Samsung Life Insurance Co., Ltd. and Subsidiaries Consolidated Financial Statements
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 9 10-155
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 the Group ), which comprise the consolidated statements of financial position as of, and the consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and notes, comprising a summary of significant accounting policies and other explanatory information. Management s responsibility for the financial statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the 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 responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the 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 financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the 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 entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. Samil PricewaterhouseCoopers, 92 Hangang-daero, Yongsan-gu, Seoul 04386, Korea, www.samil.com
Consolidated Statements of Financial Position (In millions of Korean won) Notes 2015 2014 Assets Cash and cash equivalents 9,37 \ 2,276,606 \ 4,216,720 Financial assets at fair value through profit or loss 4,9 2,337,133 2,542,066 Available-for-sale financial assets 5,9 131,894,930 123,984,920 Held-to-maturity financial assets 6,9 421,906 748,147 Loans receivable and other receivables 7,9 36,462,636 32,687,421 Derivative financial assets for hedge accounting 8,9 82,796 165,433 Investments in associates and joint ventures 10 2,603,098 2,463,717 Assets held for sale 41 6,530 2,195 Investment property 11 7,555,922 6,146,006 Property and equipment 12 1,756,873 1,800,669 Intangible assets 13 520,765 451,404 Current income tax assets 171,289 382 Deferred income tax assets 20-12 Other assets 14 4,686,714 4,815,483 Separate account assets 15 39,585,698 34,409,139 Total assets \ 230,362,896 \ 214,433,714 Liabilities and Equity Liabilities Insurance contract liabilities 16 \ 149,118,213 \ 138,982,550 Policyholders' equity adjustment 18 6,969,288 6,771,704 Financial liabilities at fair value through profit or loss 9,19 47,981 89,443 Other financial liabilities 9,19 4,202,160 3,318,418 Derivative financial liabilities for hedge accounting 8,9 620,184 528,978 Current income tax liabilities 15,174 5,880 Deferred income tax liabilities 20 4,427,612 4,195,262 Provisions 21 162,282 157,222 Other liabilities 22 500,307 503,705 Separate account liabilities 15 40,577,950 37,595,813 Total liabilities 206,641,151 192,148,975 3
Consolidated Statements of Financial Position (In millions of Korean won) Notes 2015 2014 Equity Equity attributable to owners of the parent Capital stock 23 100,000 100,000 Capital surplus 23 6,131 7,126 Capital adjustments 23 (1,575,774) (1,086,828) Accumulated other comprehensive income 23 13,548,291 12,488,331 Retained earnings 23 11,567,188 10,696,290 Non-controlling interests 75,909 79,820 Total equity 23,721,745 22,284,739 Total liabilities and equity \ 230,362,896 \ 214,433,714 The accompanying notes are an integral part of these consolidated financial statements. 4
Consolidated Statements of Comprehensive Income Years Ended (In millions of Korean won) Notes 2015 2014 Operating revenues Premium income 24 \ 17,354,147 \ 17,461,627 Reinsurance income 25 257,780 233,297 Interest income 26 5,729,876 5,702,049 Gains on financial assets at fair value through profit or loss 27 333,689 210,150 Realized gains on available-for-sale financial assets 27 184,815 685,113 Gains on loans receivable and other receivables 27 912 1,113 Gains on derivative financial instruments for hedge accounting 27 118,894 247,306 Gains on foreign currency transactions 717,194 487,471 Fee and commission income 158,175 43,020 Dividend income 389,569 284,011 Rental income 444,407 422,481 Separate account commission received 1,305,766 1,091,894 Separate account revenue 15 471,945 433,274 Other operating income 28 238,758 123,562 Operating expenses 27,705,927 27,426,368 Increase in policy reserves 16 9,864,308 10,031,329 Insurance claims paid 10,209,610 10,051,134 Reinsurance expenses 25 289,133 265,819 Acquisition and administration expenses 29 1,558,883 1,568,400 Amortization of deferred acquisition costs 14 2,056,932 2,011,555 Asset management expenses 30 521,375 478,153 Interest expenses 137,929 103,104 Losses on financial assets at fair value through profit or loss 27 335,154 209,920 Realized losses on available-for-sale financial assets 27 120,462 42,393 Losses on loans receivable and other receivables 27 6,911 13,708 Losses on derivative financial instruments for hedge accounting 27 601,678 378,137 Losses on foreign currency transactions 180,205 250,865 Separate account expenses 15 471,945 433,274 Other operating expenses 28 202,908 183,045 26,557,433 26,020,836 Operating income 1,148,494 1,405,532 5
Consolidated Statements of Comprehensive Income Years Ended (In millions of Korean won) Notes 2015 2014 Non-operating revenues 28 344,046 321,522 Non-operating expenses 28 121,027 123,597 Profit before income tax 1,371,513 1,603,457 Income tax expense 31 161,940 266,427 Profit for the year 1,209,573 1,337,030 Other comprehensive income(loss), net of tax Items to be subsequently reclassified to profit or loss : Change in value of available-for-sale financial assets 1,012,762 2,186,393 Change in value of held-to-maturity financial assets (362) (405) Change in value of derivative financial instruments for hedge accounting 69,394 129,231 Shares of other comprehensive Income(loss) of associates and joint ventures 23,688 (71,277) Other comprehensive income(loss) on separate account (29,333) 35,622 Currency translation differences (19,306) 12,968 Items that will not be reclassified subsequently to profit or loss : Remeasurements of the net defined benefit liabilities 3,404 (39,400) 1,060,247 2,253,132 Total comprehensive income for the year \ 2,269,820 \ 3,590,162 Profit attributable to: Owners of the parent 1,211,233 1,337,488 Non-controlling interests (1,660) (458) \ 1,209,573 \ 1,337,030 Total comprehensive income attributable to: Owners of the parent 2,271,193 3,589,312 Non-controlling interests (1,373) 850 \ 2,269,820 \ 3,590,162 Earnings per share attributable to owners of the parent (in Korean won) 34 Basic earnings per share \ 6,418 \ 7,062 Diluted earnings per share \ 6,418 \ 7,062 The accompanying notes are an integral part of these consolidated financial statements. 6
Consolidated Statements of Changes in Equity Years Ended (In millions of Korean won) Capital stock Capital surplus Capital adjustments Accumulated other comprehensive income Retained earnings Equity attributable to the owners of the parent Noncontrolling interest Total Balance at January 1, 2014 \ 100,000 \ 6,131 \ (882,863) \ 10,236,507 \ 9,510,401 \ 18,970,176 \ 60,215 \ 19,030,391 Comprehensive income Profit for the year - - - - 1,337,488 1,337,488 (458) 1,337,030 Gains on valuation of available-for-sale financial assets - - - 2,186,379-2,186,379 14 2,186,393 Losses on valuation of held-to-maturity financial assets - - - (405) - (405) - (405) Gains on valuation of derivative financial instruments for hedge accounting - - - 129,231-129,231-129,231 Shares of other comprehensive losses of investments in associates and joint ventures - - - (71,277) - (71,277) - (71,277) Other comprehensive income on separate account - - - 35,622-35,622-35,622 Currency translation differences - - - 11,615-11,615 1,353 12,968 Remeasurements of net defined benefit liabilities - - - (39,341) - (39,341) (59) (39,400) Transactions with shareholders Cash dividends - - - - (162,414) (162,414) - (162,414) Changes in consolidated group - - - - - - 9,087 9,087 Acquisition of treasury stock - - (201,528) - - (201,528) - (201,528) Others - 995 (2,437) - 10,815 9,373 9,668 19,041 Balance at December 31, 2014 \ 100,000 \ 7,126 \ (1,086,828) \ 12,488,331 \ 10,696,290 \ 22,204,919 \ 79,820 \ 22,284,739 7
Consolidated Statements of Changes in Equity Years Ended (In millions of Korean won) Capital stock Capital surplus Capital adjustments Accumulated other comprehensive income Retained earnings Equity attributable to the owners of the parent Noncontrolling interest Total Balance at January 1, 2015 \ 100,000 \ 7,126 \ (1,086,828) \ 12,488,331 \ 10,696,290 \ 22,204,919 \ 79,820 \ 22,284,739 Comprehensive income Profit for the year - - - - 1,211,233 1,211,233 (1,660) 1,209,573 Gains(losses) on valuation of available-for-sale financial assets - - - 1,012,773-1,012,773 (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 - - - 69,394-69,394-69,394 Shares of other comprehensive income of investments in associates and joint ventures - - - 23,688-23,688-23,688 Other comprehensive losses 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 - - - 3,417-3,417 (13) 3,404 Transactions with shareholders Cash dividends - - - - (340,335) (340,335) - (340,335) Acquisition of treasury stock - - (488,097) - - (488,097) - (488,097) Others - (995) (849) - - (1,844) (2,538) (4,382) Balance at December 31, 2015 \ 100,000 \ 6,131 \ (1,575,774) \ 13,548,291 \ 11,567,188 \ 23,645,836 \ 75,909 \ 23,721,745 The accompanying notes are an integral part of these consolidated financial statements. 8
Consolidated Statements of Cash Flows Years Ended (In millions of Korean won) Notes 2015 2014 Cash flows from operating activities Cash generated from operations Profit for the year \ 1,209,573 \ 1,337,030 Adjustments for income and expenses 37 5,971,002 5,630,564 Changes in operating assets and liabilities 37 (7,900,077) (3,432,183) (719,502) 3,535,411 Interests received 5,832,101 5,432,941 Interests paid (100,376) (88,360) Dividends received 367,057 276,769 Income taxes paid (91,192) (210,358) Net cash inflow from operating activities 5,288,088 8,946,403 Cash flows from investing activities Proceeds from disposal of available-for-sale financial assets 13,912,184 11,830,481 Payment for acquisition of available-for-sale financial assets (19,751,363) (19,101,535) Decrease of held-to-maturity financial assets 328,039 1,868 Settlement of derivative financial instruments for hedge accounting (217,392) 319,813 Payment for acquisition of investments in associates and joint ventures (9,666) (84,421) Proceeds from disposal of investments in associates and joint ventures 27,507 82,438 Payment for acquisition of subsidiaries (4,382) (379,481) Proceeds from disposal of subsidiaries - 34,189 Payment for acquisition of investment properties (1,606,914) (142,757) Proceeds from disposal of investment properties 51,655 2,464 Payment for acquisition of property and equipment (67,604) (74,128) Proceeds from disposal of property and equipment 20,456 21,745 Payment for acquisition of intangible assets (117,536) (86,014) Proceeds from disposal of intangible assets 7,389 4,698 Proceeds from disposal of group of assets held-for-sale 273,814 28,100 Increase from change in scope of consolidation (41,165) 154,297 Others 18,342 (4,062) Net cash outflow from investing activities (7,176,636) (7,392,305) Cash flows from financing activities Payment of dividends (340,335) (203,085) Payment for acquisition of treasury stocks (488,097) (201,528) Proceeds of borrowings 532,815 30,300 Payment of borrowings - (8,450) Increase in non-controlling interest 242,983 27,794 Net cash outflow from financing activities (52,634) (354,969) Net increase(decrease) in cash and cash equivalents (1,941,182) 1,199,129 Cash and cash equivalents at the beginning of the year 4,216,720 3,026,800 Exchange gains(losses) on cash and cash equivalents 1,068 (9,209) Cash and cash equivalents at the end of the year 37 \ 2,276,606 \ 4,216,720 The accompanying notes are an integral part of these consolidated financial statements. 9
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 685 branches as of December 31, 2015. 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 of December 31, 2015: Products Available Discontinued Total Annuity with tax benefits 26 226 252 Annuity - 46 46 Whole life, Term life insurance 45 481 526 Endowment insurance 20 161 181 Group insurance 18 285 303 109 1,199 1,308 As of December 31, 2015, 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 41,519 20.76 Samsung C&T Co.,Ltd. 38,688 19.34 E-MART Co., Ltd. 11,763 5.88 Samsung Foundation of Culture 9,360 4.68 Samsung Life Public Welfare Foundation 4,360 2.18 SHINSEGAE Co., Ltd. 4,381 2.19 Employee stock ownership association 2,673 1.34 CJ CheilJedang Corp 2,986 1.49 Others 69,155 34.58 184,885 92 Treasury stock 15,115 7.56 200,000 100 10
List of Samsung Life Insurance s consolidated subsidiaries The Company s major consolidated subsidiaries as of December 31, 2015, are as follows: Name of Corporate Number of Shares Percentage of ownership (%) Primary Business Location Fiscal YearEnd Samsung Life Service Claim Adjustment Co., Ltd. 3,152,919 99.78 Other service Korea Dec. 31 SSI Holding 1 25,639,658 49.00 Other financing Thailand Dec. 31 Park Capital Holding 2 50,079,567 49.00 Other financing Thailand Dec. 31 Thai Samsung Life Insurance Co., Ltd. 2 71,550,000 35.78 Life Insurance Thailand Dec. 31 30 Gresham Street (Jersey) Limited 1,380,000 100.00 Other financing Jersey Dec. 31 30 Gresham Street (Singapore) Private Limited 4 - - Koramco Firstep Real Estate Investment Trust No.16-60.21 Real estate collective investment vehicle Real estate collective investment vehicle Singapore Dec. 31 Korea Dec. 31 Beijing Samsung Real Estate Co., Ltd. - 90.00 Real estate lease China Dec. 31 Samsung SRA Asset Management Co., Ltd. 4,000,000 100.00 Samsung Asset Management Co., Ltd. 18,449,239 98.73 Investment management company Investment management company Samsung Asset Management (New york), Inc. 4 Investment management - - company Samsung Asset Management(Hong-Kong) Co., Limited. 4 - - Investment management company Samsung Asset Management (London) Ltd. 4 - - Investment management company Samsung Triple Alpha Asia Feeder Fund Investment management Limited 4 - - company Samsung Global All Asset Equity H Fund 4 - - Samsung Global All Asset Equity Master H Fund 4 - - Collective investment vehicle Collective investment vehicle Korea Dec. 31 Korea Dec. 31 U.S.A. Dec. 31 Hong Kong U.K. Cayman Korea Korea Dec. 31 Dec. 31 Dec. 31 Dec. 31 Dec. 31 Samsung Private Equity Manager I Co., Ltd 4 Investment management Dec. 31 - - Cayman company Samsung life insurance financial sevice Dec. 31 insurance agency 8,000,000 100.00 Other service Korea Samsung SRA Private Real Estate Investment Real estate collective - 14.26 Korea Dec. 31 Trust No.1 3 investment vehicle Samsung SRA Private Real Estate Investment Trust No.2 3-20.70 Samsung Private Equity Real Estate Investment Trust No.1 3-41.38 Samsung Private Equity Real Estate Investment - 22.22 Trust No.3 3 Samsung SRA Private Real Estate Investment Trust No.12 3-47.07 Real estate collective investment vehicle Real estate collective investment vehicle Real estate collective investment vehicle Real estate collective investment vehicle Samsung SRA Global Core office Real Estate Real estate collective Trust No. 1 3-36.00 investment vehicle Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 11
Name of Corporate Number of Shares Percentage of ownership (%) Primary Business Location Fiscal YearEnd Samsung Dividend stock Long-term Securities1 3-32.93 Samsung Index plus Securities Investment Trust 3-31.19 Samsung China Equity No.1-60.75 Samsung China Equity Master Fund 4 - - Samsung USA Core Bond (H) - 51.05 Samsung USA Core Bond Master Fund 4 - - Samsung Asia Representative Equity No.2-50.47 Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Collective investment vehicle Samsung Asia Representative Equity Master Fund 4 - - Collective investment vehicle Samsung USA Dynamic Asset Allocation Collective investment Balanced (H) 3-54.02 vehicle Samsung USA Dynamic Asset Allocation Collective investment Balanced Master Fund 4 - - vehicle Samsung Korea New Growth Industry Equity No.1-60.74 Collective investment vehicle Samsung Korea Concentrated Structural Growth Collective investment Equity 3-39.95 vehicle Samsung Asia Long-Short Equity Fund - 59.34 Samsung Asia Long-Short Equity Master Fund 4 - - Samsung Infra Private Equity Fund III 3-36.86 HSI Futures RMB FX ETF - 88.00 Samsung KODEX Japan 3-50.00 Samsung KODEX SYNTH-US Technology - 76.57 Samsung KODEX SYNTH-US Financials - 53.69 Samsung KODEX SYNTH-US Industrial 3-41.65 Samsung KODEX SYNTH-US Energy 3-36.43 Samsung Global Dynamic Asset Allocation Fund - 82.76 Samsung Global Stock Securities Master 4 - - 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 Hong Kong Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 Korea Dec. 31 12
Name of Corporate Number of Shares Percentage of ownership (%) Primary Business Location Fiscal YearEnd Samsung Korea Bond Securities Master 4 - - Samsung Global Commodity Equity Fund Master 4 - - Samsung Korea Stock Securities Master 4 - - Collective investment vehicle Collective investment vehicle Collective investment vehicle Samsung CHINA Mainland Leaders Securities Collective investment Feeder Master Investment 4 - - vehicle Samsung Global Bond Securities Master 4 - - Samsung India S-Mid Cap Focus Equity UH Fund - Cf - 94.64 Collective investment vehicle Collective investment vehicle Samsung India S-Mid Cap Focus Equity UH Collective investment Master Fund Cf 4 - - vehicle Samsung Global Developed Markets Equity H Fund Cf - 75.00 Samsung Global Developed Markets Equity H Master Fund Cf 4 - - Samsung Global Private Equity Manager Fund I, L.P. - 61.54 Samsung Asia Dividend Equity H Fund Cf 3-49.98 Samsung Asia Dividend Equity H Master Fund Cf 4 - - Samsung Chinese Mainland Fixed Income RMB H Fund - Cf - 99.94 Samsung Chinese Mainland Fixed Income RMB H Master Fund - Cf 4 - - 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 1 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 has 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 entity is 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 entity has been included in the consolidation scope since the Company has indirect control through its subsidiary. 13
A summary of financial information as of and for the years ended, of the subsidiaries is as follows: 2015 (in millions of Korean won) Assets Liabilities Equity Operating Net profit Revenue (loss) Samsung Life Service Claim Adjustment Co., Ltd. \ 62,41 9 \ 40,294 \ 22,125 \ 196,389 \ 10,960 Beijing Samsung Real Estate Co., Ltd. 618,845 18,040 600,805 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 1 157,382 129,580 27,802 73,690 (9,122) 30 Gresham Street (Jersey) Limited 1 584,400 372,954 211,446 36,060 1,371 Koramco Firstep Real Estate Investment Trust 250,432 142,033 108,399 16,324 1,187 No.16 Samsung Asset Management Co., Ltd. 522,973 250,679 272,294 166,441 49,396 Samsung life insurance financial sevice 44,873 6,728 38,145 7,869 (1,800) insurance agency Samsung SRA Private Real Estate Investment 134,532 74,648 59,884 8,610 2,042 Trust No.1 Samsung SRA Private Real Estate Investment 254,061 137,161 116,900 14,282 2,131 Trust No.2 Samsung Private Equity Real Estate Investment 331,243 32,854 298,389 27,277 16,819 Trust No.1 Samsung Private Equity Real Estate Investment 439,459 254,481 184,978 25,878 4,098 Trust No.3 Samsung SRA Private Real Estate Investment 636,959 331,096 305,863 25,949 1,542 Trust No.12 1 Samsung SRA Global Core office Real Estate 396,553 238,233 158,320 11,410 (1,287) Trust No. 1 Samsung Dividend stock Long-term Securities1 137,317 492 136,825 34,817 13,762 Samsung Index plus Securities Investment Trust 126,740 991 125,749 22,762 677 Samsung China Equity No.1 1 83,211 1,339 81,872 13,563 (9,057) Samsung USA Core Bond (H) 1 101,367 881 100,486 16,162 568 Samsung Asia Representative Equity No.2 1 62,469 23,141 39,328 4,462 (4,029) Samsung USA Dynamic Asset Allocation 591,996 15,763 576,233 146,328 2,428 Balanced (H) 1 Samsung Korea New Growth Industry Equity 53,254 6,027 47,227 13,618 1,351 No.1 Samsung Korea Concentrated Structural 59,122 1,044 58,078 14,884 705 Growth 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 226,064 54 226,010 6,545 6,181 HSI Futures RMB FX ETF 32,021 582 31,439 824 (4,117) Samsung KODEX Japan 17,432 12 17,420 1,443 382 Samsung KODEX SYNTH-US Technology 15,498 16 15,482 1,476 1,437 Samsung KODEX SYNTH-US Financials 17,092 17 17,075 478 443 Samsung KODEX SYNTH-US Industrial 14,051 14 14,037 512 477 Samsung KODEX SYNTH-US Energy 9,950 10 9,940 40 (1,746) Samsung Global Dynamic Asset Allocation 24,823 498 24,325 989 138 Fund 1 Samsung India S-Mid Cap Focus Equity UH 6,160 36 6,124 348 128 Fund Cf 1 Samsung Global Developed Markets Equity H 102,581 4,259 98,322 5,921 (1,678) Fund Cf 1 Samsung Global Private Equity Manager Fund I, 4,043 22 4,021 71 3 L.P. Samsung Asia Dividend Equity H Fund Cf 1 20,015 38 19,977 321 (33) Samsung Chinese Mainland Fixed Income RMB H Fund Cf 1 50,189 9 50,180 406 150 1 Consolidated financial information of investee and subsidiaries owned by the investee. 14
2014 (in millions of Korean won) Assets Liabilities Equity Operating Revenue Net profit (loss) Samsung Life Investment(America), Ltd. \ 19,967 \ 619 \ 19,348 \ 5,705 \ 754 Samsung Life Investment(UK), Ltd. 26,655 664 25,991 4,400 605 Samsung Life Service Claim Adjustment Co., Ltd. 40,324 26,846 13,478 146,654 (729) Beijing Samsung Real Estate Co., Ltd. 600,662 4,436 596,226 517 (1,580) Samsung SRA Asset Management Co., Ltd. 36,326 10,814 25,512 19,765 8,175 Thai Samsung Life Insurance Co., Ltd 1 139,179 105,263 33,916 56,142 (7,105) 30 Gresham Street (Jersey) Limited 1 581,175 367,301 213,874 30,859 (9,571) Koramco Firstep Real Estate Investment Trust No.16 252,405 142,500 109,905 17,056 1,118 Samsung Asset Management Co., Ltd. 525,350 302,376 222,974 71,572 22,994 Samsung SRA Private Real Estate Investment Trust No.1 134,969 74,527 60,442 8,495 2,860 Samsung SRA Private Real Estate Investment Trust No.2 256,504 134,822 121,682 16,725 5,952 Samsung Private Equity Real Estate Investment Trust No.1 334,055 33,210 300,845 26,976 12,921 Samsung Private Equity Real Estate Investment Trust No.3 438,989 252,289 186,700 23,366 (494) Samsung SRA Private Real Estate Investment Trust No.12 1 14,169-14,169 180 70 Samsung Long-term Income Equity No.1 204,543 3,957 200,586 12,228 (7,784) Samsung Index Plus Equity No.1 163,276 2,697 160,579 8,708 (11,006) Samsung China Equity No.1 1 56,093 454 55,639 10,697 3,024 Samsung China Small and Mid-Cap Focus Equity Fund (H) 1 90,844 3,610 87,234 23,309 7,298 Samsung USA Core Bond (H) 1 107,504 5,436 102,068 11,850 588 Samsung Asia Representative Equity No.2 1 51,775 384 51,391 8,038 2,927 Samsung USA Dynamic Asset Allocation Balanced (H) 1 774,155 67,810 706,345 150,247 56,645 Samsung Korea New Growth Industry Equity No.1 76,430 429 76,001 5,014 (6,250) Samsung Korea Concentrated Structural Growth Equity No.1 72,486 1,780 70,706 5,356 (5,958) Samsung Asia Long-Short Equity Fund 51,199 907 50,292 6,109 (233) 1 Consolidated financial information of investee and subsidiaries owned by the investee. For the year ended December 31, 2015, 14 firms including HSI Futures RMB FX ETF and Samsung Life Insurance Financial Sevice Insurance Agency, have been newly included in the consolidation scope, and Samsung China Small and Mid-Cap Focus Equity Fund (H) was de-consolidated. The equity shares of Samsung Life Investment(America), Ltd. and Samsung Life Investment(UK), Ltd. were sold to Samsung Asset Management Co., Ltd., a subsidiary of the Company, and the name of subsidiaries was changed to Samsung Asset Management (New york), Inc. and Samsung Asset Management (London), Ltd.,respectively. 15
The profit or loss allocated to non-controlling interests and accumulated non-controlling interests of subsidiaries that are material to the Group for the years ended, is as follows: 2015 (in millions of Korean won) Percentage of ownership (%) Profit or loss allocated to non-controlling interests Accumulated noncontrolling interest Dividends paid to noncontrolling interests Samsung Life Service Claim Adjustment Co., Ltd. 0.22 \ 24 \ 49 \ - Beijing Samsung Real Estate Co., Ltd. 10.00 (44) 60,142 - Thai Samsung Life Insurance Co., Ltd. 64.22 (2,416) 10,776 - Samsung Asset Management Co., Ltd. 1.27 776 4,942 - \ (1,660) \ 75,909 \ - 2014 (in millions of Korean won) Percentage of ownership (%) Profit or loss allocated to non-controlling interests Accumulated noncontrolling interest Dividends paid to noncontrolling interests Samsung Life Service Claim Adjustment Co., Ltd. 0.22 \ (1) \ 30 \ - Beijing Samsung Real Estate Co., Ltd. 10.00 (158) 59,623 - Thai Samsung Life Insurance Co., Ltd. 64.22 (984) 13,457 - Samsung Asset Management Co., Ltd. 2.3 685 6,710 - \ (458) \ 79,820 \ - 16
2. 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 the 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 the consolidated financial statements requires the use of certain critical accounting estimates. It also requires management to exercise judgment in the process of applying the Group s accounting policies. 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 3. 2.2 Changes in Accounting Policy and Disclosures (a) New and amended standards adopted by the Group The Group newly applied the following amended and enacted standards for the annual period beginning on January 1, 2015: - Amendment to Korean IFRS 1019, Employee Benefits Korean IFRS 1019, Employee Benefits, allows a practical expedient for companies that operate defined benefit plans and when contributions are made by employees or third parties. The application of this amendment does not have a material impact on the consolidated financial 17
statements. - Annual Improvements to Korean IFRS 2010-2012 Cycle - Amendment to Korean IFRS 1102, Share-based payment Korean IFRS 1102, Share-based payment, clarifies the definition of a vesting conditions, performance condition, and service condition. - Amendment to Korean IFRS 1103, Business Combination Korean IFRS 1103, Business Combination, clarifies the classification and measurement of contingent consideration in the business combination. - Amendment to Korean IFRS 1108, Operating Segments Korean IFRS 1108, Operating Segments, requires disclosures of the judgments made by management in aggregating operating segments and a reconciliation of the reportable segments assets to the entity s assets. - Amendment to Korean IFRS 1016, Property, plant and equipment, and Korean IFRS 1038, Intangible assets Korean IFRS 1016, Property, plant and equipment, and Korean IFRS 1038, Intangible assets, clarify how the gross carrying amount and the accumulated depreciation are treated where an entity uses the revaluation model. - Amendment to Korean IFRS 1024, Related Party Disclosures Korean IFRS 1024, Related Party Disclosures, includes, as a related party, an entity that provides key management personnel services to the reporting entity or to the parent of the reporting entity ( the management entity ). - Annual Improvements to Korean IFRS 2011-2013 Cycle: - Amendment to Korean IFRS 1103, Business Combination Korean IFRS 1103, Business Combination, clarifies that Korean IFRS 1103 does not apply to the accounting for the formation of any joint arrangement. - Amendment to Korean IFRS 1113, Fair Value Measurement Korean IFRS 1113, Fair Value Measurement, clarifies that the portfolio exception, which allows an entity to measure the fair value of a group of financial instruments on a net basis, applies to all contracts (including non-financial contracts) within the scope of Korean IFRS 1039. 18
- Amendment to Korean IFRS 1040, Investment property Korean IFRS 1040, Investment property, clarifies that Korean IFRS 1040 and Korean IFRS 1103 are not mutually exclusive. Other standards, amendments and interpretations which are effective for the annual period beginning on January 1, 2015, do not have a material impact on the financial statements of the Group. (b) New standards and interpretations not yet adopted New standards and amendments issued but not effective for the financial year beginning January 1, 2015, and not early adopted are enumerated below. The Group expects that these standards and amendments would not have a material impact on its consolidated financial statements. - Amendment to Korean IFRS 1001, Presentation of Financial Statements - Korean IFRS 1016, Property, plant and equipment, and Korean IFRS 1041, Agriculture and fishing: Productive plants - Korean IFRS 1016, Property, plant and equipment, and Korean IFRS 1038, Intangible assets: Amortization based on revenue - 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: Exemption for consolidation of investee - Korean IFRS 1111, Joint Agreements - Annual Improvements to Korean IFRS 2012-2014 Cycle 2.3 Consolidation The Group has prepared the consolidated financial statements in accordance with Korean IFRS 1110, Consolidated Financial Statements. (a) Subsidiaries Subsidiaries are all entities (including special purpose entities) over which the Company has control. The Company controls the corresponding investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Consolidation of a subsidiary begins from the date the Company obtains control of a subsidiary and ceases when the Company loses control of the subsidiary. 19
The Group applies the acquisition method to account for business combinations. The consideration transferred is measured at the fair values of the assets transferred, and identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are initially measured at their fair values at the acquisition date. The Group recognizes any non-controlling interest in the acquiree on an acquisition-by-acquisition basis in the event of liquidation, either at fair value or at the non-controlling interest s proportionate share of the recognized amounts of acquiree s identifiable net assets. All other non-controlling interests are measured at their acquisition-date fair values, unless another measurement basis is required by IFRSs. Acquisition-related costs are expensed as incurred. Goodwill is recognized as the excess of the aggregate of the consideration transferred, the amount of any non-controlling interest in the acquiree, and the acquisition-date fair value of the acquirer s previously held equity interest in the acquiree over the identifiable net assets acquired. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognized in profit or loss. Balances of receivables and payables, income and expenses and unrealized gains on transactions between the Group subsidiaries are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. If the Group loses control of a subsidiary, any investment continuously retained in the subsidiary is re-measured at its fair value at the date when control is lost and any resulting differences are recognized in profit or loss. (b) Associates Associates are all entities over which the Group has significant influence, and investments in associates are initially recognized at acquisition cost using the equity method. Unrealized gains on transactions between the Group and its associates are eliminated to the extent of the Group s interest in the associates. If there is any objective evidence that the investment in the associate is impaired, the Group recognizes the difference between the recoverable amount of the associate and its book value as impairment loss. (c) Elimination of intergroup transaction Intercompany transactions, balances, income and expenses on transactions between Group companies are eliminated. Unrealized losses are also eliminated after recognizing impairment of transferred assets. 20
2.4 Segment Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the steering committee that makes strategic decisions. 2.5 Foreign Currency Translation (a) Functional and presentation currency Items included in the financial statements of each of the Group s entities are measured using the currency of the primary economic environment in which the entity operates ( the functional currency ). The consolidated financial statements are presented in Korean won, which is the controlling entity s functional currency. (b) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement, except when deferred in other comprehensive income as qualifying cash flow hedges and qualifying net investment hedges. Foreign exchange gains and losses related to monetary assets and liabilities are presented in the statement of comprehensive income within gains(losses) on foreign currency transactions. The changes in the fair value of monetary securities denominated in foreign currency classified as available-for-sale are analyzed between translation differences resulting from changes in the amortized cost of the security and other changes in the carrying amount of the security. Translation differences related to changes in amortized cost are recognized in profit or loss, and other changes in carrying amount are recognized in other comprehensive income. Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognized in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary financial assets, such as equities classified as availablefor-sale, are included in other comprehensive income. 21
2.6 Cash and Cash Equivalents Cash and cash equivalents include cash in hand, deposits held at call with banks, and other shortterm highly liquid investments with original maturities of three months or less. 2.7 Financial Instruments 2.7.1 Classification The Group classifies its financial instruments in the following categories: financial assets or liabilities at fair value through profit or loss, loans and receivables, available-for-sale financial assets, held-to-maturity financial assets and other financial liabilities at amortized cost. Management determines the classification of financial instruments at initial recognition. (a) Financial assets or liabilities at fair value through profit or loss Financial assets or liabilities at fair value through profit or loss are financial assets or liabilities held for trading. A financial asset and liability is classified in this category if acquired principally for the purpose of selling or repurchasing in the short term. Derivatives or embedded derivatives are also categorized as held for trading unless they are designated as hedges. Assets or liabilities in this category are classified as financial assets or liabilities at fair value through profit or loss. (b) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. (c) Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group intends and is able to hold to maturity. If the Group were to sell other than an insignificant amounts of held-to-maturity investments, the whole category would be tainted and reclassified as available-for-sale. (d) Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. (e) Financial liabilities measured at amortized cost 22
The Group classifies non-derivative financial liabilities, except for financial liabilities at fair value through profit or loss and financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition, as financial liabilities carried at amortized cost and as other financial liabilities in the statement of financial position. 2.7.2 Recognition and Measurement Regular purchases and sales of financial assets are recognized on the trade date. Investments are initially recognized at fair value with transaction costs added for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognized at fair value, and transaction costs are expensed in the consolidated statements of comprehensive income. Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at amortized cost using the effective interest rate method. Gains or losses arising from changes in the fair value of the financial assets carried at fair value through profit or loss are presented in the consolidated statements of comprehensive income within gains (losses) on financial assets at fair value through profit or loss in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognized in the consolidated statements of comprehensive income as part of dividend income when the Group s right to receive dividend payments is established. When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognized in equity are included in the comprehensive income statement as Change in value of available-for-sale financial assets. Interest on available-for-sale and held-to-maturity securities calculated using the effective interest method is recognized in the consolidated statements of comprehensive income as part of Interest income. Dividends on available-for-sale equity instruments are recognized in the statement of comprehensive income as part of dividend income when the Group s right to receive dividend payments is established. 2.7.3 Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. 2.7.4 Impairment of Financial Assets (a) Assets carried at amortized cost 23
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event ) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or a group of financial assets that can be reliably estimated. The criteria that the Group uses to determine that there is objective evidence of an impairment loss include: Significant financial difficulty of the issuer or obligor; A breach of contract, such as a default or delinquency in interest or principal payments For economic or legal reasons relating to the borrower s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider; It becomes probable that the borrower will enter bankruptcy or other financial reorganization; The disappearance of an active market for that financial asset because of financial difficulties; or Observable data suggesting that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets, even though the decrease cannot be identified with respect to individual financial assets in the portfolio. Impairment loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted using the initial effective interest rate. The carrying amount of the asset is reduced by the impairment loss amount and the amount of the loss is recognized in the statement of comprehensive income. In practice, the Group may measure impairment loss based on the fair value of financial asset using an observable market price. Impairment of loans and receivables is presented as a deduction in an allowance account. The Group writes off financial assets when the assets are determined to be no longer recoverable. If, in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized (for example, an improvement in debtor s credit rating), the reversal of the previously recognized impairment loss is recognized in the statement of comprehensive income. 24
(b) Assets classified as available-for-sale The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. For debt securities, the Group uses the criteria refer to in (1) above. In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is also evidence that the asset is impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized in profit or loss is removed from equity and recognized in the income statement. Impairment losses recognized in the consolidated income statement on equity instruments are not reversed through the income statement. If, in a subsequent period, the fair value of a debt instrument classified as available-forsale increases, and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss is reversed through the income statement. 2.7.5 Derecognition If the Group transfers a financial asset and the transfer does not result in derecognition because the Group has retained substantially of all risks and rewards of ownership of the transferred asset due to a recourse in the event the debtor defaults, the Group continues to recognize the transferred asset in its entirety and recognizes a financial liability for the consideration received. The related financial liability is classified as borrowings in the statement of financial position. 2.8 Derivative Financial Instruments and Hedging Activities Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. 2.8.1 Derivative financial instruments for trading All derivative financial instruments, except for derivatives that are designated and qualify for hedge accounting, are measured at fair value. A gains or losses arising from a change in fair value is recognized in the consolidated statements of comprehensive income as part of net gains on financial instruments at fair value through profit or loss. 25