Samsung Life Insurance Co., Ltd. and Subsidiaries. Consolidated Financial Statements December 31, 2016 and 2015

Transcription

1 Samsung Life Insurance Co., Ltd. and Subsidiaries Consolidated Financial Statements

2 Index Page(s) Independent Auditor s Report 1-2 Consolidated Financial Statements Consolidated Statements of Financial Position 3-4 Consolidated Statements of Comprehensive Income 5 6 Consolidated Statements of Changes in Equity 7-8 Consolidated Statements of Cash Flows

3 Independent Auditor s Report (English Translation of a Report Originally Issued in Korean) To the Shareholders and Board of Directors of Samsung Life Insurance Co., Ltd. We have audited the accompanying consolidated financial statements of Samsung Life Insurance Co., Ltd. and its subsidiaries (collectively referred to as "the Group"), which comprise the consolidated statements of financial position as at December 31, 2016 and 2015, and the consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies and other explanatory information. Management s Responsibilities for the Financial Statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (Korean IFRS), and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibilities Our responsibility is to express an opinion on the consolidated financial statements based on our audits. We conducted our audits in accordance with Korean Standards on Auditing. Those standards require that we comply with ethical requirements, and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Group's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

4 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Opinion In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2016 and 2015, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with Korean IFRS. Other Matter Auditing standards and their application in practice vary among countries. The procedures and practices used in the Republic of Korea to audit such financial statements may differ from those generally accepted and applied in other countries. Seoul, Korea March 9, 2017 This report is effective as of March 9, 2017, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying consolidated financial statements and notes thereto. Accordingly, the readers of the audit report should understand that there is a possibility that the above audit report may have to be revised to reflect the impact of such subsequent events or circumstances, if any. 2

5 Consolidated Statements of Financial Position (In millions of Korean won) Notes Assets Cash and cash equivalents 9,37 4,723,503 2,276,606 Financial assets at fair value through profit or loss 4,9 2,094,584 2,337,133 Available-for-sale financial assets 5,9 138,214, ,894,930 Held-to-maturity financial assets 6,9 328, ,906 Loans receivable and other receivables 7,9 60,503,788 36,462,636 Derivative financial assets for hedge accounting 8,9 314,897 82,796 Investments in associates 10 1,490,325 2,603,098 Finance lease receivables 7,9 792,448 - Assets held for sale ,415 6,530 Investment properties 11 6,854,774 7,555,922 Property and equipment 12 1,454,095 1,756,873 Intangible assets , ,765 Current tax assets 198, ,289 Deferred tax assets 20 5,322 - Other assets 14 5,035,748 4,686,714 Separate account assets 15 41,505,148 39,585,698 Total assets 264,653, ,362,896 Liabilities and Equity Liabilities Insurance contract liabilities ,729, ,118,213 Policyholders' equity adjustment 18 8,075,517 6,969,288 Financial liabilities at fair value through profit or loss 9,19 71,468 47,981 Other financial liabilities 9,19 18,546,201 4,202,160 Derivative financial liabilities for hedge accounting 8,9 721, ,184 Current tax liabilities 69,599 15,174 Deferred tax liabilities 20 4,976,383 4,427,612 Provisions , ,282 Other liabilities , ,663 Separate account liabilities 15 43,857,426 40,571,594 Total liabilities 236,345, ,641,151 3

6 Consolidated Statements of Financial Position (In millions of Korean won) Notes Equity Equity attributable to owners of the Parent Company Share capital , ,000 Reserves 23 63,084 6,131 Capital adjustments 23 (2,117,768) (1,575,774) Accumulated other comprehensive income 23 15,310,260 13,548,291 Retained earnings 23 13,288,661 11,567,188 Non-controlling interests 1,664,211 75,909 Total equity 28,308,448 23,721,745 Total liabilities and equity 264,653, ,362,896 The above consolidated statements of financial position should be read in conjunction with the accompanying notes. 4

7 Consolidated Statements of Comprehensive Income Years Ended (In millions of Korean won) Notes Operating revenues Premium income 24 16,768,276 17,354,147 Reinsurance income , ,780 Interest income 26 6,681,999 5,729,876 Gains on financial assets at fair value through profit or loss , ,689 Realized gains on available-for-sale financial assets , ,815 Gains on loans receivable and other receivables Gains on derivative financial instruments for hedge accounting , ,894 Gains on foreign currency transactions 553, ,194 Fee and commission income 2,062, ,175 Dividend income 450, ,569 Rental income 437, ,407 Separate account commission received 1,442,637 1,305,766 Separate account revenue , ,945 Other operating income , ,758 Lease income 269,622 - Operating expenses 30,428,633 27,705,927 Increase in policy reserves 16 9,241,518 9,864,308 Insurance claims paid 10,610,167 10,209,610 Reinsurance expenses , ,133 Acquisition and administration expenses 29 1,523,630 1,558,883 Amortization of deferred acquisition costs 14 2,123,811 2,056,932 Asset management expenses , ,191 Interest expenses 415, ,929 Losses on financial assets at fair value through profit or loss , ,154 Realized losses on available-for-sale financial assets , ,462 Losses on loans receivable and other receivables ,978 6,911 Losses on derivative financial instruments for hedge accounting , ,678 Losses on foreign currency transactions 356, ,205 Separate account expenses , ,945 Other operating expenses 28 2,872, ,092 29,442,112 26,557,433 Operating profit 986,521 1,148,494 5

8 Consolidated Statements of Comprehensive Income Years Ended (In millions of Korean won) Notes Non-operating revenues 28 2,645, ,046 Non-operating expenses 28 1,024, ,027 Profit before income tax 2,607,476 1,371,513 Income tax expense , ,940 Profit for the period 2,149,956 1,209,573 Other comprehensive income for the period, net of tax Items that may be subsequently reclassified to profit or loss: Changes in the fair value of available-for-sale financial assets 1,796,574 1,012,762 Losses on valuation of held-to-maturity financial assets (293) (362) Gains on valuation of derivative financial instruments for hedge accounting 76,994 69,394 Shares of other comprehensive income of associates 42,041 23,688 Other comprehensive income on separate account (25,985) (29,333) Currency translation differences (98,354) (19,306) Items that will not be reclassified to profit or loss : Remeasurements of net defined benefit liabilities (18,193) 3,404 1,772,784 1,060,247 Total comprehensive income for the period 3,922,740 2,269,820 Profit attributable to: Owners of the Parent Company 2,054,267 1,211,233 Non-controlling interests 95,689 (1,660) 2,149,956 1,209,573 Total comprehensive income attributable to: Owners of the Parent Company 3,816,236 2,271,193 Non-controlling interests 106,504 (1,373) 3,922,740 2,269,820 Earnings per share attributable to the equity holders of the Parent Company (in Korean won) 34 Basic earnings per share 11,407 6,418 Diluted earnings per share 11,407 6,418 The above consolidated statements of comprehensive income should be read in conjunction with the accompanying notes. 6

9 Consolidated Statements of Changes in Equity Years Ended (In millions of Korean won) Share capital Reserve Capital adjustments Accumulated other comprehensive income Retained earnings Equity attributable to owners of the Parent Company Noncontrolling interest Total Balance at January 1, ,000 7,126 (1,086,828) 12,488,331 10,696,290 22,204,919 79,820 22,284,739 Comprehensive income Profit for the period ,211,233 1,211,233 (1,660) 1,209,573 Changes in the fair value of available-for-sale financial assets ,012,773-1,012,773 (11) 1,012,762 Losses on valuation of held-to-maturity financial assets (362) - (362) - (362) Gains on valuation of derivative financial instruments for hedge accounting ,394-69,394-69,394 Shares of other comprehensive income of associates ,688-23,688-23,688 Other comprehensive income on separate account (29,333) - (29,333) - (29,333) Currency translation differences (19,617) - (19,617) 311 (19,306) Remeasurements of net defined benefit liabilities ,417-3,417 (13) 3,404 Transactions with owners Cash dividends (340,335) (340,335) - (340,335) Acquisition of treasury share - - (488,097) - - (488,097) - (488,097) Others - (995) (849) - - (1,844) (2,538) (4,382) Balance at December 31, ,000 6,131 (1,575,774) 13,548,291 11,567,188 23,645,836 75,909 23,721,745 7

10 Consolidated Statements of Changes in Equity Years Ended (In millions of Korean won) Share capital Reserve Capital adjustments Accumulated other comprehensive income Retained earnings Equity attributable to owners of the Parent Company Noncontrolling interest Total Balance at January 1, ,000 6,131 (1,575,774) 13,548,291 11,567,188 23,645,836 75,909 23,721,745 Comprehensive income Profit for the period ,054,267 2,054,267 95,689 2,149,956 Changes the in fair value of available-for-sale financial assets ,787,045-1,787,045 9,529 1,796,574 Losses on valuation of held-to-maturity financial assets (293) - (293) - (293) Gains on valuation of derivative financial instruments for hedge accounting ,860-75,860 1,134 76,994 Shares of other comprehensive income of associates ,041-42,041-42,041 Other comprehensive income on separate account (25,985) - (25,985) - (25,985) Currency translation differences (96,878) - (96,878) (1,476) (98,354) Remeasurements of net defined benefit liabilities (19,821) - (19,821) 1,628 (18,193) Transactions with owners Cash dividends (332,794) (332,794) (113,302) (446,096) Acquisition of treasury share - - (541,994) - - (541,994) - (541,994) Capital increase ,176 12,176 Changes in scope of consolidation ,871,916 1,871,916 Others - 56, ,953 (288,992) (232,039) Balance at December 31, ,000 63,084 (2,117,768) 15,310,260 13,288,661 26,644,237 1,664,211 28,308,448 The above consolidated statements of changes in equity should be read in conjunction with the accompanying notes. 8

11 Consolidated Statements of Cash Flows Years Ended (In millions of Korean won) Notes Cash flows from operating activities Cash used in operations Profit for the period 2,149,956 1,209,573 Adjustments for income and expenses 37 4,123,921 5,971,002 Changes in operating assets and liabilities 37 (7,726,159) (7,900,077) (1,452,282) (719,502) Interests received 6,666,585 5,832,101 Interests paid (333,251) (100,376) Dividends received 448, ,057 Income taxes paid (494,986) (91,192) Net cash inflow from operating activities 4,834,400 5,288,088 Cash flows from investing activities Proceeds from disposal of available-for-sale financial assets 11,222,559 13,912,184 Payment for acquisition of available-for-sale financial assets (13,504,092) (19,751,363) Decrease of held-to-maturity financial assets 94, ,039 Settlement of derivative financial instruments for hedge accounting (140,929) (217,392) Payment for acquisition of investments in associates (502,533) (9,666) Proceeds from disposal of investments in associates 26,441 27,507 Payment for acquisition of investment properties (694,132) (1,606,914) Proceeds from disposal of investment properties 679,823 51,655 Payment for acquisition of property and equipment (131,107) (67,604) Proceeds from disposal of property and equipment 342,517 20,456 Payment for acquisition of intangible assets (176,213) (117,536) Proceeds from disposal of intangible assets 48,930 7,389 Proceeds from disposal of group of assets held-for-sale 786, ,814 Changes in scope of consolidation 20,445 (41,840) Changes due to business combination (983,438) 675 Others (23,913) 13,960 Net cash outflow from investing activities (2,934,095) (7,176,636) Cash flows from financing activities Payment of dividends (446,095) (340,335) Payment for acquisition of treasury shares (541,994) (488,097) Proceeds of borrowings 15,165, ,815 Payment of borrowings (14,187,116) - Proceeds of debentures 38,544,260 - Repayment of debentures (37,624,400) - Increase in non-controlling interest (357,157) 242,983 Net cash inflow (outflow) from financing activities 552,932 (52,634) Net increase (decrease) in cash and cash equivalents 2,453,237 (1,941,182) Cash and cash equivalents at the beginning of the year 2,276,606 4,216,720 Effects of exchange rate changes on cash and cash equivalents (6,340) 1,068 Cash and cash equivalents at the end of the year 37 4,723,503 2,276,606 The above consolidated statements of cash flows should be read in conjunction with the accompanying notes. 9

12 1. The Group The consolidated financial statements of Samsung Life Insurance Co., Ltd. ( the Company ) and its subsidiaries (collectively referred to as the Group ) have been prepared in accordance with Korean IFRS 1110, Consolidated financial statements. Samsung Life Insurance Co., Ltd. was incorporated under the laws of the Republic of Korea on April 24, 1957, and has 88 local divisions and 632 branches as at December 31, The Company is engaged in life insurance business as permitted by the Insurance Business Law of the Republic of Korea. On May 12, 2010, the Company was listed on the Korea Exchange. The following table lists numbers of available and discontinued products as at December 31, 2016: Products Available Discontinued Total Annuity with tax benefits Annuity Whole life, Term life insurance Endowment insurance Group insurance ,192 1,268 As at December 31, 2016, major shareholders of the Company and their respective shareholdings are as follows: Name of Shareholder Number of Shares (in thousands) Percentage of Ownership (%) Lee Kun-Hee 41, Samsung C&T Co.,Ltd. 38, E-MART Co., Ltd. 11, Samsung Foundation of Culture 9, SHINSEGAE Co., Ltd. 4, Samsung Life Public Welfare Foundation 4, CJ CheilJedang Corp 2, Employee share ownership association 2, Others 64, , Treasury shares 20, ,

13 List of Samsung Life Insurance s consolidated subsidiaries The Company s major consolidated subsidiaries as at December 31, 2016, are as follows: Name of Corporate Number of Shares Ownership interest held by the Group (%) Primary Business Location Fiscal YearEnd Samsung Life Service Claim Adjustment Co., Ltd. 3,152, Other service Korea Dec. 31 SSI Holding 1 25,639, Other financing Thailand Dec. 31 Park Capital Holding 2 50,079, Other financing Thailand Dec. 31 Thai Samsung Life Insurance Co., Ltd. 2 71,550, Life Insurance Thailand Dec Gresham Street (Jersey) Limited 1,380, Other financing Jersey Dec Gresham Street (Singapore) Private Limited Koramco Firstep Real Estate Investment Trust No Real estate collective investment vehicle Real estate collective investment vehicle Singapore Dec. 31 Korea Dec. 31 Beijing Samsung Real Estate Co., Ltd Real estate lease China Dec. 31 Samsung SRA Asset Management Co., Ltd. 4,000, Samsung Asset Management Co., Ltd. 18,686, Samsung Asset Management (New york), Inc Samsung Asset Management(Hong-Kong) Co., Limited Samsung Asset Management (London) Ltd Samsung Triple Alpha Asia Feeder Fund Limited Samsung Global All Asset Equity H Fund Samsung Global All Asset Equity Master H Fund Samsung Asset Management (Beijing) Limited Samsung Private Equity Manager I Co., Ltd Samsung Rothschild Europe CB Securities Feeder Investment Trust H Samsung Solution Global Alpha Securities Feeder Investment Trust H Investment management company Investment management company Investment management company Investment management company Investment management company Collective investment vehicle Collective investment vehicle Collective investment vehicle Investment management company Investment management company Collective investment vehicle Collective investment vehicle Korea Dec. 31 Korea Dec. 31 U.S.A. Dec. 31 Hong Kong Dec. 31 U.K. Dec. 31 Cayman Dec. 31 Korea Dec. 31 Korea Dec. 31 China Dec. 31 Cayman Dec. 31 Korea Dec. 31 Korea Dec. 31 Samsung Card 5 83,259, Specialized credit financial business Korea Dec. 31 SAMSUNGCARD CUSTOMER SERVICE CO.,LTD Other service Korea Dec. 31 Challenger XXI Securitization Specialty Co., Asset-backed Ltd securitization Korea Dec. 31 Challenger XXII Securitization Specialty Co., Asset-backed Ltd securitization Korea Dec. 31 Challenger XXIII Securitization Specialty Co., Asset-backed Ltd securitization Korea Dec. 31 Challenger XXIV Securitization Specialty Co., Asset-backed Ltd securitization Korea Dec

14 Name of Corporate Number of Shares Ownership interest held by the Group (%) Primary Business Location Fiscal YearEnd Challenger XXV Securitization Specialty Co., Ltd Asset-backed securitization Korea Dec. 31 Challenger XXVI Securitization Specialty Co., Asset-backed Ltd Korea Dec. 31 securitization Samsung life insurance financial service Dec. 31 8,000, insurance agency Other service Korea Samsung SRA Private Real Estate Investment Real estate collective Korea Dec. 31 Trust No.1 3 investment vehicle Samsung SRA Private Real Estate Investment Trust No.2 3 Samsung Private Equity Real Estate Investment Trust No.1 3 Samsung Private Equity Real Estate Investment Trust No.3 3 Samsung SRA Private Real Estate Investment Trust No.12 3 Samsung SRA Global Core office Real Estate Trust No Samsung China Equity No Samsung China Equity Master Fund Samsung USA Core Bond (H) Samsung USA Core Bond Master Fund Samsung Asia Representative Equity No Samsung Asia Representative Equity Master Fund Samsung USA Dynamic Asset Allocation Balanced (H) Samsung USA Dynamic Asset Allocation Balanced Master Fund Samsung Korea New Growth Industry Equity No.1 Samsung Korea Concentrated Structural Growth Equity Samsung Asia Long-Short Equity Fund Samsung Asia Long-Short Equity Master Fund Samsung Infra Private Equity Fund III HSI Futures RMB FX ETF Samsung KODEX Japan Samsung Global Dynamic Asset Allocation Fund Samsung Global Stock Securities Master Real estate collective investment vehicle Real estate collective investment vehicle Real estate collective investment vehicle Real estate collective investment vehicle Real estate collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Hong Kong Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec

15 Name of Corporate Number of Shares Ownership interest held by the Group (%) Primary Business Location Fiscal YearEnd Samsung Korea Bond Securities Master Samsung Global Commodity Equity Fund Master Samsung Korea Stock Securities Master Samsung CHINA Mainland Leaders Securities Feeder Master Investment Samsung Global Bond Securities Master Samsung India S-Mid Cap Focus Equity UH Fund Cf Samsung India S-Mid Cap Focus Equity UH Master Fund Cf Samsung Global Developed Markets Equity H Fund Cf Samsung Global Developed Markets Equity H Master Fund Cf Samsung Global Bond Securities H Fund Samsung Global Private Equity Manager Fund I, L.P Samsung Asia Dividend Equity H Fund Cf Samsung Asia Dividend Equity H Master Fund Cf Samsung Chinese Mainland Fixed Income RMB H Fund Cf Samsung Chinese Mainland Fixed Income RMB H Master Fund - Cf Samsung US Index Equity H Samsung US Index Equity Master Samsung Europe Index Equity H Samsung Europe Index Equity Master Samsung Japan Index Equity H Samsung Japan Index Equity Master Samsung Japan Small and Mid-Cap Focus Equity Fund H Samsung Japan Small and Mid-Cap Focus Equity Fund Master Samsung UK Solar Senior Bond Private Fund Samsung Japan Solar Energy Private Fund No Korea TDF 2020 Equity H Korea TDF 2025 Equity H Korea TDF 2030 Equity H Korea TDF 2035 Equity H Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec

16 Name of Corporate Number of Shares Ownership interest held by the Group (%) Primary Business Location Fiscal YearEnd Korea TDF 2040 Equity H Korea TDF 2045 Equity H Korea TDF 2015 Equity H Samsung UK Biomass Private Fund No Samsung Aircraft Private Fund No Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec Considering the Company can control the investee by nominating the majority of members of board of directors, SSI Holding is classified as a subsidiary even though the Company owns less than 50% of the equity shares. 2 Park Capital Holdings and Thai Samsung Life Insurance Co., Ltd. have been classified as a subsidiary even though the direct shareholding held by the Company is below 50% since the Company has control over the investee because of the indirect shareholding of the Company's subsidiary. 3 Considering the percentage of ownership and de facto agent control, the entities are classified as a subsidiary even though the Company owns less than 50% of the equity shares. 4 Although the Company does not have direct shareholding, the entities have been included in the consolidation scope since the Company has indirect control through its subsidiary. 5 Samsung Card is reclassified from an associate to a subsidiary after acquisition of additional equity shares during the year ended December 31, A summary of financial information as at and for the periods ended December 31, 2016 and 2015, of the subsidiaries is as follows: 2016 (in millions of Korean won) Assets Liabilities Equity Operating revenue Profit (loss) for the period Samsung Life Service Claim Adjustment Co., Ltd. 52,251 32,538 19, ,165 (1,390) Thai Samsung Life Insurance Co., Ltd 1 196, ,568 11, ,418 (7,778) 30 Gresham Street (Jersey) Limited 1 495, , ,986 36,069 4,317 Koramco Firstep Real Estate Investment Trust No , , ,437 16,152 1,336 Beijing Samsung Real Estate Co., Ltd. 727,341 25, ,999 1,479 (3,020) Samsung SRA Asset Management Co., Ltd. 41,127 6,025 35,102 22,635 7,342 Samsung Asset Management Co., Ltd , , , ,702 49,826 Samsung Card 1 21,904,459 15,288,787 6,615,672 3,470, ,443 Samsung life insurance financial service insurance agency 45,298 9,788 35,510 36,154 (2,391) Samsung SRA Private Real Estate Investment Trust No.1 132,911 74,688 58,223 8,575 3,074 Samsung SRA Private Real Estate Investment Trust No.2 206,762 37, , ,913 67,861 Samsung Private Equity Real Estate Investment 329,047 33, ,178 25,346 14,754 14

17 (in millions of Korean won) Assets Liabilities Equity Trust No.1 Samsung Private Equity Real Estate Investment Trust No.3 Operating revenue Profit (loss) for the period ,520 20,525 Samsung SRA Private Real Estate Investment Trust No , , ,658 30,755 10,114 Samsung SRA Global Core office Real Estate Trust 914, , ,553 54,543 (10,590) No. 1 Samsung China Equity No ,541 3,735 86,806 22,148 3,725 Samsung USA Core Bond (H) 1 121,568 8, ,846 25,052 3,707 Samsung Asia Representative Equity No , ,940 7,046 2,850 Samsung USA Dynamic Asset Allocation Balanced (H) 1 186,972 15, , ,144 21,098 Samsung Korea New Growth Industry Equity No.1 43, ,202 9,548 1,030 Samsung Korea Concentrated Structural Growth 46,932 1,241 45,691 11,987 2,462 Equity No.1 Samsung Asia Long-Short Equity Fund 45,989 1,967 44,022 33,161 (4,110) Samsung Infra Private Equity Fund III 217, ,789 9,632 9,023 HSI Futures RMB FX ETF 16, ,821 3, Samsung KODEX Japan 13, ,764 2, Samsung Global Dynamic Asset Allocation Fund 1 35,219 1,349 33,870 4, Samsung India S-Mid Cap Focus Equity UH Fund Cf 1 24, ,272 3, Samsung Global Developed Markets Equity H Fund Cf 1 125,256 6, ,723 29,024 9,124 Samsung Global Bond Securities H Fund 99,906 2,135 97,771 13,530 (2,246) Samsung Global Private Equity Manager Fund I, L.P. 53,915 2,594 51,321 5,108 5,813 Samsung Asia Dividend Equity H Fund Cf 1 22, ,171 5,434 1,641 Samsung Chinese Mainland Fixed Income RMB H Fund Cf 1 50, ,488 4,933 (687) Samsung US Index Equity H 20, ,507 4,664 2,245 Samsung Europe Index Equity H 3, , Samsung Japan Index Equity H 14, ,710 3,063 1,734 Samsung Japan Small and Mid-Cap Focus Equity 46,877 2,982 43,895 19,764 (1,511) Fund H Samsung UK Solar Senior Bond Private Fund 65, ,396 12,150 2,534 Samsung Japan Solar Energy Private Fund No.1 42, ,149 2, Korea TDF 2020 Equity H 16, ,277 1, Korea TDF 2025 Equity H 10, ,086 1, Korea TDF 2030 Equity H 9, , Korea TDF 2035 Equity H 7, , Korea TDF 2040 Equity H 11, ,581 1, Korea TDF 2045 Equity H 8, , Korea TDF 2015 Equity H 101,441 5,652 95,789 8,582 1,601 Samsung UK Biomass Private Fund No.1 21, , Samsung Aircraft Private Fund No.3 5, , (59) 1 Consolidated financial information of investee and subsidiaries owned by the investee (in millions of Korean won) Assets Liabilities Equity Operating revenue Profit (loss) for the period Samsung Life Service Claim Adjustment Co., Ltd. 62,419 40,294 22, ,758 10,960 Beijing Samsung Real Estate Co., Ltd. 618,845 18, ,805 2,770 (1,058) Samsung SRA Asset Management Co., Ltd. 30,715 2,973 27,742 14,379 2,285 Thai Samsung Life Insurance Co., Ltd 1 157, ,580 27,802 73,690 (9,122) 30 Gresham Street (Jersey) Limited 1 584, , ,446 36,060 1,371 Koramco Firstep Real Estate Investment Trust No , , ,399 16,324 1,187 Samsung Asset Management Co., Ltd , , , ,424 49,396 15

18 (in millions of Korean won) Assets Liabilities Equity Operating revenue Profit (loss) for the period Samsung life insurance financial sevice insurance agency 44,873 6,728 38,145 7,869 (1,800) Samsung SRA Private Real Estate Investment Trust No.1 134,532 74,648 59,884 8,610 2,042 Samsung SRA Private Real Estate Investment Trust No.2 254, , ,900 14,282 2,131 Samsung Private Equity Real Estate Investment Trust No.1 331,243 32, ,389 27,277 16,819 Samsung Private Equity Real Estate Investment Trust No.3 439, , ,978 25,878 4,098 Samsung SRA Private Real Estate Investment Trust No , , ,863 25,949 1,542 Samsung SRA Global Core office Real Estate Trust 396, , ,320 11,410 (1,287) No. 1 Samsung Dividend stock Long-term Securities1 137, ,825 34,817 13,762 Samsung Index plus Securities Investment Trust 126, ,749 22, Samsung China Equity No ,211 1,339 81,872 13,563 (9,057) Samsung USA Core Bond (H) 1 101, ,486 16, Samsung Asia Representative Equity No ,469 23,141 39,328 4,462 (4,029) Samsung USA Dynamic Asset Allocation Balanced (H) 1 591,996 15, , ,328 2,428 Samsung Korea New Growth Industry Equity No.1 53,254 6,027 47,227 13,618 1,351 Samsung Korea Concentrated Structural Growth 59,122 1,044 58,078 14, Equity No.1 Samsung Asia Long-Short Equity Fund 49,806 1,251 48,555 41,150 (1,766) Samsung Infra Private Equity Fund III 226, ,010 6,545 6,181 HSI Futures RMB FX ETF 32, , (4,117) Samsung KODEX Japan 17, ,420 1, Samsung KODEX SYNTH-US Technology 15, ,482 1,476 1,437 Samsung KODEX SYNTH-US Financials 17, , Samsung KODEX SYNTH-US Industrial 14, , Samsung KODEX SYNTH-US Energy 9, , (1,746) Samsung Global Dynamic Asset Allocation Fund 1 24, , Samsung India S-Mid Cap Focus Equity UH Fund Cf 1 6, , Samsung Global Developed Markets Equity H Fund Cf 1 102,581 4,259 98,322 5,921 (1,678) Samsung Global Private Equity Manager Fund I, L.P. 4, , Samsung Asia Dividend Equity H Fund Cf 1 20, , (33) Samsung Chinese Mainland Fixed Income RMB H Fund Cf 1 50, , Consolidated financial information of investee and subsidiaries owned by the investee. For the year ended December 31, 2016, 22 firms including Samsung US Index Equity H, have been newly included in the consolidation scope, and Samsung Long-term Income Equity No.1 and other 5 firms were de-consolidated. Samsung Card and other 8 subsidiaries have been newly included in the consolidated scope. The profit or loss allocated to non-controlling interests and accumulated non-controlling interests of subsidiaries that are material to the Group for the periods ended December 31, 2016 and 2015, is as follows: 2016 (in millions of Korean won) Profit or loss allocated to non-controlling Accumulated noncontrolling Dividends paid to noncontrolling 16

19 interests interest interests Samsung Life Service Claim Adjustment Co., Ltd (3) 43 - Beijing Samsung Real Estate Co., Ltd (302) 70,213 - Thai Samsung Life Insurance Co., Ltd (2,062) 3,062 - Samsung Asset Management Co., Ltd Samsung Card ,423 1,590, ,302 95,689 1,664, , (in millions of Korean won) Profit or loss allocated to non-controlling interests Accumulated noncontrolling interest Dividends paid to noncontrolling interests Samsung Life Service Claim Adjustment Co., Ltd Beijing Samsung Real Estate Co., Ltd (44) 60,142 - Thai Samsung Life Insurance Co., Ltd (2,416) 10,776 - Samsung Asset Management Co., Ltd ,942 - (1,660) 75, Summary of Significant Accounting Policies The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated. 2.1 Basis of Preparation The Group maintains its accounting records in Korean won and prepares statutory financial statements in the Korean language (Hangul) in accordance with International Financial Reporting Standards as adopted by the Republic of Korea (Korean IFRS). The accompanying consolidated financial statements have been condensed, restructured and translated into English from the Korean language financial statements. Certain information attached to the Korean language financial statements, but not required for a fair presentation of the Group's financial position, financial performance or cash flows, is not presented in the accompanying consolidated financial statements. The consolidated financial statements of the Group have been prepared in accordance with Korean IFRS. These are the standards, subsequent amendments and related interpretations issued by the International Accounting Standards Board (IASB) that have been adopted by the Republic of Korea. The preparation of financial statements requires the use of critical accounting estimates. Management also needs to exercise judgement in applying the Group s accounting policies. 17

20 The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note Changes in Accounting Policy and Disclosures (a) New and amended standards adopted by the Group The Group has applied the following standards and amendments for the first time for their annual reporting period commencing January 1, The adoption of these amendments did not have any impact on the current period or any prior period and is not likely to affect future periods. - Disclosure Initiative Amendments to Korean IFRS 1001 Presentation of Financial Statements Korean IFRS 1001 Presentation of Financial Statements clarifies that materiality applies to the exclusion or inclusion or aggregation of the disclosures in the notes. And also, clarifies that the share of OCI arising from equity-accounted should be presented in total for items which will and will not be reclassified to profit or loss. Additional amendments are made in relation to a particular order of the notes and other. - Agriculture: Bearer Plants Amendments to Korean IFRS 1016 Property, Plant and Equipment, and Korean IFRS 1041 Agriculture Korean IFRS 1041 Agriculture now distinguishes between bearer plants and other biological asset. Bearer plants must be accounted for as Korean IFRS 1016 Property, Plant and Equipment. - Clarification of Acceptable methods of Depreciation and Amortization Amendments to Korean IFRS 1016 Property, Plant and Equipment, and Korean IFRS 1038 Intangible assets Amendments to Korean IFRS 1016 Property, Plant and Equipment clarify that a revenuebased method should not be used to calculate the depreciation of items of property, plant and equipment. Korean IFRS 1038 Intangible assets now includes a rebuttable presumption that the amortization of intangible assets based on revenue is inappropriate. This presumption can be overcome if either; the intangible asset is expressed as a measure of revenue, or it can be shown that revenue and the consumption of economic benefits generated by the asset are highly correlated. - Investment entities: Applying the Consolidation Exception Amendments to Korean IFRS 1110 Consolidated Financial Statements, Korean IFRS 1028 Investments in Associates and Joint Ventures, and Korean IFRS 1112 Disclosures of Interests in Other Entities Amendments made to Korean IFRS 1110 Consolidated Financial Statements clarify that 18

21 the exception from preparing consolidated financial statement is also available to intermediate parent entities which are subsidiaries of investment entities. If an investment entity has a subsidiary that is an investment entity and whose activities are providing services that related to the investment entity s investment activities, the investment entity measures the subsidiary at fair value through profit or loss. Amendments made to Korean IFRS 1028 Investments in Associates and Joint Ventures clarify that entities which are not investment entities but have an interest in an associate which is an investment entity have a policy choice when applying the equity method of accounting. Amendments made to Korean IFRS 1112 Disclosures of Interests in Other Entities clarify that an investment entity which does not prepare consolidated financial statements should present disclosures relating to investment entities required by Korean IFRS Accounting for Acquisitions of Interests in Joint Operations Amendments to Korean IFRS 1111 Joint Arrangements Amendments to Korean IFRS 1111 Joint Arrangements clarify the accounting for the acquisition of an interest in a joint operation where the activities of the operation constitute a business. An investor requires to apply the principles of business combination accounting when the investor acquires an interest in a joint operation that constitutes a business. - Annual Improvements to Korean IFRS Cycle Korean IFRS 1105 Non-current Assets Held for Sale and Discontinued Operation clarifies when an asset (or disposal group) is reclassified from held for sale to held for distribution or vice versa, this does not have to be accounted for as such. Korean IFRS 1107 Financial Instruments: Disclosures clarifies the specific guidance for transferred financial assets to help management determine whether the terms of a servicing arrangement constitute continuing involvement, and also clarifies that the additional disclosures relating to the amendments in 2012 Offsetting of Financial Assets and Financial Liabilities only need to be included in interim reports if required by Korean IFRS 1034 Interim Financial Reporting. Korean IFRS 1019 Employee Benefits clarifies that when determining the discount rate for post-employment benefit obligations, it is the currency in which the liabilities are denominated that is important, and not the country where they arise. Korean IFRS 1034 Interim Financial Reporting clarifies what is meant by the reference in the standard to information disclosed elsewhere in the interim financial report ; and also amended requirements for a cross-reference from the interim financial statements to the location of that information. 19

22 - Korean IFRS 1011 Construction Contract, Korean IFRS 1037 Provisions, Contingent Liabilities and Contingent Assets and Interpretation 2115 Arrangements for Property Construction These standards and interpretation clarify the accounting information disclosure requirement for construction contracts. The accounting estimates and potential risk information of the construction contracts should be disclosed in detail by either individual construction or operating segment. 20

23 (b) New standards and interpretations not yet adopted by the Group Certain new accounting standards and interpretations that have been published that are not mandatory for December 31, 2016 reporting periods and have not been early adopted by the Group are set out below. - Amendments to Korean IFRS 1007 Statement of Cash Flows Amendments to Korean IFRS 1007 Statement of Cash flows requires to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash flows. The Group will apply this amendment for annual reporting periods beginning on or after January 1, 2017 with early application permitted. The Group does not expect the amendments to have a significant impact on the consolidated financial statements. - Amendments to Korean IFRS 1012 Income Tax Amendments to Korean IFRS 1012 clarify how to account for deferred tax assets related to debt instruments measured at fair value. Korean IFRS 1012 provides requirements on the recognition and measurement of current or deferred tax liabilities or assets. The amendments issued clarify the requirements on recognition of deferred tax assets for unrealized losses, to address diversity in practice. The Group will apply the amendments for annual periods beginning on or after January 1, 2017 with early application permitted. The Group does not expect the amendments to have a significant impact on the consolidated financial statements. - Amendments to Korean IFRS 1102 Share-based Payment Amendments to IFRS 2 clarifies accounting for a modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled. And also, clarifies that the measurement approach should treat the terms and conditions of a cash-settled award in the same way as for an equity-settled award. The Group will apply the amendments for annual periods beginning on or after January 1, 2018 with early application permitted. The Group does not expect the amendments to have a significant impact on the consolidated financial statements. - Korean IFRS 1109 Financial Instruments Korean IFRS 1109 Financial instruments was issued on September 25, 2015, and is effective for annual periods beginning on or after January 1, However the Group plans to choose the exemption option from applying Korean IFRS 1109 until 2020, which the amendments of Korean IFRS 1104 Insurance contracts graces. On September 13, 2016, the International Accounting Standards Board (IASB) published an amendment to IFRS 4, and the Korea Accounting Institute (KAI) is processing with the amendment to Korean IFRS 1104 Insurance contracts. The Company s activities are predominantly connected with insurance, and the 21

24 portion of the total carrying amount of its liabilities related with insurance excesses 80 percent of the total carrying amount of its total liabilities as at December 31, These satisfy the requirements for applying the optional temporary exemption from applying Korean IFRS The Group expects Korean IFRS 1109 will be effective for annual periods beginning on or after January 1, (a) Classification and Measurement of Financial Assets When implementing Korean IFRS 1109, the classification of financial assets will be driven by the Group s business model for managing the financial assets and contractual terms of cash flow. The following table shows the classification of financial assets measured subsequently at amortized cost, at fair value through other comprehensive income and at fair value through profit or loss. For hybrid (combined) instruments, if the Group is unable to measure an embedded derivative separately from its host contract, financial assets with embedded derivatives are classified in their entirety. Business model for the contractual cash flows characteristics Hold the financial asset for the collection of the contractual cash flows Hold the financial asset for the collection of the contractual cash flows and trading Hold for trading Solely represent payments of principal and interest Measured at amortized cost 1 Recognized at fair value through other comprehensive income 1 Recognized at fair value through profit or loss All other Recognized at fair value through profit or loss 2 1 A designation at fair value through profit or loss is allowed only if such designation mitigates an accounting mismatch (irrevocable). 2 Equity investments not held for trading can be recorded in other comprehensive income (irrevocable). With the implementation of Korean IFRS 1109, the criteria to classify the financial assets at amortized cost or at fair value through other comprehensive income are more strictly applied than the criteria applied with Korean IFRS Accordingly, the financial assets at fair value through profit or loss may increase by implementing Korean IFRS 1109 and may result an extended fluctuation in profit or loss. As at December 31, 2016, the Group owns loan and trade receivables of 60,503,788 million, financial assets held-to-maturity of 328,992 million, financial assets available-forsales of 138,214,702 million and financial assets at fair value through profit or loss of 2,094,584 million. According to Korean IFRS 1109, a debt instrument is measured at amortized cost if: a) the objective of the business model is to hold the financial asset for the collection of the 22

25 contractual cash flows, and b) the contractual cash flows under the instrument solely represent payments of principal and interest. As at December 31, 2016, the Group measured loan and trade receivables of 60,503,788 million and financial assets held-to-maturity of 328,992 million at amortized costs. According to Korean IFRS 1109, a debt instrument is measured at fair value through other comprehensive income if the objective of the business model is achieved both by collecting contractual cash flows and selling financial assets; and the contractual cash flows represents solely payments of principal and interest on a specific date under contract terms. As at December 31, 2016, the Group holds debt instruments of 112,528,107 million classified as financial assets available-for-sale. According to Korean IFRS 1109, equity instruments that are not held for trading, the Group can make an irrevocable election at initial recognition to classify the instruments as assets measured at fair value through other comprehensive income, which all subsequent changes in fair value being recognized in other comprehensive income and not recycled to profit or loss. As at December 31, 2016, the Group holds equity instruments of 25,686,595 million classified as financial assets available-for-sale. According to Korean IFRS 1109, debt instruments those contractual cash flows do not represent solely payments of principal and interest and held for trading, and equity instruments that are not designated as instruments measured at fair value through other comprehensive income are measured at fair value through profit or loss. As at December 2016, the Group holds debt and equity instruments classified as financial assets at fair value through profit or loss that amount to 19,183 million and 1,687,068 million, respectively. (b) Classification and Measurement of Financial Liabilities Korean IFRS 1109 requires the amount of the change in the liability s fair value attributable to changes in the credit risk to be recognized in other comprehensive income, unless this treatment of the credit risk component creates or enlarges a measurement mismatch. Amounts presented in other comprehensive income are not subsequently transferred to profit or loss. Under Korean IFRS 1039, all financial liabilities designated at fair value through profit or loss recognized their fair value movements in profit or loss. However, under Korean IFRS 1109, certain fair value movements will be recognized in other comprehensive income and as a result profit or loss from fair value movements may decrease. (c) Impairment: Financial Assets and Contract Assets Korean IFRS 1109 sets out a new forward looking expected loss impairment model which replaces the incurred loss model under Korean IFRS 1039 that impaired assets if there is an objective evidence and applies to: 23