converted) is to be set, such period or duration shall be determined by the Board of Directors at the time of issuance, and shall end within one (1) to ten (10) years from the issuance of the convertible preferred shares. With respect to the dividends on the shares issued upon conversion of the convertible preferred shares, the provisions of Article 11 and Article 43-2, Paragraph (4) shall apply mutatis mutandis.

 

68


(6) Preferred shares may be issued, by a resolution of the Board of Directors at the time of issuance, as redeemable within certain period of time with earnings (“redeemable preferred shares”). The redemption period shall be determined by the Board of Directors at the time of issuance and shall end within one (1) to ten (10) years from the issuance of the redeemable preferred shares. The Board of Directors shall determine the redemption price and the method of redemption, the source of which shall be earnings.

(7) Preferred shares may be issued, by a resolution of the Board of Directors at the time of issuance, with any or all of the features set forth above in Paragraphs (5) and (6).

(8) If the resolution not to pay the prescribed dividends on preferred shares is adopted at a General Meeting of Shareholders, the preferred shares shall have voting rights, starting with the first General Meeting of Shareholders following the General Meeting of Shareholders at which the resolution not to pay dividends on preferred shares was adopted, until the end of a General Meeting of Shareholders at which a resolution to pay dividends for such preferred shares is adopted.

(9) In case the Company issues new shares by rights issue or bonus issue, then the new shares issued with respect to the preferred shares shall be common shares in the case of rights issues and shall be the shares of the same class in the case of bonus issues.

Article 10 (Preemptive Rights)

(1) The Company may issue additional shares with the resolution of the Board of Directors setting forth the detailed terms of the issue within the authorized share capital.

(2) The Company’s shareholders shall have preemptive rights to subscribe to new shares in proportion to their respective shareholding ratios; provided that the names and addresses of such shareholders shall be registered in the Register of Shareholders as of the date designated by the Company in the public notice made two (2) weeks prior thereto.

(3) Notwithstanding Paragraph (2) above, the Company may allocate new shares to persons other than existing shareholders of the Company by a resolution of the Board of Directors in any of the following cases, provided that the aggregate number of shares issued pursuant to items 1 through 7 below shall not exceed 20% of the total number of issued and outstanding shares:

 

  1.

Where the Company invites or cause underwriters to invite subscriptions for new shares;

 

 

  2.

Where the Company issues new shares through a method of general public offering under Article 165-6 of the Financial Investment Services and Capital Market Act (the “Capital Market Act”);

 

 

  3.

Where the Company allocates new shares to any member of its Employee Stockownership Association pursuant to Article 165-7 of the Capital Market Act or pursuant to the Employee Welfare Basic Act;

 

 

  4.

Where the Company issues new shares by exercise of stock options under Article 340-2 of the Commercial Code;

 

 

  5.

Where the Company issues new shares for the issuance of a depositary receipt (DR) under Article 165-16 of the Capital Market Act;

 

 

  6.

Where the Company issues new shares to corporations, institutional investors or domestic or overseas financial institutions, etc. for the achievement of the company’s operational objectives, such as improvement of financial structure, etc.;

 

 

  7.

Where the Company issues new shares for the purpose of drawing foreign investment, when it deems necessary for its management; or

 

 

69


  8.

Where the Company issues new shares through a public offering or cause underwriters to underwrite the new shares and/or DR for the purpose of initial listing on the Korea Exchange and/or the New York Stock Exchange.

 

(4) If shares are not subscribed for as the result of a shareholder waiving or losing his/her pre-emptive right, or if fractional shares result from the allocation of new shares, such shares shall be disposed of in accordance with a resolution of the Board of Directors.

(5) The recipient of the new shares shall become a shareholder of the Company the succeeding day of the payment date.

 

3.

Matters related to voting rights

 

 

Article 20 (Exercise of Voting Rights)

(1) Each share shall have one (1) voting right.

(2) A shareholder may exercise his/her vote through a proxy. In this case, the proxy holder shall file with the Company document evidencing authority to act as a proxy no later than the beginning of the General Meeting of Shareholders.

(3) The Company shall not adopt the cumulative voting system provided under Article 382-2 of the Commercial Code.

Article 21 (Restrictions on the Exercise of Voting Rights by Cross Ownership)

If the Company, its parent company and subsidiaries, or any of its subsidiaries hold shares exceeding one-tenth (1/10) of the total number of issued shares of another company, such other company may not exercise any voting rights with respect to the shares of the Company which it holds.

Article 22 (Split Exercise of Votes)

(1) A shareholder, holding two (2) or more votes, who wishes to split his/her votes, shall notify the Company to that effect and the reasons thereof by writing no later than the third day preceding the date set for the General Meeting of Shareholders.

2) The Company may refuse to allow the shareholder to split his/her votes unless the shareholder acquired the shares in trust or otherwise holds the shares for and on behalf of some other person.

 

4.

Matters related to dividends

 

 

Article 11 (Record Date for Dividends on New Shares)

In case the Company issues new shares through rights issues, bonus issues or stock dividends, the new shares shall be deemed to have been issued at the end of the fiscal year immediately prior to the fiscal year during which the new shares are issued for purposes of distribution of annual dividends for such new shares.

Article 42 (Appropriation of Earnings)

The Company shall dispose of the unappropriated retained earnings as of the end of each fiscal year as follows:

 

  1.

Legal reserve;

 

 

  2.

Other statutory reserves;

 

 

70


  3.

Dividends;

 

 

  4.

Discretionary reserve; and

 

 

  5.

Other appropriation of retained earnings.

 

Article 43 (Dividends)

(1) Dividends may be paid in either cash or shares.

(2) In case dividends are distributed in shares, if the Company has issued several classes of shares, such distribution may be made through shares of different classes by a resolution of a General Meeting of Shareholders.

(3) Dividends in Paragraph (1) above shall be paid to the shareholders or pledgees registered in the shareholders registry of the Company as of the end of each fiscal year.

Article 43-2 (Interim Dividends)

(1) The Company may pay interim dividends in accordance with Article 462-3 of the Commercial Code to its shareholders who are registered in the shareholder’s registry as of 00:00 a.m. on July 1 of the relevant fiscal year. Such interim dividends shall be made in cash.

(2) The interim dividends mentioned in Paragraph (1) above shall be decided by a resolution of the Board of Directors, which resolution shall be made within forty-five (45) days from the date mentioned in Paragraph (1) above.

(3) The maximum amount to be paid as interim dividends shall be calculated by deducting the following amounts from the net asset amounts recorded in the balance sheet of the fiscal year immediately prior to the fiscal year concerned:

 

  1.

Paid in capital of the company for the fiscal year immediately prior to the fiscal year concerned;

 

 

  2.

The aggregate amount of capital reserves and legal reserves which had been accumulated up until the fiscal year immediately prior to the fiscal year concerned;

 

 

  3.

The amount which was resolved to be distributed as dividends at an ordinary General Meeting of Shareholders of the fiscal year immediately prior to the fiscal year concerned;

 

 

  4.

Voluntary reserves which had been accumulated for specific purposes in accordance with the relevant provisions of the Articles of Incorporation or by resolution of the General Meetings of Shareholders until the fiscal year immediately prior to the fiscal year concerned; and

 

 

  5.

Aggregate earned surplus reserves to be accumulated for the fiscal year concerned as a result of the interim dividends.

 

(4) If the Company has issued new shares (including those shares issued by way of conversion of reserves into capital stock, stock dividends, request of conversion of convertible bonds or exercise of warrants) prior to the date set forth in Paragraph (1) above, but after the commencement date of the fiscal year concerned, the new shares shall be deemed to have been issued at the end of the fiscal year immediately prior to the fiscal year concerned for the purpose of interim dividends.

(5) When distributing interim dividends, the same dividend ratio as that of the common shares of the Company shall be applied to the preferred shares.

Article 44 (Prescription Period for Claim for Payment of Dividends)

(1) The right to dividends shall be extinguished by prescription if the right is not exercised for five (5) years.

(2) After the expiration of the prescription period set forth in Paragraph (1), unclaimed dividends shall revert to the Company.

 

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III. Investment Risk Factors

 

  1.

Business Risks

 

 

A. Risk of increasing uncertainty due to economic fluctuations in Korea and abroad

Countries around the world have seen solid growth in their private spending since the end of the COVID-19 pandemic thanks to the reopening of China and considerable job creations in major advanced economies. Nonetheless, such growth has been slowing down due to, among other things, increasing financial instability, geopolitical risks and undermined investment sentiment caused by monetary tightening, and the possibility of further considerable delay in economic recovery in Korea and abroad in the future cannot be ruled out. In the display industry in which the Company is engaged, the product demand in downstream industries is affected by consumer sentiment depending on economic fluctuations. The Companys overseas sales accounted for approximately 96.8% of its total sales in the first nine months of 2023. As the Company is heavily dependent on exports given the nature of the industry in which the Company is engaged, global economic fluctuations in the future will have considerable effects on the sales and profitability of the Company. There are uncertainties in trend in the recovery of global and domestic economies, which are exposed to various downside risks, such as uncertainties in the monetary policies of central banks around the world, continuing inflation and geopolitical divisions. As further delays in the economic recovery in Korea and abroad may have negative effects on the sales performance of the Company, which is heavily dependent on overseas sales, investors are advised to make their investment decision after engaging in an ongoing monitoring of market conditions and volatility in the financial markets in Korea and abroad.

(1) Global economic trend

According to the World Economic Outlook announced by the International Monetary Fund (“IMF”) in October 2023, the global economic growth rate is expected to record 3.0%, which is the same as the forecast in July 2023. In addition, the World Health Organization (“WHO”) announced in May 2023 that it no longer considers the COVID-19 pandemic as an emergency, and concurrently with such announcement, the global supply chain also recovered to pre-pandemic levels, showing signs of improvement.

The IMF announced that the end of the COVID-19 pandemic in the first half of 2023 has led to a surge in service spending with the global economy growing steadily thanks to the early alleviation of financial anxieties originated from the U.S. and Switzerland. However, such economic growth around the world has been slowing down due to a continuous slump in the manufacturing sector caused by a deepening of economic recession in China. Factors suppressing the global economic recovery mentioned by the IMF include the continuing war between Russia and Ukraine, geopolitical economic divisions and monetary tightening. Due to such factors, the global economic growth rate for 2024 was forecast to record 2.9%, declining by 0.1 percentage point from a 3.0% forecast in July 2023. The IMF also forecast that, while the currently high inflation rates are showing signs of stabilizing thanks to high interest rates around the world and declining international raw material prices, it will take a significant amount of time to reach a stable target inflation rate as the core inflation rate is still high.

 

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[Global Economic Growth Rate Forecast]

 

(Unit: %, percentage points)

 

 

Category          

   2022      2023 (E)      2024 (E)  
   July (A)      Oct. (B)      Revision (B-A)      July (C)      Oct. (D)      Change (D-C)  

World

     3.5        3.0        3.0        —         3.0        2.9        (0.1

Developed Nations

     2.6        1.5        1.5        —         1.4        1.4        —   

USA

     2.1        1.8        2.1        0.3        1.0        1.5        0.5  

Eurozone

     3.3        0.9        0.7        (0.2      1.5        1.2        (0.3

Germany

     1.8        (0.3      (0.5      (0.2      1.3        0.9        (0.4

France

     2.5        0.8        1.0        0.2        1.3        1.3        —   

Italy

     3.7        1.1        0.7        (0.4      0.9        0.7        (0.2

Spain

     5.8        2.5        2.5        —         2.0        1.7        (0.3

Japan

     1.0        1.4        2.0        0.6        1.0        1.0        —   

UK

     4.1        0.4        0.5        0.1        1.0        0.6        (0.4

Canada

     3.4        1.7        1.3        (0.4      1.4        1.6        0.2  

Other Developed Nations

     2.6        2.0        1.8        (0.2      2.3        2.2        (0.1

Korea

     2.6        1.4        1.4        —         2.4        2.2        (0.2

Developing Nations

     4.1        4.0        4.0        —         4.1        4.0        (0.1

China

     3.0        5.2        5.0        (0.2      4.5        4.2        (0.3

India

     7.2        6.1        6.3        0.2        6.3        6.3        —   

Russia

     (2.1      1.5        2.2        0.7        1.3        1.1        (0.2

Brazil

     2.9        2.1        3.1        1.0        1.2        1.5        0.3  

Mexico

     3.9        2.6        3.2        0.6        1.5        2.1        0.6  

Saudi Arabia

     8.7        1.9        0.8        (1.1      2.8        4.0        1.2  

South Africa

     1.9        0.3        0.9        0.6        1.7        1.8        0.1  

Source: IMF World Economic Outlook (October 2023)

The economic growth rate forecasts for advanced economies, including the U.S., France, Japan and the UK, have been revised upward from those in July 2023 in accordance with expanded corporate investment and increased spending by consumers. However, the 2023 economic growth rate forecast for the Eurozone was revised downward by 0.2 percentage points, reaching 0.7% from the previously forecasted 0.9% in July 2023 given the impacts of monetary tightening and energy crisis. As for emerging economies, the economic growth rate forecast for China was revised downward by 0.2 percentage points, reaching 5.0% from the previously forecasted 5.2% in July 2023, and such rate for India was revised upward by 0.2 percentage points, reaching 6.3% from the previously forecasted 6.1% in July 2023. The 2023 economic growth rate forecast for Korea remained unchanged at 1.4%, the same rate forecast in July 2023, which is identical with the domestic economic growth rate forecast announced by the Bank of Korea. However, the 2024 economic growth rate forecast for Korea was revised downward to 2.2%, marking a 0.2 percentage points decrease from the forecast in July 2023. As the expected inflation rates continue to remain at high levels around the world, the IMF recommends that governments and central banks refrain from relaxing their monetary policies and maintain austerity measures until there are clear signs of decreasing inflation rates.

 

73


The global economic growth rates and the speed of economic recovery of each country in the future are expected to be determined by inflation controls and the timings of benchmark rate adjustments in major economies. However, it is currently too early to accurately forecast the timings of benchmark rate adjustments, and despite reports of Federal Open Market Committee’s discussion in December 2023 on the timing for reducing interest rates, it is not possible to predict the exact timing of interest rate reductions and therefore, there are uncertainties in the trajectory of global economic growth.

(2) Domestic economic trend

The Bank of Korea forecast in its economic outlook report for November 2023 that the Korean domestic GDP will grow by 1.4% in 2023 and by 2.1% in 2024. Despite the weakened momentum in consumption recovery in Korea, Korea’s economy is expected to improve gradually, primarily driven by its exports in light of, among other reasons, a rebound in the semiconductor industry and solid growth of the U.S. economy, after the second half of 2023. In 2024, the Korean economy is expected to continue to improve through exports and capital spending due to, among other reasons, the recovery of the semiconductor industry and increased investments of major economies in new growth engine industries. However, due to a delay in the recovery of domestic demand, including consumption and construction investment, the 2024 domestic GDP growth rate forecast was revised downward slightly from the previous forecast of 2.2% in August 2023. In addition, there continues to remain uncertainties related to economic recovery stemming from, among other things, changes in the direction of monetary policies of major economies, the economic situation in China, geopolitical tensions and international oil price trends in the future.

[Domestic Economic Growth Rate Forecast]

 

                                    (Unit: %)  

Category                    

   2022     2023 (E)     2024 (E)  
   Annual     First Half     Second Half     Annual     First Half      Second Half     Annual  

GDP Growth Rate

     2.6       0.9       1.8       1.4       2.2        2.0       2.1  

Private Consumption

     4.1       3.1       0.7       1.9       1.5        2.2       1.9  

Capital Expenditure

     (0.9     5.3       (5.8     (0.4     0.8        7.5       4.1  

Intellectual Property Product Investment

     5.0       2.9       1.3       2.1       2.8        2.1       2.4  

Construction Investment

     (2.8     1.8       3.6       2.7       0.5        (3.7     (1.8

Export of Goods

     3.6       (0.9     5.4       2.3       4.1        2.7       3.3  

Import of Goods

     4.3       1.9       (2.1     (0.2     0.7        4.1       2.4  

Source: The Bank of Korea’s Economic Outlook Report (November 2023)

The following is a sector-by-sector overview of the Korean economy. In 2023, the recovery of private consumption levels in Korea slowed down compared to 2022 as net household incomes decreased due to heavier burdens of the repayment of principal and interest for households, high prices and the weakening of a momentum in wage increases. In 2024, private consumption levels in Korea is expected to recover gradually thanks to stable employment situations and increasing household income. However, the recovery is expected to be slower than projected earlier due to the continued effects of high interest rates, among other reasons. Capital expenditure in Korea decreased considerably due in part to a lackluster global manufacturing industry and an increase in financing cost, and, based on such trend, is expected to post negative growth of 5.8% in the second half of 2023. However, capital expenditure in Korea is expected to grow by 4.1% annually in 2024 as the IT sector is forecast to recover in earnest, leading to increased investment by semiconductor companies in advanced technology processes, while investments in eco-friendly sectors and new economic growth engine industries are also projected to increase. Despite a slowdown in the commencement of new construction projects in 2023 due to the impacts of high interest rates, construction investment was solid due to the construction projects that had already begun as supply problems were eased. Nonetheless, continual decreases in orders for, and commencements of, new construction projects of residential buildings are expected to lead to a reduction in the quantity of construction projects in the end. In contrast, exports of goods have been improving mainly due to increased exports of semiconductors, and a steady increase in demand for IT products is expected to lead to increased investments in new economic growth engine industries from major economies.

 

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Countries around the world have seen solid growth in their private consumption levels since the end of the COVID-19 pandemic thanks to the reopening of China and considerable job creations in major advanced economies, among other factors. Nonetheless, such growth has been slowing down due to increasing financial instability, geopolitical risks and worsening investment sentiment caused by monetary tightening, among other reasons. As there continues to remain uncertainties stemming from monetary tightening, continuing inflation and geopolitical divisions even after the end of the COVID-19 pandemic, the possibility of further considerable delay in economic recovery in Korea and abroad in the future cannot be ruled out.

The macroeconomic uncertainties above may affect the overall economies in Korea and abroad, and, in the display industry in which the Company is engaged, the product demand in downstream industries is affected by consumer sentiment depending on economic fluctuations. The Company’s overseas sales accounted for approximately 96.8% of its total revenue in the first nine months of 2023. As, the Company is heavily dependent on exports given the nature of the industry in which the Company is engaged, global economic fluctuations in the future will have considerable effects on the sales and profitability of the Company. The proportion of the Company’s sales by business sector is as follows.

[Proportion of Revenue by Business Sector]

 

                                  (Unit: KRW 100 millions)  

Business

Sector   

   Type    Item    First Nine
Months of 2023
     First Nine Months
of 2022
     2022      2021      2020  

Display

   Product
Sales
   Display Panel      Overseas      134,398        184,558        256,507        292,042        233,118  
    Domestic       4,407        5,117        6,679        6,207        9,053  
   Total      138,805        189,675        263,186        298,249        242,170  
   Royalty
Income
   LCD, OLED
Technology
Patent
   Overseas      127        96        124        140        142  
   Domestic      0        0        0        0        0  
   Total      127        96        124        140        142  
   Other Sales    Raw
Materials,
Parts, etc.
   Overseas      299        176        234        273        235  
   Domestic      118        81        103        119        68  
   Total      417        257        337        392        303  

Subtotal

         Overseas      134,824        184,830        256,865        292,455        233,495  
   Domestic      4,525        5,198        6,782        6,325        9,121  
   Total      139,349        190,028        263,647        298,780        242,616  

Source: Quarterly and Annual Business Reports of the Company

Note 1) The sales are categorized into overseas sales and domestic sales based on the ship-to destination information.

Note 2) The figures for 2022 do not include KRW 213 billion in hedge losses from currency futures derivatives, which were reclassified as sales related to cash flow hedging for anticipated export transactions.

For now, it is difficult to predict how the global and domestic economies will recover, and they are exposed to various downside risks, such as uncertainties in the monetary policies of central banks around the world, continuing inflation and geopolitical divisions. As further delays in the economic recovery in Korea and abroad may have negative effects on the sales performance of the Company, which is heavily dependent on overseas sales, investors are advised to make their investment decision after engaging in an ongoing monitoring of market conditions and volatility in the financial markets in Korea and abroad.

 

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B. Risks involved in the slowdown in the growth of downstream industries (including the television, IT and mobile industries)

The display panel business in which the Company is engaged is directly affected by the business conditions of the industries of electronic products, including televisions, laptops, monitors and smartphones, which constitute downstream industries of such business. Demands for IT products, such as televisions and smartphones, increased after the emergence of the COVID-19 pandemic in 2020. However, the global demand for televisions began to decline in the second half of 2021 when COVID-19 preventive measures were relaxed. The sales volume in the global television markets, which continually grown since 2017, decreased by approximately 5.3% in 2021 from the previous year and further decreased in 2022 by approximately 5% from the previous year due to the extension of the replacement cycle of electronic products following the pandemic-created demand for such products. In 2023, the sales volume in the global television markets is expected to continue to decrease slightly from the previous year due to factors such as a decrease in the demand for televisions in Europe caused by the protracted war between Russia and Ukraine and uncertainties in the global economy. Recently, OLED panels have been replacing LCD panels in the display industry, leading to the expansion of the OLED-panel market and the emergence of new demands mainly for small-and mid-sized OLED panels. However, the growth of the display industry has been slowing down following a decrease in the demands for downstream products caused by global economic recession. In addition, given that electronic products, such as televisions and smartphones, have already been significantly popularized around the world, a failure to release new products applying new technologies in the market may result in a continued decrease in the demands for downstream industries. Investors are advised to note that, in such case, there is a possibility that the growth of the display panel industry in which the Company is engaged may slow down, leading to decreases in the Company’s revenue and operating profits, among others. Due to a delay in the demand recovery in downstream industries as a result of such prolonged global economic downturn, the Company has experienced a decline in revenue and operating losses for six consecutive quarters from the second quarter of 2022 through the third quarter of 2023. The cumulative operating loss on a consolidated basis for the last six quarters amounted to approximately KRW 4.8 trillion, and as the Company cannot predict the timing of demand recovery in the downstream industries at this point, the Company cannot assure you that the trend of weak profitability will not continue.

The Company is currently engaged in the business of researching, developing, manufacturing and selling products utilizing technologies related to displays, including OLED and TFT-LCD. The Company is a global company specialized in the manufacturing of display panels with a high market position in the global display panel market, including LCD and OLED. The Company has been establishing its position in the global market, recording a market share of 15.6% in the large LCD display panel market, 5.2% in the small- and mid-sized LCD market, 64.8% in the large OLED market and 13.5% in the small- and mid-sized OLED market based on the sales amount in 2022.

The display panel business in which the Company is engaged is directly affected by the business conditions of the industries of electronic products, including televisions, laptops, monitors and smartphones, which constitute downstream industries of such business. Television panels, which accounted for 21.6% of the Company’s total sales on a consolidated basis in the first nine months of 2023, are also affected by an increase or decrease in the size of the global television market.

 

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[Trend in, and Outlook for, Sales Volume in the Global Television Market]

 

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Source: OMDIA, Kiwoom Securities Research Center (November 2023)

There has been an increase in consumers who refrained from leaving their homes since the emergence of the COVID-19 pandemic in 2020, and the trend of online education led to an increase in the demands for IT products, including televisions and smartphones. However, as COVID-19 preventive measures started to ease in the second half of 2021, the global demand for televisions began to decline. The sales volume in the global television market, which had continually grown since 2017, decreased by approximately 5.3% in 2021 from the previous year and further decreased by approximately 5% in 2022 from the previous year due to the extension of the replacement cycle of electronic products following the pandemic-created demand for such products. In 2023, the sales volume in the global television markets is expected to continue to decrease slightly from the previous year due to factors such as a decrease in the demand for televisions in Europe caused by the protracted war between Russia and Ukraine and uncertainties in the global economy. Between 2024 and 2025, the sales volume in the global television market is expected to increase with the arrival of the replacement cycle of television products along with the anticipated economic recovery. However, as the penetration rate has reached 90% in the television industry, a dramatic growth in new demand is not expected, and the growth in the television industry has been slowing down due to the lack of products utilizing innovative technology to drive market growth. Nonetheless, there continues to exist demand for the replacement of television products thanks to increases in the demands for premium (high-resolution and OLED) televisions, smart televisions and large-sized televisions. Given that televisions are expected to serve as hub devices for the smart-home and Internet of Things (“IoT”) era in the future and there is an increase in the demand for high-definition contents, the Company believes that there exists solid potential for the television market.

[Global Display Market Status and Outlook (Based on Sales Amount)]

 

               (Unit: USD 100 millions)  

Device   

   Size   2022     2023     2024     2025     2026     2027  

LCD

   Large     651       635       669       692       691       694  
   (Proportion)

 

   

 

81.8

 

 

   

 

85.4

 

 

   

 

86.3

 

 

   

 

86.7

 

 

   

 

86.7

 

 

   

 

86.7

 

 

   Small- and
Mid-Sized
    145       108       106       106       106       106  
   (Proportion)

 

   

 

18.2

 

 

   

 

14.6

 

 

   

 

13.7

 

 

   

 

13.3

 

 

   

 

13.3

 

 

   

 

13.3

 

 

   Subtotal     796       743       775       798       797       801  
   (Proportion)     64.9     62.9     62.7     61.9     60.7     59.0

 

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OLED

   Large     59       60       88       109       129       153  
   (Proportion)

 

   

 

14.1

 

 

   

 

14.0

 

 

   

 

19.8

 

 

   

 

23.1

 

 

   

 

26.6

 

 

   

 

30.2

 

 

   Small- and
Mid-Sized
    361       368       359       364       357       354  
   (Proportion)

 

   

 

85.9

 

 

   

 

86.0

 

 

   

 

80.2

 

 

   

 

76.9

 

 

   

 

73.4

 

 

   

 

69.8

 

 

   Subtotal     421       428       447       474       486       507  
   (Proportion)     34.3     36.2     36.2     36.7     37.0     37.4

Others

    9       10       14       18       30       49  

(Proportion)

    0.7     0.8     1.2     1.4     2.3     3.6

Total

    1,226       1,181       1,237       1,290       1,312       1,356  

Source: OMDIA, Korea Display Industry Association (“KDIA”)’s Key Statistics in Display Industry in Second Quarter of 2023 (August 2023)

In the global display market, as LCD products became less profitable due to considerable production of lower-priced products by Chinese manufacturers along with the growth of the OLED television sector, mainly consisting of premium products, the proportion of LCD televisions decreased whereas the proportion of OLED televisions increased. According to the Key Statistics in Display Industry in Second Quarter of 2023 published by the KDIA (August 2023), the size (based on the sales amount) of the global display market is expected to reach U.S. Dollar (“USD”) 118.1 billion in 2023, slightly decreasing from the previous year, due to a decrease in the market demand as a result of an increase in the number of hours spent in outdoor activities following the official announcement of the COVID-19 endemic around the world. In contrast to the contraction of the LCD panel market in 2023, the OLED panel market has been gradually growing as OLED panels have been replacing LCD panels, and OLED displays are expected to account for 37.4% of the entire display market by 2027. The global display market is expected to grow from USD 122.6 billion in 2022 to USD 135.6 billion in 2027 thanks to the continued enhancement of technological prowess and expansion of OLED-oriented production lines by panel manufacturers.

[Annual Shipment Volume of OLED TV and Outlook]

 

                 (Unit: thousands, %)  

Classification        

   2022     2023     2024     2025     2026     2027  

OLED TV Shipment

     7,455       5,703       6,890       8,360       9,520       10,488  

Year-over-Year (“YoY”)

     0.5     (23.5 )%      20.8     21.3     13.9     10.2

Source: OMDIA (2023.10)

The shipment volume of OLED televisions, which had previously continued growing, is expected to record around 5.7 million units in 2023, decreasing by 23.5% from the previous year, which appears to be partly due to a decrease in the demand therefor in the European market in which most large-sized OLED televisions are sold as most OLED televisions are premium products sensitive to factors such as changes of consumer income and economic slowdown. However, the shipment volume of OLED televisions is forecast to reach about 6.9 million units in 2024 thanks to economic recovery and carryover effects, increasing by 20.8% from 2023. While the OLED television panel market is expected to grow at the annual average growth rate of 16.5% until 2027, the rate of adoption is still relatively low, with projected shipments of OLED televisions at approximately 2.7% of the global television market in 2024. In addition, the pace of growth may be limited by factors, including a delayed recovery in the production of, and demand for OLED televisions due to the continued economic slowdown, geopolitical risks such as the Russia-Ukraine war in Europe, a key geographic market, and the Israeli-Palestinian conflict, and whether the price gap between OLED and LCD will become narrower. Given the competition with LCD televisions in the premium product market, including the introduction of new extra-large LCD televisions, it is expected to take some time for OLED televisions to reach the market penetration level of LCD televisions. Therefore, investors should consider that a rapid increase in production volume of the Company’s OLED television panels may be difficult to achieve.

 

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[Smartphone Shipment and Outlook]

(Unit: millions; %)

 

LOGO

Source: OMDIA, Kiwoom Securities Research Center (November 2023)

Furthermore, downstream industries, including the smartphone industry in which small- and mid-sized OLED panels are used, also affect the Company’s sales. Though the growth of the smartphone market has been slowing down due to an increase in the penetration rate of smartphones, smartphone manufacturers are exploring new growth strategies based on differentiation through the introduction of new technologies. In addition, thanks to an increase in the proportion of OLED panels used in premium smartphones and strong sales of new smartphones around the world, the shipment of OLED panels for smartphones has been increasing.

[Shipment and Penetration Rate of OLED Smartphones]

(Unit: millions; %)

 

LOGO

Source: OMDIA, Kiwoom Securities Research Center (November 2023)

 

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As OLED panels naturally produce less heat and are thinner in size compared to LCD panels, global smartphone manufacturers have recently shown increased preference for OLED panels with an increase in the shipment of 5G smartphones. For this reason, the market penetration rate of smartphones equipped with OLED panels is expected to increase from 49% in 2022 to 56% in 2024, due to more OLED panels adopted by smartphone manufacturers in North America and China. The stabilization in the prices of small-sized OLED panels due to the increased production yield rate and a widening technological gap with LCD panels act as factors for the adoption of OLED panels for smartphones. However, given the slowdown in demand for new and replacement electronic devices, including smartphones, due to the continued effects of high interest and inflation rates, there needs to be improvement in the unfriendly macroeconomic environment in order for demand in downstream industries to expand. While the Company believes that there is a possibility of an improvement in IT consumer sentiment, including smartphones, beginning in the second half of 2024 due to the possible termination of the monetary tightening in the United States and normalization of inflation, the likelihood of a sharp increase in demand is expected to be limited. In addition, despite the increased adoption of OLED panels by Chinese smartphone manufacturers, an increase of shipments by Korean panel manufacturers, including the Company, may be limited due to the expansion of domestic panel procurement in China. See “Chapter 1. Matters Regarding the Offering or Sale – III. Investment Risk Factors – 1. Business Risks – D. Risks of intensifying competition following Chinese manufacturers’ supply expansion.”

[Outlook for Shipment of OLED for IT products]

(Unit: millions, %)

 

LOGO

Source: UBI Research (October 2023)

Note) Based on the 5.5th-generation and 6th-generation lines, 8.5th-generation QD-QLED line and 8.6th-generation (2290 x 2620mm²) IT products line of Samsung Display and the 6th-generation OLED line of LG Display, BOE and Visionox

For small- and mid-sized OLED panels, new customers are expected to continue to emerge in addition to smartphone manufacturers adopting OLED panels. The OLED shipment for IT products, including tablet devices, personal computers, monitors and laptops, is expected to grow by 41% on average per year from 7,900,000 units in 2023 to 31,300,000 units in 2027. The world’s largest IT device manufacturer set the target of using OLED panels for its tablet devices to be released in the second quarter of 2024 and aims to use OLED panels for its laptop products as well from 2027, which reinforces the expectation that the shipment of small- and mid-sized OLED panels used in IT products such as tablet devices and laptops will increase in the future. In particular, as OLED panels used in tablet devices and laptops, are wider in size than those used in smartphones, the prices of panels for tablet devices and laptops are set higher than compared to those of smartphones. Accordingly, such trend is expected to help increase the profitability of the Company. The production volume of small and medium-sized OLED panels is increasing due to the diversification of applications for OLED panels, including tablet devices, laptops and automotive displays. However, as described above, unless there is an improvement in the macroeconomic environment, demand in the downstream industries may continue to remain sluggish, resulting in slower growth than market expectations.

 

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The Company’s downstream industries, including electronics such as televisions and IT devices, are highly affected by the global economic situation due to the nature of such products being durable consumption goods rather than essential goods. Due to a delay in the demand recovery in downstream industries as a result of such prolonged global economic downturn, the Company has experienced a decline in revenue and operating losses for six consecutive quarters from the second quarter of 2022 through the third quarter of 2023. In the first nine months of 2023, on a consolidated basis, the Company’s revenue was approximately KRW 13.9 trillion and its operating loss was approximately KRW 2.6 trillion, representing a decrease in revenue of 26.1% and a 118.5% increase in operating loss deficit compared to the first nine months of 2022. The cumulative operating loss on a consolidated basis for the last six quarters amounted to approximately KRW 4.8 trillion, and as the Company cannot predict the timing of demand recovery in the downstream industries at this point, the Company cannot assure you that the trend of weak profitability will not continue.

Despite such business environment as described above, the Company is continuing to invest in OLED-related facilities. In addition to this proposed offering, the Company has borrowed funds from its largest shareholder and entered into syndicated loan borrowing agreements with government-owned banks and domestic commercial banks. On March 27, 2023, the Company entered into an agreement to obtain a long-term borrowing from LG Electronics, its largest shareholder, in the aggregate amount of KRW 1 trillion. It received KRW 650 billion of the principal amount of such borrowing on March 30, 2023 and the remaining KRW 350 billion on April 20, 2023. In addition, on December 22, 2023, the Company entered into a syndicated loan agreement with Korea Development Bank, Export-Import Bank of Korea and Shinhan Bank in the amount of KRW 650 billion, which is scheduled to be repaid in installments over two years following a three-year grace period. On December 28, 2023, the Company withdrew KRW 200 billion, and the remaining amount of KRW 450 billion is scheduled to be withdrawn by the Company in the first half of 2024. Through such borrowings, including this proposed offering of approximately KRW 1.3 trillion, the Company continues to raise external funds due to the recent decline in its operating results. The Company’s borrowings scheduled to mature in 2024 amount to approximately KRW 4.5 trillion, excluding KRW 290 billion of Series 43-1 public bonds that the Company plans to repay using proceeds from this proposed offering. With respect to the remaining borrowings of approximately KRW 4.2 trillion, the Company intends to manage its liquidity and total borrowings at a level of refinancing such borrowings at their maturity. As of the date of submission of this prospectus, the Company does not have any additional plans for large-scale borrowings, and as a result, the amount of total borrowings is not expected to deviate significantly from the current level. However, investors should consider that if the Company’s profitability continues to decline in the future due to, among other reasons, a slowdown in demand in the downstream industries, the Company may continue to engage in additional external financing, which may affect the Company’s financial stability.

Furthermore, due to a decline in the Company’s profitability as a result of stagnant demand in the downstream industries, and the reorganization of the Company’s business structure toward OLED panels, the Company has suspended the operation of its older LCD production facilities and has implemented voluntary retirement programs for employees engaged in the Company’s LCD-related production business beginning in December 2023. Accordingly, the Company’s non-operating expenses may temporarily increase if the Company incurs significant labor restructuring costs, which in turn could negatively impact the Company’s profitability.

Although OLED panels have been replacing LCD panels in the display industry, leading to the expansion of the OLED panel market and the emergence of new demand primarily for small-and mid-sized OLED panels, the growth in the display industry has been slowing down due to a decrease in the demands for downstream industries products caused by the global economic recession. In addition, given that electronic products, such as televisions and smartphones, have already been significantly popularized, a failure to release new products using new technologies in the market may result in a continued decrease in the demands for downstream industries. Investors are advised to note that, in such case, the growth of the display panel industry in which the Company is engaged may slow down, leading to decreases in, among other things, the Company’s sales and operating profit.

 

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C. LCD panel price fluctuation risk

In the display panel industry, prices of LCD panels fluctuate periodically depending on various factors affecting their supply and demand, which directly impacts the change in the profitability of the display panel manufacturer. The prevalence of non-face-to-face activities, including remote working and online education, caused by the COVID-19 pandemic from 2020 has helped increase the demands for IT devices, such as laptops, and an increase in the sales volume of large-sized and high-resolution televisions prompted by a surge in the hours spent on indoor activities, among other factors, has led to an increase in the demand for display panels and a dramatic increase in their prices. However, due to an increase in the supply following aggressive facility expansions by Chinese manufacturers along with a decline in the demands for IT products, the prices of LCD panels began to drop. While there have been signs of a recovery in the industry in the first half of 2023 when major suppliers adjusted their capacity utilization rates and the demand for television manufacturers increased, a delay in the global economic recovery has undermined the recovery of the overall demand, leading to a decrease in the prices of LCD panels from October 2023 with the expectation that the prices would continue to drop in the future. Such fluctuations in the prices of LCD panels caused by various factors affecting the supply and demand in the market and decreased demand due to a delay in the global economic recovery may have negative effects on the profitability of the Company.

The global display panel market mainly consists of LCD and OLED products. With the recent increase in demand for premium televisions, markets for large and small- and mid-sized OLED panels are expected to grow bigger. However, according to the KDIA’s Key Statistics in Display Industry in Second Quarter of 2023 (August 2023), LCD panels accounted for approximately 64.9% of the global display panel market (based on the sales amount) in 2022. Although the proportion of LCD panels in the market has been declining, it is expected to continue to maintain a high proportion of at least 60% in between 2023 and 2026.

[Display Panel Market Share]

(Unit: USD 100 millions)

 

LOGO

Note) The market share is calculated based on sales amount

Source: OMDIA, KDIA (August 2023)

 

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The display panel industry shows relatively high economic volatility depending on periodic imbalances in the supply and demand. However, various positive factors, including a relatively large market compared to other industries, reduced economic volatility due to the diversification of customer base and high capital/technology entry barriers, mitigate the risks involved in the industry. While the Company is directly affected by fluctuations in the panel prices depending on supply and demand, it is able to respond to market volatility through its industry-leading production capacity and front-end and back-end infrastructure of its affiliates.

[Supply and Demand of LCD Display by Year]

 

LOGO

Source: OMDIA, KR (May 2023)

Note 1) “Glut” means the ratio of oversupply of panel shipments against products.

[Trend in, and Outlook for, LCD Television Panel Prices]

(Unit: USD)

 

LOGO

Source: OMDIA, Shinhan Securities Research Center

 

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The profitability of the display panel industry is affected by the selling prices of panels determined by supply and demand. While increased inventory in the market and a decrease in the demand for panels by product manufacturers had caused oversupply from the second half of 2015 until the first half of 2016, the Company’s competitors, including Samsung Display and Panasonic, began to restructure some of their LCD lines in 2016, which had led to a reduction in the supply of panels and an overall improvement in the selling prices. Although the effects of such restructuring in the second half of 2016 lasted until the first half of 2017 to cause a tightening in the market supply level, a decrease in the demand resulting from an increase in the prices of certain television products coupled with Chinese panel manufacturers’ operation of their equipment and facilities in 2017 led to an increase in the overall supply of LCD display panels, which in turn resulted in a decrease in its selling prices.

In particular, as China’s BOE Technology Group (“BOE”)’s operation of its 10.5th-generation production facilities in 2018 prompted a rapid increase in the productivity and cost efficiency of China’s leading manufacturers primarily producing large panels, the downward trend in the panel prices continued until the first half of 2020. However, the prevalence of contactless social norms, including remote working and online education, as a result of the COVID-19 pandemic that began in 2020 led to an increase in the purchases of IT devices, such as monitors and laptops, and an increase in the sales volume of large-sized and high-resolution televisions caused by an increased in the hours spent on indoor activities, among other factors, resulted in the increase in demand for panel products and a surge in the prices of panels. However, due to the relaxation of COVID-19 preventive measures and the supply expansion of LCD products mainly by Chinese manufacturers, the price of LCD panels started to drop, and domestic and overseas LCD panel manufacturers dramatically reduced their capacity utilization rates as the panel prices hovered below the production costs of LCD panels. The price of LCD television panels slightly dropped but showed signs of recovery from the first half of 2023 due to the adjustment of capacity utilization rates by major suppliers and increased demand from television manufacturers. For example, the price of a 32-inch LCD panel increased by 26% from approximately USD 31 in January 2023 to approximately USD 39 in August 2023. However, as the overall demand in the market has not recovered due to a delay in the global economic recovery, the price of LCD panels began to drop in October 2023 despite adjustments by panel suppliers’ in their capacity utilization rates and it is expected that the price will continue to decrease in the future. In particular, as Korean display manufacturers, including the Company, began to suspend their production of LCD panels, the LCD panel prices are heavily dependent on the volume of supply from Chinese manufacturers. Such volatility in the LCD panel prices caused by various factors affecting the supply and demand in the market may have negative effects on the profitability of the Company.

[Manufacturing Facility Utilization Rate of Display Panel Manufacturers]

 

LOGO

Source: OMDIA (October 2023)

 

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The manufacturing facility utilization rate of display panel manufacturers, which had shown an upward trend since the first half of 2023 when LCD panel prices rebounded, started to drop under the expectations of decreased demand and lower LCD panel prices. Pursuant to OMDIA’s forecast in October 2023, display panel manufacturers’ manufacturing facility utilization rate is expected to drop by a larger margin than the previously forecasted rate in August 2023. A decrease in the LCD panel prices directly impacts the business strategies of display panel manufacturers, including the Company, making their products less profitable and causing a drop in their manufacturing facility utilization rates. In particular, due to a reduction in the profitability of LCD television panels of the Company and its planned expansion of the OLED business, the Company suspended the production of LCD television panels in Korea in December 2022 and reduced the utilization rate of its LCD manufacturing facility in Guangzhou, China to approximately 50% as of the date of submission of this prospectus. The Company will decide on its strategy relating to the operation of its LCD manufacturing facility in Guangzhou after comprehensively examining the LCD panel market conditions and global economic conditions. Investors are advised to note that, as the Company is undergoing various discussions on such matter, it will continue to communicate with investors through electronic disclosure as specific plans materialize in the future.

 

D. Risks of intensifying competition following Chinese manufacturers’ supply expansion

While Korean manufacturers, including the Company, are enjoying large market shares in the global display panel market, a rapid increase in the market shares of Chinese manufacturers has been intensifying competition in the display panel market. Korean manufacturers currently achieve higher profitability than their Chinese competitors by producing high value-added display products, including OLED display panels. However, Chinese manufacturers are investing heavily in small- and medium-sized OLED display panels with the support of the Chinese government. In the smartphone OLED market, the ongoing trade dispute between the United States and China has led to a wave of “patriotic consumption” in China, which has led to an increase in the sales of smartphones manufactured in China and adoption of OLED panels for such smartphones. As such, Chinese panel manufacturers are expected to expand their supplies through support by the Chinese government, among other factors, which is likely to further intensify competition in the display panel industry and result in an oversupply. This may have negative effects of the profitability of the Company by causing a drop in its selling prices and its market share of display panels.

The LCD panel industry in which the Company is engaged is highly competitive, and the prices and profit margins of the Company’s products are affected by the expansion of production facilities by its panel manufacturer competitors in Korea, Taiwan, China and Japan. In particular, Chinese panel manufacturers are potentially the largest suppliers with price competitiveness. Chinese panel manufacturers have begun their full-scale investments in 8th-generation and 10.5th-generation large-sized LCD panel production facilities. As Chinese manufacturers are expected to continue operating and constructing new 10.5th-generation production facilities, including BOE’s commencement of its second 10.5th-generation LCD production line in 2021, their supply expansion and aggressive pricing are likely to lead to increased competition in the LCD display market.

In the second half of 2020, as a result of the COVID-19 pandemic, there were setbacks in the production activities due to disruptions in the operations of factories in China, including BOE’s 10.5th-generation LCD factory in Wuhan, Sharp (acquired by Foxconn)’s 10.5th-generation factory in Guangzhou, TCL (CSOT)’s 10.5th-generation T7 factory and HKC’s 8.6th-generation LCD factory in Mianyang. In addition, as Samsung Display and LG Display reduced their productions of LCD products in 2020 while there were delays in the expansion of production by 10.5th-generation and 8.5th-generation LCD factories of Chinese panel manufacturers, the prices of LCD television panels continued to increase. The prices of LCD panels are heavily dependent on the quantity of supply from Chinese manufacturers that maintain a dominant position in the LCD market. The full-scale operation of new production facilities by Chinese manufacturers will lead to an increase the supply of display panels and a decrease in the selling prices of panels, which will likely have a negative effect on the profitability of the Company.

 

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[LCD Market Share by Country]

 

                                         (Unit: %)  

Category          

     Nationality      2017        2018        2019        2020        2021        2022  

LCD Market as a Whole

     China        25.2          30.6          37.2          44.7          50.8          55.5  
     Taiwan        27.7          30.5          28.3          29.7          31.7          27.6  
     Korea        32.9          29.2          25.8          20.2          14.4          13.5  
     Japan        13.0          8.2          7.6          4.6          2.5          2.9  
     Others        1.1          1.5          1.2          0.7          0.5          0.5  

Large-sized

     China        23.3          28.2          35.0          43.2          50.6          56.3  
     Taiwan        34.5          32.3          30.5          31.2          32.6          27.5  
     Korea        41.8          37.8          33.3          25.4          16.8          16.2  
     Japan        0.4          1.8          1.2          0.2          0.0          0.0  

Small- and Mid-Sized

     China        28.9          35.2          40.9          48.1          51.8          53.1  
     Taiwan        14.9          27.0          24.4          26.5          28.6          27.8  
     Japan        36.8          20.7          18.5          14.6          11.2          11.8  
     Korea        16.3          12.6          12.9          8.5          6.1          5.2  
     Others        3.1          4.4          3.3          2.2          2.3          2.1  

Source: OMDIA, KDIA’s Key Statistics in Display Industry (August 2023)

Due to China’s full-scale investment into LCD panels, Chinese manufacturers’ market share of LCD panels rose by 30.3 percentage points from 25.2% in 2017 to 55.5% in 2022. In contrast, Korean manufacturers’ market share of LCD panels dropped by 19.4 percentage points from 32.9% in 2017 to 13.5% in 2022.

In particular, BOE has continually expanded its production facilities with full support from the Chinese government, and accordingly, BOE’s market share of large-sized LCD panels surged from approximately 13.4% in 2017 to 32.1% in 2022. As the market shares of other display manufacturers in the Greater China region, including AUO and China Star, have also continued to increase, display manufacturers from such region have achieved leading positions in the large-sized LCD panel market in terms of market share since 2019, and the gap in the market share between such Chinese manufacturers and manufacturers of other countries continues to increase. In contrast, the combined market share of Korean manufacturers, including the Company, in the global large display panel market recorded 16.2% as of 2022 (LG Display: 15.6%, Samsung Display: 0.6%), decreasing by 25.6 percentage points from 41.8% (LG Display: 27.8%, Samsung Display: 14.0%) in 2017, which reflects a downward trend in recent years. In the case of small- and medium-sized LCD panels, the market share of Chinese manufacturers in the global LCD panel market is also increasing due to their strategy of producing large volumes of low-priced panels, which is supported by subsidies granted by the Chinese government. China’s share in the small- and medium-sized LCD panel market increased from 28.9% in 2017 to 53.1% in 2022. Although the Company is responding to the dominant position of Chinese manufacturers by focusing on the production of high-value-added small- and medium-sized LCD panels based on its technological competitiveness, its share in the small- and medium-sized LCD panel market significantly declined from 16.0% in 2017 to 5.2% in 2022. The profitability of Korean panel manufacturers in the LCD sector has also been affected by the increased volatility in the selling prices of LCD panels due to aggressive pricing policies of Chinese manufacturers and inferior price competitiveness of Korean panel manufacturers. Therefore, Samsung Display completely terminated its LCD business in June 2022 whereas the Company postponed a part of its planned suspension of the production of LCD panels for televisions amid increases in the price of LCD panels and shortages in their supply. However, as the selling prices of LCD panels against the production cost thereof continued falling thereafter, the Company also decided to cease its production of LCD television panels in Korea in December 2022. As of the date of submission of this prospectus, the Company has been operating its LCD manufacturing facility in Guangzhou, China, which is the only LCD panel manufacturing facility it currently continues to operate, at a reduced capacity and utilization rate. The Company is considering a phased exit strategy for such facility in light of the current LCD television panel market and global economic conditions. The Company is conducting various discussions on how to maximize the utilization value of its LCD manufacturing facility in Guangzhou,, and will continue to communicate with investors as plans materialize. As discussed above, Korean manufacturers, including the Company, suspended their production of LCD panels or reduced the proportion thereof in their business portfolio while transitioning into an OLED-oriented business structure.

 

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[Large LCD Market Share by Manufacturer]

 

                                  (Unit: %)  

Category     

     2017        2018        2019        2020        2021        2022  

BOE

       13.4          17.3          20.7          22.9          28.4          32.1  

LG Display

       27.8          26.1          23.9          17.2          15.3          15.6  

China Star

       6.2          5.5          6.2          8.8          11.7          13.6  

Innolux

       13.7          12.7          12.2          11.1          11.6          9.8  

AUO

       14.0          13.8          12.9          11.9          12.2          9.5  

Sharp

       6.2          4.8          5.0          7.6          8.0          7.3  

HKC Display

       0.6          1.3          1.8          3.7          6.3          6.8  

CHOT

       —           0.6          1.8          2.3          2.5          2.2  

HannStar

       0.2          0.5          0.4          0.6          0.8          0.9  

Tianma

       0.1          0.2          0.4          0.3          0.4          0.5  

Source: OMDIA, KDIA’s Key Statistics in Display Industry (August 2023)

[Small- and Medium-sized LCD Market Share by Manufacturer]

 

                                  (Unit: %)  

Category     

     2017        2018        2019        2020        2021        2022  

BOE

       10.5          12.6          15.7          19.0          18.8          20.2  

Tianma

       10.4          15.2          15.5          16.3          18.8          17.8  

Sharp

       11.8          10.7          9.8          10.4          10.2          10.6  

Japan Display

       22.3          18.0          16.2          12.7          9.0          9.5  

Innolux

       5.4          5.8          6.3          8.6          10.2          9.0  

AUO

       5.5          6.6          6.5          5.0          5.4          6.2  

Truly

       3.8          1.7          1.0          3.6          5.3          6.1  

China Star

       0.1          1.7          5.1          4.8          4.8          5.3  

LG Display

       16.0          12.6          12.9          8.5          6.1          5.2  

IVO

       0.1          0.0          1.4          1.4          2.0          2.1  

Source: OMDIA, KDIA’s Key Statistics in Display Industry (August 2023)

 

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As discussed above, China has played an important role on the supply side in the display panel industry. The Chinese government has encouraged the purchases of products manufactured in China and discouraged the market entries of foreign companies since the proposal of the “Buy China” bill in 2003, and has been providing Chinese display panel manufacturers with corporate tax reductions and exemptions and subsidies, among others. The “Made in China 2025” initiative announced in 2015 specifies the introduction of the local semiconductor industry fund and the expansion of financial support, and the ‘semiconductor industry development plan’ announced in 2016 aims to increase the sales and narrow the gap with global leading companies by 2020. The “three-year action plan for the expansion of information consumption and advancement” announced in 2018 mentions product innovation to facilitate the development of new display products and the achievement of industrial restructuring, and the acceleration of the development of display-related products to the extent of next-generation electronic information technologies, science and technology innovation was declared through the “Fourteenth five-year plan for national economy and social development” announced in October 2020 and the Central Committee of the Chinese Communist Party’s suggestion for the establishment of long-term targets for 2035. Furthermore, the Chinese government announced in March 2021 its policy to grant benefits of tariff exemptions, among others, for materials, components and consumables to be imported for the manufacturing of LCD, OLED and other display panels for 10 years until 2030. Such announcements and policies of China illustrate its willingness to achieve the internalization of equipment and materials through technological advancement and production expansion.

[Major Policies that Support the Chinese Display Industry]

 

Policy

  

Details

Fourteenth Five-Year Plan for National Economy and Social Development and the Central Committee of the Chinese Communist Party’s Suggestion (2020)   

–   To accelerate the development in nine key sectors of the new strategic industry, including next-generation information technology and new materials

Implementation Opinion for Facilitation of Enhancement of Quality of Products and Services in Manufacturing Industry (Ministry of Industry and Information Technology, 2019)   

–   To build a flexible display innovation center

 

–   To proactively pursue the commercialization and industrialization of innovative achievements

Three-Year Action Plan for the Expansion of Information Consumption and Advancement’ (2018 – 2020) (Ministry of Industry and Information Technology, National Development and Reform Commission, 2018)   

–   To accelerate the development of new display products

 

–   To achieve product innovation and industrial restructuring with groundbreaking achievements from mass-production technologies for ultra-high-resolution flexible panels, among others

 

–   To extend applications of display panel manufacturers and terminal manufacturers in other sectors, including the Internet, Internet of Things and Artificial Intelligence

 

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“Made in China 2025” Technology Roadmap (National Manufacturing Promotion Strategic Advisory Committee, 2017)   

–   (Printing display) To develop 100-inch, 8k/4k printing AMOLED displays by 2025

 

–   (Flexible display) To develop 100-inch, 8k rollable, 4k flexible and small- and mid-sized foldable displays by 2025

Overview of Thirteenth Five-Year Plan for National Economy and Social Development (State Council, 2016)   

–   To nurture new display products as new growth engines

Made in China 2025 (State Council, 2015)   

–   To increase the self-sufficiency rates in major manufacturing industries

 

–   To accelerate quality improvement of electronic component products

Action Plan for New Display Industrial Innovation and Development for 2014 to 2016 (Ministry of Industry and Information Technology, National Development and Reform Commission, 2014)   

–   To emphasize the development of the new display industry

 

–   To pursue the groundbreaking development and improvement of quality, effects and benefits of advanced technologies so that new displays can serve as a key springboard for the innovation and development of next-generation information technology industries

Industrial Restructuring Guidance List (Amendment, 2011) (Ministry of Industry and Information Technology, National Development and Reform Commission, 2013)   

–   To include components of new flat displays, including TFT-LCD, PDP, OLED, laser display and 3D display, and related components in the “promoted category”

Twelfth Five-Year Plan for the Development of New Display Science and Technology (Ministry of Science and Technology, 2012)   

–   To establish standards of key patents for new display products and formation of national and industry standards

 

–   To develop materials, important equipment, low-cost technologies, low-power loss technologies related to the new display industry and technologies for product designing

Source: Korea Institute for Industrial Economics & Trade (KIET)’s Development of Chinese Display Industry and Its Implications (November 2020)

As display manufacturers in China can raise significant portions of the funds required to invest in facilities and equipment through subsidies granted by the Korean government and special low interest rate loans from banks. they are in an advantageous position to continuously undertake investment activities in a proactively manner given the relatively lower financial burden on them. Accordingly, Chinese panel manufacturers are continuously expanding their supplies in order to take advantage of such situation. BOE’s additional 10.5th-generation facilities and other LCD panel manufacturers’ manufacturing facilities in the Greater China region began mass production in the first half of 2020 and 2019, respectively. As the productivity and cost efficiency of leading Chinese panel manufacturers mainly producing large panels have improved rapidly, the Company’s market dominance, including its market share of LCD panels, has deteriorated even further.

 

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[Outlook for TFT-LCD Production Capacity by Country]

(Unit: 1,000 panels)

LOGO

Note) Sharp is included as a Taiwanese manufacturer.

Source: OMDIA, KDIA’s Key Statistics in Display Industry (August 2023)

As discussed above, as the LCD panel supply in the Chinese display industry has expanded on the back of large investments in production facilities and full-scale support from the Chinese government, the LCD production capacity in China increased by 1.4% to 43,860,000 panels in 2023 from 43,280,000 panels in 2022 and is expected to grow at the annual average growth rate of 5.1% to reach 53,470,000 panels by 2027. Such increase in the production capacity of Chinese panel manufacturers caused by their continued investment in equipment and facilities is likely to undermine the Company’s market dominance and lead to a decrease in the selling prices of display panel products, thereby negatively affecting the Company’s profitability.

[Large OLED Market Share by Manufacturer]