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Growth Collaboration

Passion

Samsung Securities

Report 2017

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About This Report

Samsung Securities informs its various stakeholders, including shareholders, customers, and employees, about the company's vision, strategies, and achievements through the publication of the annual Integrated Report. Our desire is to move one step closer to sustainable growth by disclosing and communicating the company's business philosophy and corporate information. This integrated report was prepared in accordance with the IIRC's International <IR> Framework.

01

38

16 Our Value

Our Capital

Financial Capital

Intellectual Capital

Human Capital

Social Capital

18

20

24

28

32

50 Other Information

Financial MD&A

Financial Data

Position Paper

Non-Financial MD&A

Materiality Assessment

GRI Standard Index

Third Party Assurance

Corporate Information

Our Vision

CEO Message

About Samsung Securities

2017 Review

Our Business

How we Create Value

How we Share Value

02

04

06

08

12

14

Our Management

Governance

Risk Management

40

44

ContentsReport Overview

Prime Wealth Management BrandAs the representative integrated wealth management

brand of Samsung Securities, Platform of Private Banking

Services, or simply POP, embodies our core philosophy

of "wealth management for all."

Corporate VIP client servicesPreferred membership services

UHNWI services

Membership Service Brands

Product / System Brands

Robo-advisor-based wealth management services

ustomized entrusted wealth management services

Samsung Securities' listed securities

Online wealth management service platform

Retirement wealth management services

Wrap account services

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56

61

64

70

72

74

76

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Growth, Collaboration, Passion

CEO Message

CEO Message

Our Vision Our Value Our Management Our Information

Sung-Hoon KooPresident & Chief Executive Officer,Samsung Securities

Distinguished stakeholders,

Looking back on the previous year, the Korean stock market saw a rapid rise in conjunction with the global economy's high growth as domestic and international political uncertainties became resolved in May. However, competition for survival has been escalating following the industry's restructuring that began in 2016, and busi-nesses scrambled to find new revenue sources.

We, at Samsung Securities, have been working tirelessly and adapting to this rapidly-changing business environ-ment and have achieved substantial growth as a result, with increasing total assets, equity, net operating profit, and net income. Total assets increased 13.2% YoY to KRW 36 trillion on a separate basis, and separate net operating profits and net income reached KRW 917 billion and KRW 257 billion, respectively, resulting in the highest perfor-mance recorded since 2007. Assets under management (AUM) and the number of customers with more than KRW 100 million in managed assets also increased significant-ly, allowing us to achieve meaningful results in establish-ing a long-term management base.

In addition, Samsung Securities is doing our best to build an environment in which customers can trade with confidence. Of all securities firms in Korea, Samsung Securities was the only company to receive satisfactory assessments in all categories of the financial consumer evaluation conducted by the Financial Supervisory Ser-vice in 2016. In 2018, we acquired the Personal Informa-tion Management System (PIMS) certification and are being recognized for our external efforts in protecting fi-nancial consumers. Based on these efforts, 2017 marked the eighth consecutive year that Samsung Securities was included in the DJSI World Index, a first among domestic financial companies.

Competition in the domestic securities industry is ex-pected to further intensify in 2018, and we expect the market to diminish due to both small and large global issues. Samsung Securities will treat these changes as stepping stones to innovation and progress.

First, we will take responsibility in managing the na-tion’s assets using the industry’s best ‘prestigious wealth management’ capabilities. We will reinforce cooperation between retail businesses and IB to offer comprehensive wealth management solutions while strengthening part-nerships with financial companies around the world to lead the way for global wealth management.

Additionally, we will accelerate digital innovation to meet the changing needs of customers and are prepar-ing to launch our new interactive channel, a chatbot service, to enhance digital usability. We are also striving toward shared growth with fintech companies through the ongoing development and support of youth innova-tion ventures.

Dear Stakeholders,

We sincerely apologize for the concerns caused by the dividend incident which occurred on April 6th of 2018. All of our employees, including myself, feel deeply respon-sible for this incident.Samsung Securities will focus all our capabilities to re-gain the trust of our shareholders and customers. We will check all the systems and processes within the company and bring them to perfect condition to prevent any other unfortunate occurrences in the future. We also have es-tablished a global-level ethics management system and strengthened ethics education, as we raise the ethical awareness of our employees and use this as an opportu-nity to reinforce morality.

Samsung Securities will continue to add value to our company based on the deep trust of our customers and will continuously strive toward sustainable growth. We ask for your continued support and trust in Samsung Se-curities.

Thank you.

4 5


About Samsung Securities

As a comprehensive financial investment company providing various services ranging from securities brokerage and wealth management to corporate finance, Samsung Securities operates 68 branches nationwide including the head office, as well as 3 overseas subsidiaries and 2 local offices. We provide institutional investors with solutions based on differentiated research and digital financial capabilities and strive to provide individual investors with optimized wealth management services.

Company History

Company Overview (Dec. 2017)

2017

2016

2015

2014

2013

2012

Comprehensive business alliance with HSC Securities (Vietnam)Comprehensive business alliance with KGI Securities (Taiwan)Received satisfactory assessments in all categories of Financial Consumer Protection Evaluation 2016Held the Asia Investment Conference 2017Announced a new brand slogan; Held the 1st Samsung Securities CEO ForumHeld signing ceremony with KGI Securities (Taiwan); Opened a financial centerDeclared Customer Protection Charter; POP UMA surpassed sales of KRW 2 trillionIntroduced a customer-oriented product recommendation systemAlliance with Lombard Street Research & BCA ResearchHeld a value statement proclamation ceremonyLaunched a next-gen financial IT system Announced retirement planning at all branches

Signed an MOU with China Wealth Management, the largest AM in ChinaDeclared CS Innovation (Gonggam 36.5)Obtained the Business Continuity Management (BCM) international certificationLaunched SNI, an exclusive UHNWI brand/officeJoined the DJSI World Index as the first Korean financial companyDeclared brand management (Slogan: "Create with You")Launched POP, an advanced wealth management brandLaunched industry-first customized fee selection serviceAcquired all inflation-linked bonds, a first among financial companies in KoreaNamed 'Korea's Best Private Bank' by financial publication AsiamoneyNamed the 'Best Research Center in Korea' by American financial publica-tion Institutional InvestorSelected as having the highest scores among securities companies by three domestic customer satisfaction indices (KS-SQI, KCSl, and NCSI)Won in 9 categories of finance in the Asiamoney Brokers Poll 2006

2011

2010

2009

20082007

2006

Global Network

Tokyo Office

Beijing Office

Seoul Head Office

BBAM

SMBC Nikko Securities

CITIC Securities

KGI Securities

Dragon CapitalHo Chi Minh City Securities

Rothschild&Co

Local Subsidiaries

3Overseas

Offices

2Affiliates

7

We protect the interests of financial consumers on every

front, from product development and sales to trading, and are

committed to the prevention of financial incidents.

Samsung Securities leads in capital market innovation by continuously overcoming challeng-es and provides the highest levels of financial services to customers. The following are some key achievements from 2017.

Samsung Securities provides customers with a wide range

of overseas investment opportunities via an expanding

network of superior financial companies.

Samsung Securities actively supports fintech innovation and provides products and services that leverage digital technology

such as artificial intelligence.

The design and operation of investment products that

balance economic, social, and environmental impacts and achievements are important

factors in our management of customer assets.

• Satisfactory assessments in all categories of the Financial

Consumer Protection Evaluation• Financial Consumer Protection Award, Grand Prize (The Korea

Economic Daily)

• Business agreement and stock investment conference with HSC

Securities (Vietnam)• Business agreement with SMBC

Nikko Securities (Japan)

• AI securities exchange service: Alliance with SK Telecom

• Launching interactive AI service

• Expansion of alternative invest-ments: Solar power plants

• Expanding venture capital investments

2017 Highlights

Expansion of Digital

Innovation

Expansion/Cultivation of Responsible Investments

Enhanced Customer-Oriented

Management

Expansion of Global Network

Launched the Fn Honors Club, a PB service brandLaunched the Samsung Cash Management Account (SMA)Held the annual Samsung Global Investor ConferenceDeclared the Samsung Securities WAYObtained full London Stock Exchange membershipLaunched Samsung WrapNamed the Best Investment Bank in Korea by financial publication Finance AsiaEstablished the Shanghai officeEstablished the Hong Kong subsidiaryNamed the Best Equity House by financial publication Euromoney (Three consecutive years)Merged with Samsung Investment Trust & Securities Co., Ltd.

20052004

2003

2002

2001

2000

Largest call center operation in KoreaEstablished the New York subsidiaryBegan selling mutual funds for the first time in KoreaEstablished the London subsidiaryTransferred to Samsung GroupChanged the company name to Samsung SecuritiesChanged the company name to International Securities and launched the securities businessIPO (Listed on securities exchange)Held the Meeting of Promoters for Hanil Investment & FinanceCompany established; Held the inaugural General Meeting; Paid KRW 20 billion in capital

19991998

19961992

1991

19881982

2012~ 2006~ 2000~ 1982~

Oct. 19, 1982 KRW 344 billion 101,392 2,242KRW 2.787 trillion / 1,160.19% 68

Korea Ratings (AA+), Korea Investors Service (AA+),

Moody's (Baa1)

Founding Operating Profit EmployeesNet Capital / RatioDomestic

Branches and Offices

Sub-HNWI Customers (More than KRW 100M)

Credit Rating

About Samsung

Securities


London Subsidiary

Hong Kong Subsidiary

Headquarters

p. 22 - Strengthening Global Business

p. 33 - Financial Consumer Protection

p. 25 - Digital Financial Innovation

p. 35 - Expanding Responsible Investment

New York Subsidiary

6 7


Samsung Securities pursues sustainable growth based on customer-oriented management.

First Korean financial company to be listed for eight consecutive years on the DJSI World Index

Carbon Disclosure Project (CDP) participant

2017 Review

With a foundational philosophy of "customer-oriented management" that is deeply-rooted in the company's culture, Samsung Securities achieved a variety of outstanding results in 2017. We recorded the highest operating profit in the past 10 years in terms of financials and ranked the first place in three domestic customer satisfaction surveys, allowing us to once again confirm our position as a market leader. Samsung Securities will continue to promote synergy and achieve sustainable growth via collaborative inter-divisional efforts and alliances with domestic and international financial institutions.

20

17R

ev

iew

Samsung Securities creates synergy through borderless collaboration.

Samsung Securities strives to satisfy our customers with unrelenting passion.

Linked Performance Highlights

WM-IB IPO mandate-related performance

29

2 cases

cases

KRW

KRW630B

63B

1st place, 10 consecutive years, Korean Standard Service Quality Index (KS-SQI)

1st place, 12 consecutive years, Korean Cus-tomer Satisfaction Index (KCSI)

Ranked 1st in Korea's Top 3 Customer Satisfaction Surveys

1st place, 14 consecutive years, National Brand Competi-tiveness Index (NBCI)

1st place, 20 consecutive years, Korea Brand Power Index (K-BPI)

1st place in the securities industry, Best Korea Brands 2018

Ranked 1st in Brand Power

Collaboration

Passion

Growth

Total Assets (KRW trillion)

2015 2016 2017

36

Operating Profit (KRW billion)

344

2015 2016 2017

Sub-HNWI Customers (More than KRW 100 million)

101,392

Assets Under Management (KRW trillion)

188

1st place, 12 consecutive years, National Cus-tomer Satisfaction Index (NCSI)

Sustainability Performance

Financial Highlights

2017 Review


20162017

2015 2016 20172015 2016 2017

on a separate basis

8 9


Our Business

Our Business


Organizational Chart

Seok Hoon Chang

Senior Executive Vice President Management

Support

Jae Hun Sa Executive VP,

WM

Han Yong Cho Senior VP,

CPC Strategy

Sung-Hoon KooCEO

Bernard Park Executive VP,

S&T

Seung Ho LeeSenior VP, Wholesale

Jae Kyung Lee Executive VP,

SNI

Weon Jung Shin Executive VP,

IB

Conan B. LeeSenior VP,

Trading

Board of Directors

WM DivisionThe WM Division provides personalized wealth management advisory. to each customer's unique investment preferences and objectives. Based on specialized ad-visory competency and various solutions, WM systematically manages customers' assets.

SNI DivisionThe SNI Division provides customers with finely tailored wealth management servic-es through SNI, a service brand developed exclusively for ultra high net worth individ-uals and specialized advisory services via the SNI Advisory Group. SNI is committed to the continuation of wealth management and investment into future generations based on perpetual, long-term relation-ships with customers.

CPC Strategy DivisionThe Customer-Product-Channel (CPC) Strat-egy Division designs products and portfoli-os and offers asset allocation strategies tai-lored to customer orientation with the sole goal of ensuring stable long-term wealth management. CPC Strategy provides cus-tomers with the best in products and ser-vices through the development of efficient channels and marketing strategies.

101,392Number of CustomersTotal Assets

1. Jae Kyung Lee, Executive VP, SNI2. Jae Hun Sa, Executive VP, WM3. Han Yong Cho, Senior VP, CPC Strategy

12

3

1,858Number of CustomersTotal Assets

71.5 trillionKRW(Overseas: KRW 7T)

KRW172 trillion

Seok Hoon Chang, Senior Executive Vice President

"All Samsung Securities' business divisions are focused on providing customers with the best in products and services. In 2018, we will maximize the synergy between divisions via restructuring and strive for differentiated customer satisfaction."

2017 Performance

Retail Sub-HNWI (More than KRW 100M in assets) HNWI (More than KRW 3B in assets)

Samsung Securities is expanding its customer base through cooperation between its business units, which is based on its wealth management-focused business model. In the future, we will continue to secure market dominance by strengthening our workforce, system, product, and service capabilities.

10 11

Growth, Collaboration, PassionOur Vision Our Value Our Management Our Information

1. Seung Ho Lee, Senior VP, Wholesale2. Weon Jung Shin, Executive VP, IB3. Bernard Park, Executive VP, S&T4. Conan B. Lee, Senior VP, Trading

Our Business

12 3 4

Sales & Trading DivisionThe S&T Division provides the company with structured prod-ucts related to stocks, bonds and derivatives that meet the investment needs of customers and offers advisory services to institutional investors and corporate clients with optimal investment alternatives customized for their specific require-ments.

Wholesale Division The Wholesale Division offers various investment alternatives such as stocks and derivatives to domestic and international institutional investors and corporate customers. The Division excels in increasing returns for customers via differentiated marketing and research.

IB Division The IB Division provides corporate investment services such as M&A related advisory, acquisition financing, and credit grants, as well as other corporate finance services such as IPOs, right issues, equity-linked bond (CB/BW/EB) issuance, and bond acquisition/issuance. Differentiated financial products using structured products (ABS, property funds, etc.) are also of-fered.

Trading DivisionThe Trading Division provides financial products and services that meet customer needs through product-linked trading and contributes to the increase of company-wide profits via stable hedge and equity trading.

2017 Performance

Industry leader in self-managed ELS

Issued ELS volume Issued DLS volume

2017 Performance

2017 Performance

2017 Performance

Corporate bonds (Based on the

representative company, "the bell")

IPOs(Based on acceptance,

“the bell,” domestic companies)

M&As (Bloomberg, completed,

domestic companies)

Overseas securities brokerage sales

Domestic securities brokerage M/S

1

1

4

1

7st

st

th

st

th

Samsung Securities will continue to lead the way with strong performances as an industry leader in self-managed ELS, M&A, and domestic brokerage markets.

trillion trillion trillion

Supply of products to other HQs

Sales Gross operating assets

trillion billion trillion

5.7KRW

2.7KRW 60.3KRW 12.5KRW

9.4KRW 3.2KRW

12 13


How we Create Value

Reported Capitals Output & Outcome

Reinvestment

Business Activities & Core Capabilities

Wealth

Management

Sales &

Trading

Investment

Banking

SNI

Wholesale

Trading

Samsung Securities classifies major capitals in the financial industry based on medium- to long-term strategies and utilizes capital effectively according to the specific characteristics of business conducted. The main reported capitals are classified as financial, intellectual, human, and social, and we produce superior results by leveraging the capital invested.

WM Customer-Based Growth Engine

- More than KRW 100 trillion in cumulative assets of sub-HNWI customers (more than KRW 100M)

Increased Customer ROI via Customer-Oriented Manage-ment

- 20% ROI on model portfolio (3-year cumulative return)

- 25% cumulative ROI on overseas recommendations

Differentiated Global Investment Capabilities via Overseas Securities Specialization- +5% growth on overseas securi-

ties AUM- KRW 2.2 trillion in AUM

Investment

Trading

Investm

ent

Brokerage

- Business operations and strategic invest-ments via financial capital provided by shareholders and investors

- Listed on the Korea Exchange (016360; March 28, 1988)

- Intellectual property such as products and services developed to respond to changing customer needs

- Personnel that create value: The most criti-cal competitive element in running a busi-ness

- Relationships and mutual influences with various stakeholders including customers and local communities

Financial CapitalBusiness Domain Core Competence


Human Capital

Social Capital

- Assets: KRW 36.169 trillion- Capital: KRW 4.376 trillion- Total number of issued shares

(common): 89.3 million shares

Financial Capital

- Number of online channel users: More than 600,000

- Computer operating cost: KRW 75 billion


- Number of employees: 2,242- Employee welfare expense:

KRW 315.4 billion- Education/training:

266,715 hours in total

Human Capital

- Sales volume of RI products: KRW 127.3 billion

- Social contribution expenditure: KRW 3.28 billion

- Financial consumer protection: Satisfactory in all aspects

Social Capital

Sales via trading, investments, and financing

Net profit

General expenditures

Dividends

Direct/indirect taxes and regulatory costs

Investments & reserve assets for business maintenance and

growth

Flow of Financial Capital

Inve

stm

ent

Advi

sory

Entr

uste

d

Inve

stm

ent

Man

agem

ent

Collective

Investment

Trust

How we Create Value


14 15


How we Share Value

Samsung Securities periodically reviews the capital invested according to the company's strategy as well as generated value and transparently discloses such information to stakeholders.

Financial CapitalIn 2017, Samsung Securities surpassed KRW 36 trillion in total assets, a YoY increase of 13.2%, and net oper-ating profit was KRW 917 billion, a 23% increase from 2016.

Non-Financial CapitalSamsung Securities significantly expanded the sales volume of its responsible investment portfolio in 2017 with 23 products equaling KRW 127.3 billion, an 83% YoY increase from 2016. In addition, we reduced GHG emissions by 5% in relation to employee business trav-el to actively manage environmental capital.

Value AllocationSamsung Securities is involved in value re-allocation ac-tivities, directly and indirectly returning to stakeholders the economic value generated in the process of conduct-ing business. Of the KRW 917 billion in net operating prof-it from the reporting period, KRW 256.9 billion was net profit. The total amount of value directly and indirectly allocated to stakeholders was KRW 813.3 billion.

Samsung Securities respects the diversity of human capital and exhibits one of the highest percentages of female management-level employees in the industry. Furthermore, we continue to promote social contribu-tion activities through finance.

Financial Review Stakeholder DistributionNon-Financial Review

Related Capital Stakeholder Area of

AllocationAllocated

Value

Financial capital

Shareholders and investors Dividends KRW 89.3B

Financial/social capital Customers

Business/academic activity expenses for

customersKRW 38.1B

Intellectual/human capital Employees Wages, retirement/

welfare benefits, etc. KRW 315.4B

Social capital PartnersPurchases & miscel-laneous administra-

tive expensesKRW 99.3B

Social capital Local communities

Donations to communities/NGOs KRW 3B

Social capital Local commu-nities

Miscellaneous expenses for corpo-

rate activitiesKRW 75.4B

Social capital Government and related

organizations

Income taxes and dues KRW 117.4B

Social capital Media Media, advertising, and PR KRW 75.4B

Increase in sales volume of responsible investments (KRW 127.3 billion total)

83%

Increase in the number of responsible investment products (23 items)

15%

Decrease in GHG emissions related to employee business travel

5%

Percentage of female managers (Average from 2015 to 2017)

Human capital diversity index

Cumulative number of classes participating in Economics and Securities Education for Youth

classes

5%

7,110

23%

How we Share Value


13.2% YoY increase

15.4% YoY increase

23.0% YoY increase

57.3% YoY increase

36

4.4

Assets

Equity

trillion

trillion

917

256.9

NOP

Net Income

billion

billion

*Financial and non-financial capitals for 2017 were prepared on a separate basis.

KRW

KRW

KRW

KRW

16 17


Our Value

16 17

Recognizing

the different capitals of

Samsung Securities

Our Capital

Financial Capital


Human Capital

Social Capital

18

20

24

28

32


18 19


Secure positive capital circulation via proper allocation of value to stakeholders

Enhance customer confidence via stable operation of products and services leveraging professional know-how

Customers- CS investigation, VOC,

customer conferences

Enhance employee satisfaction via stable employment and human rights guaran-tees; Seek mutual growth between com-pany and individuals

Employees- VOE, Junior Innovation

Board, mentoring, multi-faceted evaluation

Enhance corporate image, strengthen customer trust, expand responsible in-vestments, and seek sustainable growth via financial consumer protection

Local communities- Volunteer Corps, YAHO

Volunteers, Economics and Securities Education for Youth, Nanumi Fund

Government and related organizations- Public hearings, financial

and securities association meetings

Closely linked to reputation risks, con-tributing to reputation Media

- Press conferences, PR-related activities

Our Capital

Reporting Topic & RelevanceClassification of Capital and Reporting of Key Issues

Financial Capital

- Maximizing synergy- Strengthening global business

- Financial capital obtained via shareholders and investors- Used for business operations; Profit returned in the form of stock

price increases and dividends

As a factor directly affecting the expan-sion of the enterprise, financial capital requires smooth capital procurement for sustainable long-term growth

- Intellectual capital that can respond to changing customer needs such as digital finance and various types of new products and services

- Means to enhance customer convenience based on a stable system

Securing long-term growth engines by enhancing competitiveness and market leadership via innovative products and services

- Human capital that is the core of the financial industry and serves as the basis for customer trust

- A direct entity that provides and manages goods and services for various customer groups based on expertise

The recruiting of talented individuals, fostering of talent into financial experts, and subsequent securing of industry-leading expertise are essential elements of customer-centric management

- Samsung Securities' relationship with various stakeholders- Social capital that merges Samsung Securities' relationships

with various stakeholders such as customers, investors, regula-tors, and local communities

- Non-financial risks such as corporate image and reputation

Establishing win-win relationships and collaborating with stakeholders are es-sential to the business value chain

- Samsung Securities' comprehensive efforts and compliance and risk management activities for the establishment of trans-parent governance and proliferation of ethical management

Enhancing transparency in governance, strengthening risk management, and conducting regulatory compliance activities are important in terms of efficiency and reliability

Social Capital

- Financial consumer protection- Expanding responsible investment


- Digital financial innovation- Enhancing information protection

Human Capital

- Recruiting talented personnel and supporting growth

- Achieving industry-leading level of expertise- Senior lifecycle management

Management

- Improving governance transparency- Risk management efforts - Enhancing compliance

Long-term Impact

Stakeholder Engagement

Capital & Issue

RelevanceDefinition

Samsung Securities strategically manages major capital injected for business operations as well as the medium- to long-term impact of said capital. Notably, important management issues for each capital are considered not only in terms of financial but also social and environmental impact. We communicate with key stakeholders and preemptively identify management-related risks that may arise.

Shareholders and investors- Shareholders' Meeting,

IR activities

Letter from the CEOOur Capital


20 21


Financial Capital

In 2017, the securities industry saw a shift in business models, as seen with the rise of large-scale IB accreditation. Emphasis was placed on innovation and synergy to secure medium- to long-term growth en-gines and uncover new businesses, and restructure large-scale companies via M&As. Competition based on capital and economies of scale is expected to inten-sify well into the future.

Market Review

Samsung Securities actively responded to market changes via expansion of equity capital, and we provided a com-prehensive service that maximized cus-tomer satisfaction by leveraging differ-entiated services and superior product competitiveness as the driving force of sustainable growth.

Our Approach

A New Customer-Centric EndeavorIn 2018, Samsung Securities will strength-en its global business for a new undertak-ing. We will expand our global business to find investment opportunities, drive new businesses, and lead digital innova-tion.

Our Future Plan

Maximizing Synergy

Differential Services Based on Inter-Divisional CollaborationCustomized Corporate Finance AdvisorySamsung Securities has recruited brilliant IB experts for each in-dustry to provide specialized services including IPO consultation. For the biotechnology industry, which has been in the spotlight in recent years, PhD-level experts and bio-analysts from the Re-search Center provide valuable information and insights. Based on these differentiated capabilities, we offer the best customized solutions through experts in each division, providing corporate clients with legal and tax advice, corporate financing, and man-agement succession planning. Additionally, we offer IPO services for WM customers with corporate financing needs. Samsung Se-curities was able to achieve excellent linked performance in 2017 based on our differentiated services.

Expansion of WM and IB BusinessesNetworking CommunitySamsung Securities holds the CEO Forum, CFO Forum, and Next CEO Forum designed specifically for CEOs, CFOs, and second- and third-generation business owners. Lectures for each forum covers a variety of topics, from management trends and hu-manities knowledge to wealth management solutions, provided by top domestic and international industry professionals and managers of global innovation companies alike. We also operate programs for visiting outstanding member companies as well as advanced overseas companies and continue to support network-ing well into the future.We even hold joint seminars with senior class members and alumni meetings to provide a forum in which class members can communicate freely. Forum members study the latest trends, share management know-how, and discover new business op-portunities through active participation in the networking pro-grams of Samsung Securities. As a result of this interest, we have created customized communities and forums according to each region and industry which are being continually expanded into a large-scale network spanning the entire country and multiple industries. In addition to regular services, Samsung Securities is providing advisory for corporate financing and IPOs to corporate forum members, as well as wealth management for corporations and employees and other high-quality VVIP programs to further solidify our position as a business that grows together with mem-ber companies.

Ranked 1st in the PBS MarketSamsung Securities has built an excellent WM customer base with a foundation of customized services, resulting in excellent performance in the PBS market. We have established trust rela-tionships with hedge fund management companies and achieved excellent results based on our distinctive market advantage. Samsung Securities has surpassed KRW 3 trillion in trust assets for the first time in the securities industry (June 2017) with a mar-ket share of more than 30%.


cases cases2 29KRW 63B KRW 630B

2016 2017

Customer-Oriented Management

Enhanced global network and product offering

New business dominance

Digital innovation

Strengthened Global

Business

Maximizing Synergy

- Differential Services- Superior Product

Capabilities

KEY Performance

29cases


630

Financial Capital


CEO Forum

KRW billion

22 23


Strengthening Global Business

Samsung Securities is strengthening its wealth management capabilities and providing overseas investment opportunities to clients by expanding cooperation with major global financial companies.

Expanding Affiliate NetworkSamsung Securities continues to expand its alliance with over-seas financial institutions to provide customers with high-quality research services and a range of overseas investment opportuni-ties. In addition to strengthening existing partnerships with CITIC Securities in China and KGI Securities in Taiwan, we have expand-ed our affiliate network via HSC Securities in Vietnam, SMBC Nik-ko Securities in Japan, and RBC in the Americas to broaden the coverage and enhance the level of our overseas equity research services.

Financial Performance Summary

Summary Analysis: Financial PerformanceSamsung Securities' separate net operating profit for the fiscal year 2017 (Jan. 1-Dec. 31, 2017) improved in all segments (securities brokerage, financial product sales, commodity management, IB, etc.), up 23.0% from the previous fiscal year (Jan. 1-Dec. 31, 2016) to KRW 917 billion. Separate operating expenses (personnel and sales management) amounted to KRW 573.0 billion (+4.5% YoY), and separate pre-tax income was KRW 341 billion (+58.9% YoY). Separate net income increased by 57.3% to KRW 257 billion. As a result, the return on equity (annualized ROE, controlling interest) increased from 4.5% in the previous fiscal year to 6.3%.

Major Shareholders

Strengthening Overseas Product SupplySince the low interest rate trend continues in Korea, Samsung Securities is making efforts to expand the variety of overseas products available to our customers. All of our divisions are col-laborating to broaden the supply of various overseas products to include real estate, aircraft, and infrastructure in addition to traditional products such as securities and bonds. In 2017, we entered into a partnership with BBAM, a U.S.-based aircraft leas-ing and management company, to promote aircraft investment products, and we launched a product that invests in high-quality IPOs in collaboration with Dragon Capital, the leading wealth management company in Vietnam. We will globalize our domes-tic wealth management framework and engender a paradigm shift to provide customers with new revenue opportunities by continually exploring exceptional overseas products.

Financial Highlights (IFRS separate)Recent Data (Unit: KRW billion)

FY2017 FY2016 YoY

Balance Sheet Summary

Total Assets 36,168.6 31,941.4 13.2%

Total Liabilities 31,792.3 28,148.4 12.9%

Total Equity 4,376.3 3,793.1 15.4%

Earnings Summary

Net Operating Profit 917.0 745.5 23.0%

Brokerage commissions 313.3 274.8 14.0%

Sales commissions on financial products 409.0 313.4 30.5%

Underwriting and advisory commissions 66.2 32.6 103.1%

Trading and interest income 124.3 126.8 -1.9%

Other income 37.9 27.0 40.2%

Commission expenses -33.8 -29.2 15.8%

Pretax Income 340.5 214.3 58.9%

Net Income 256.9 163.3 57.3%

Major Shareholder Shares (Common/Share) Holdings (%)

Samsung Life Insurance 26,282,823 29.43

Other Affiliates 195,992 0.22

National Pension 7,504,609 8.40

Other 55,316,576 61.95

Total 89,300,000 100

Global NetworkNew in 2017: Vietnam (HSC Securities, Dragon Capital Group), Japan (SMBC Nikko Securities), USA (BBAM (aircraft financing))

USAJapan

Taiwan

Vietnam

China

Europe

Financial Capital


Other61.95

Samsung Life Insurance29.43

Other Affiliates0.22

National Pension 8.40

Headquarters

24 25


Smart AdvisorSmart Advisor is an easy-to-use, end-to-end system that enables anyone to conveniently manage their assets, from sign-up and investment design to follow-up management. We also provide the Global ETF Club service, designed specifically for mPOP, for investors with a keen interest in the global market. The service allows customers to query global ETF-related investment and se-curities information as well as place orders free-of-charge.

RASSI-i, a Dedicated Smartwatch AppSamsung Securities' RASSI-i is a smartwatch app designed with the Samsung Gear S2 and S3 in mind. The app can be used with just an Internet connection, without the need for pairing with a smartphone, and conveniently provides real-time ticker informa-tion as well as trading signals as push notifications.

Associated Services (SamsungPay, Toss etc.)A Samsung Securities account can be linked and used with Sam-sung Pay or Viva Republica's Toss, a payment application. Finan-cial services such as balance inquiries, Samsung Card merchant payments, and Samsung Securities and Daegu Bank ATM trans-actions are just a few swipes away with Samsung Pay, and Toss offers convenient remittance and transfer services.


Mobile sales support (POP Touch 2.0)Expanding fintech wealth management services

Our Future Plan

KEY Performance

PIMS

16,545Hours

600,000Customers

Digital Financial Innovation

Enhancing Customer ConvenienceSamsung Securities provides a variety of customer services via our website, mobile app, and customer support center that elimi-nates the need for customer branch visits. The number of online channel users reached 600,000 in 2017, and non-face-to-face ac-count openings exceeded 240,000.

Innovative Financial Services Samsung Securities is actively responding to the rapidly-chang-ing financial market and diverse needs of customers through new products and platforms based on innovative technologies.

mPOP Mobile AppSamsung Securities' mPOP is a mobile trading system (MTS) that allows customers to easily open an account and conduct compre-hensive wealth management, including portfolio investment and pension management, in addition to domestic and international securities trading.

Awards

Service Improvement History

Launch of industry-first fingerprint authentication serviceLaunch of mPOPAssociated Samsung Pay serviceAbolition of ActiveX

Aug.

Oct.Oct. Dec.

2016

Vietnamese stock trading serviceIris recognition serviceAssociated advisory/advisory servicePortfolio advisory service

Mar. Apr.Nov. Dec.

2017

App of the Year, 2017 App Awards Korea (Chosun.com)2017 App of the Year (Maeil Business Newspaper)

Financial products and services based on digital innovation are increasing along with the proliferation of mobile chan-nels and fintech. Notably, IT-based digi-tal wealth management solutions such as Robo-Advisor are steadily advancing, as is the utilization of online services by customers. In addition, non-financial players have become more visible in the financial industry by way of fintech start-ups and IT vendors, and the creation of synergies via collaboration with other industries has become an important in-dustry issue.

Market Review

Enhancing Financial Services via Digital InnovationSamsung Securities is providing mobile app-based services mPOP and Smart Advisor to cope with changes in the fi-nancial market. What's more, we devel-oped POP Touch, a support system for enhancing sales efficiency and planned to launch an interactive AI service. We are being proactive in providing secure financial services as the importance of information protection is being further emphasized with the proliferation of digi-tal financial services and non-customer-facing channels.

Our Approach



Online channel users

Information security training

Personal Information Management System (PIMS) Certification

26 27


Information Protection ActivitiesInformation Security TrainingSamsung Securities conducts biannual online training for all em-ployees, including those at partner companies, in recognition of the importance of information security and to raise the general level of security. In addition, we designate a Security Day each month to share our security policies with employees via the re-spective security officers stationed throughout our branch of-fices. We are committed to the prevention of information-related incidents and want all employees to recognize the importance of protecting customer information.

Server-Side Personal Information Detection SolutionEncryption is essential for the secure management of personal information on servers as well as the personal computers of em-ployees. Although Samsung Securities encrypts all personal in-formation as a general rule, we have implemented an additional layer of security in the form of a server-side personal information detection system as a preventive measure to stop the outflow of information that has not been encrypted.

Integrated Information Management System To improve the level of privacy protection, Samsung Securities has built a systematic and comprehensive integrated manage-ment system to respond to changes in relevant laws and regula-tions and eliminate erroneous regulatory violations via system-atic operation and management of internal controls, activities, and personal information distribution.

Fingerprint Authentication for Work-Related ComputersTo enhance security, Samsung Securities has implemented fin-gerprint authentication on all work-related computers. The sys-tem fundamentally prevents the use of work-related computers by unauthorized users, and this security measure applies to all employees, partners, and outsourced personnel of Samsung Se-curities.

Hard Drive EncryptionSamsung Securities encrypts data on hard drives to prevent damage should a data leak or hardware loss occur.

POP Touch 2.0, a Mobile Sales Support SystemIn August 2017, Samsung Securities developed POP Touch 2.0, a tablet-based mobile sales support system, to improve efficiency and mobility for the sales staff. POP Touch allows easy customer management, market and financial product data inquiries, and handling of work-related tasks so that sales staff can provide cus-tomers with faster and higher-quality service.

POP Cloud, an Integrated Content Management PlatformSamsung Securities developed the POP Cloud system to man-age all internal content for easy distribution to various channels. POP Cloud features an intuitive UI, user-customizable environ-ment, and deep search capabilities and links with the POP Touch 2.0 mobile environment for improved user convenience and ef-ficiency.

Enhancing Information Protection

PIMS CertificationAs digital financial services and various non-face-to-face plat-forms grow, the importance of privacy is being emphasized. As a preemptive response to privacy concerns, Samsung Securities acquired Personal Information Management System (PIMS) certi-fication in 2018 as a continuation of our commitment to provide secure financial services following our Information Security Man-agement System (ISMS) certification in 2014.

Interactive AI ChatbotSamsung Securities is currently developing a chatbot service to provide prompt responses to a variety of customer inquiries. In the near-future, customized stocks, product recommendations, and individual wealth management services will be provided in combination with speech recognition and analysis, AI, and big data. As a new interactive communications channel, the chatbot service will provide personalized notifications and response sce-narios in the event of a change in a customer's stocks or products.

Speech RecognitionThrough a partnership with SK Telecom, Samsung Securities' services can now be accessed via Nugu, the voice recognition-based AI assistant. Using Nugu, users can receive information such as stocks of interest, trading status, and market index and even contact Samsung Securities' Customer Support Center.

2018 Operational Plan

Internal pilot launch

Distribution to sales staff

Corporate/pension content development

Paperless work environment

Feb.

Mar.

Q2

Q3

POP Touch 2.0 The voice recognition-based AI assistant, NUGU

PIMS & ISMS Certification

Information Security SystemSamsung Securities has appointed a Chief Information Security Officer (CISO) and formed a dedicated organization consisting of the Information Security Team and IT Security Department. Together, the two entities integrate policy formulation and secu-rity operations and are committed to the protection of customer information and the creation of a secure environment for elec-tronic financial transactions.

CISO Organization

Information Security

Team

IT Security

Dept.

• Policy formulation/operation• Privacy protection• Security Council• Information security training• Physical security

• Security inspection• Incident response• IT security audit



Information Security Training

16,545 Hours

28 29


Recruiting Talented Personnel and Supporting Growth

Young Creator, the Collegiate Recruitment ProgramYoung Creator is a program that selects exceptional university stu-dents via competition to eventually be hired after one year of spe-cial development. Young students selected for the program receive financial and preliminary Samsung employee training to be fostered as a Samsung Securities Talent. We build a foundation for PB com-petency through a year-long assignment, practical application at a branch or department, and simulated investment competitions. In 2017, we selected 16 outstanding students for the program.

Open Employment, TogetherSamsung Securities is committed to fair employment without dis-crimination based on our Group-wide open recruitment policy. We operate an open recruitment policy for high-school graduates when hiring an office assistant, and we are taking the lead in post-child-birth employment for women whose careers have been interrupted.

New Employee Adjustment ProgramNew employees build a foundation for their work through one year of introductory training, basic job training, and OJT. In addition, we operate a dual-care system that supports employee adjustment and expertise development via mentoring. For each new employee, we also assign two dedicated mentors, a 'field master' for adjustment in the field and a 'guardian' for emotional management and grievance resolution.

Junior Innovation Board, the Creative Solution Pro-posal ProgramSamsung Securities has been operating the Junior Innovation Board since 2013 for the purpose of discovering new ideas from junior-level employees. One board consisting of two teams is active for each half of a fiscal year, proposing creative solutions for key challenges faced by the company. A wide range of creative solutions has been pro-posed by ten different boards since the program's inception in 2013, from digital channel improvements and new service and marketing proposals to work efficiency improvement plans. The respective de-partments review the proposals and reflect and use suggestions in a timely manner when appropriate. Exceptional solutions are shared throughout the company, building a consensus among employees regarding innovative ideas.

Voluntary LearningWe operate a Learning Center that allows employees to participate in voluntary learning based on their interests. We provide support via teaching materials and instructor and conference expenses when five people with the same interest gather to form a learning group. Additionally, participation is encouraged by reflecting the participa-tion rate in the department evaluation index. Currently, more than 100 Learning Centers are operated in each half of a fiscal year.

Key Proposals by the Junior Innovation Board

Proposal Description

Pocket PB

Enhance communication between sales staff and customers via development of a mobile app that reflects customer needs

Smart Finder

Develop a customizable UI/UX with added search function for financial product conditions to enhance customer convenience

POP-Robo Talk

Respond to basic business needs and expand online wealth management by launching a customized AI-based chatbot consultation service

Human Capital

KEY Performance

6th class of the Young Creator program Junior Innovation Board

Human Capital


Enhancing global PB competenciesExpanded support for the acquisition of job-related certifications

Our Future Plan

Competitiveness in the financial industry is defined by human resources that play a critical role in the development, launch, and operation of products in addition to the scale of capital. The hiring and foster-ing of financial experts are more impor-tant than ever in responding to the rap-idly-changing financial landscape that is continuously being reshaped by the proliferation of alternative investments, the emergence of new market segments, development of financial technologies, and the rise of diversified risks. In par-ticular, the ability to analyze the global market, operate diversified investment products and cultivate professional per-sonnel capable of operating a customer's financial portfolio are core competencies of a financial institution.

Market Review

Fostering Creativity and Securing Financial ExpertiseTo foster and secure financial experts, Samsung Securities operates a variety of programs for each field and position and continues to develop talented human re-sources. The Young Creator program cul-tivates talented individuals and provides them with the expertise required to be private bankers, and the Junior Innova-tion Board contributes to improving effi-ciency within the enterprise by proposing creative solutions to address challenges in different areas of the organization. Ad-ditionally, we actively support activities such as dispatched training for the culti-vation of global market experts, training for alternative investment and digital fi-nance experts, and internal study groups.

Our Approach

119Hours

Per-person training hours

100+Training courses

25%Highest within the industry

CFP-Certified PBs

42Highest among domestic

companies

CFAs

30 31


Achieving Industry-Leading Level of Expertise

Specialized TrainingTo enable all employees to provide differentiated services based on their best professional competencies, Samsung Securities operates specialized HR development programs for each job type. PB Job TrainingWith the aim of training wealth management consultants rather than simple stock brokers, Samsung Securities operates a systematic fos-tering system for private bankers (PB). In addition to the market, fi-nancial product, and investment strategy education, we also conduct in-depth learning programs to provide high-quality advisory services tailored to each customer's individual financial needs.

WM Master CourseSamsung Securities conducts the WM Master Course in collaboration with exceptional graduate schools to acquire expert financial theory and strengthen responsiveness to market and product changes. Through the course, we teach multi-disciplinary expertise in every-thing from portfolio management, customer needs analysis and product trends to global wealth management trends via overseas field trips.

Corporate Business School (CBS)Samsung Securities conducts corporate finance training for PBs to provide all-encompassing services to business owners and cor-porate customers. We foster comprehensive corporate advisory capabilities from corporate value and growth direction analyses to financing and operational strategies.

PB Video Training To rapidly share market and product issues with all PBs, we conduct video training each morning connecting all national branches. All PBs receive the most up-to-date information on market forecasts, response strategies, and promising investment prospects.

etc.) that are garnering the most attention in terms of finance. Such experts contribute to overseas market analyses and business promotions based on a broad understanding of local politics, economies, and societies.

Advanced Financial IT CapabilitiesAs the importance of IT in the securities industry grows, Samsung Securities continues to be at the forefront in establishing and operating a financial IT education system. Expert courses are structured according to specific tasks such as strategic planning, architecture, and systems development, and we operate a learning organization centered on the Chief Information Officer (CIO) to understand IT trends and emerging technologies in a timely manner.

Senior Lifecycle Management

Executive TrainingSamsung Securities conducts leadership training for executive-level employees according to promotion stage and role. We cultivate not only professional expertise, but leadership and management skills as well to strengthen communications and relationship management.

Life & Retirement Design CourseSamsung Securities provides life and retirement design training for employees over 40 years of age to manage their career in the company and design a second life after retirement. Through this course, employees are given the opportunity to enhance job commitment and design life-long experience through a re-examination of their current work experience and vision. We also provide specialized advisory services through the Career Cultivation Center (CCC), which is managed by Samsung Finance Company, to support a systematic life and retirement design.

WM Master Course at Sungkyunkwan University CFP class

Professional CertificationSamsung Securities actively supports the acquisition of professional certifications for gaining global expertise. Because we prioritize the acquisition of the Certified Financial Planner (CFP) certification to enhance the wealth management capabilities of PBs and Chartered Financial Analyst (CFA) certification to strengthen the market analysis capability at our head office, Samsung Securities currently boasts the highest numbers in the industry. In addition, we have noted increases in the acquisition of the Chartered Alternative Investment Analyst (CAIA) certification for securing alternative investment capabilities and Certified Information Systems Auditor (CISA) certification for improving systems’ stability and reliability.

Global CompetenceTo provide customers with new investment opportunities in global markets and products, Samsung Securities is fostering global competence in a variety of fields by visiting overseas companies, dispatching local experts, and strengthening foreign language competence.

Overseas PB TrainingSamsung Securities selects outstanding PBs for field trips to emerging markets and leading companies. In 2017, we visited the major markets in China, Japan, and Vietnam, starting with Silicon Valley in the US, to acquire up-to-date information and insight, and in 2018, about 25% of the entire PB base is expected to experience overseas sites directly.

Overseas ExpertsThrough the Overseas Experts training program, Samsung Securities conducts regional and market research in parallel by dispatching employees to emerging countries (China, Vietnam,

Samsung Securities PBs' visit to Silicon Valley

Headquarters Job TrainingSamsung Securities' head office operates division-specific training systems (IB, wholesale, research, etc.) to provide solutions that are customized to each business and customer issue. We also conduct expert training and seminars to identify trends and improve indi-vidual competence.

Expert CourseThe Expert Course is specialized for juniors in each division. Through this training, employees are able to further enhance knowledge and skills for job performance and identify key issues and countermea-sures for their respective fields.

Expert SeminarExpert Seminars are interactive, discussion-based training programs that involve leading industry authorities to strengthen market domi-nance in key markets and businesses. We analyze and forecast mar-kets from multiple perspectives via external experts and provide a good opportunity to identify hidden strategies and their potential impact.

Training Highlights

2.03

42

119 Hours

25%

millionKRW

Per-person training hours

CFP-Certified PBsHighest among domestic

companies

Per-person training expenses

CFAsHighest among domestic

companies

Human Capital


32 33


Financial Consumer Protection

Consumer Protection Organization and SystemSince 2013, Samsung Securities has been operating the Financial Consumer Protection Team under the directorship of the CEO with the Chief Customer Officer (CCO) as an appointed executive officer. We reflect up to 45% of customer ROI on sales personnel evaluations, and for cases of excessive customer losses, we have introduced the concept of "sound sales," which excludes the performance from the evaluation. Through such efforts, we share the mindset that a customer's return is that of Samsung Securities and its employees.

Social Capital

KEY Performance

SatisfactoryIn all

categories

Enhancing financial consumer protectionEradication of incomplete sales

Our Future Plan

Financial companies are increasingly launching new products and services that reflect technological and societal changes such as the diversification of digital innovations and customer groups. The development and diversification of digital finance are increasing the need for the protection of financial consumer rights and interests. Investment plat-forms are becoming more prevalent in a shift from traditional methods of capital procurement, and cases of alternative in-vestments targeting venture companies that generate social value are gradually increasing. What's more, responsible in-vestment, traditionally centered on the European market, is growing strongly in North America and other emerging mar-kets, quickly becoming a major invest-ment trend.

Market Review

Protecting Financial Consumers and Expanding Responsible InvestmentTo protect financial consumer interests, Samsung Securities operates a trans-action review committee as well as a product committee to carefully examine compliance from the planning and de-velopment stages of financial products. In addition, we conduct periodic and special inspections to eradicate incom-plete sales and commit to consumer protection throughout the entire pro-cess, including follow-up management, through our customer healing services. As of December 2017, we are operating responsible investment products of ap-proximately KRW 127.3 billion in value, an increase of about 83% from the previ-ous year. Additionally, we pursued quali-tative growth via the launching of new responsible investment products and expansion of capital investments.

Our Approach

Social Capital


Financial Consumer Protection Evaluation

On-site inspections of incomplete sales

Responsible investment scale

Special inspections

KRW billion

215

127.28

Voice of the Customer (VOC)Samsung Securities listens to the voice of customer (VOC) through online and offline channels. Customer feedback and complaints received via VOC are immediately communicated to the respon-sible personnel, and the progress and results are shared in real-time among employees. Relevant information is reflected in future works and improvements via the VOC Reflection and Improvement Process. Matters that require changes in management policies are selected and reviewed as items for improvement, and results are dis-closed to employees and the public via Samsung Securities' intranet and website.

VOC Improvement in 2017

· Change to investment ratio for retirement pension bond ETFs· Improved customer satisfaction via expansion of mobile services

for KONEX and gold· Minimized customer inconvenience via improvement in overseas

securities rights notification process

Customer Healing ServicesWhen selling products, Samsung Securities complies strictly with trading guidelines for the prevention of illegal sales, and as a rule, we automatically notify all customers when an order is concluded. For completed sales, we provide customer healing services via the Risk Management Rapid Response Team.

Customer Healing Services

· Purchase Retraction Sales commission refunded if product subscription is canceled

within five business days· myManager New PB selected to meet customer's needs if in conflict with

previous selection· P/F Risk Management Systematic wealth management services such as periodic

performance reports and portfolio risk management

Dispute ResolutionSamsung Securities has been committed to improving our credibil-ity via dispute resolutions since the introduction of customer-centric management concepts.

· Company-wide self-regulation for employee-client disputes· Establishment/operation of dispute management system· Processing time: Within 14 business days as a general rule· Number of cases in 2017 - No lost cases - 10 in-progress cases· No financial incidents in 2017

Incomplete Sales PreventionRisks related to incomplete sales at divisions and branches are mon-itored via an early warning system, and regular inspections are con-ducted. In addition, we conduct frequent inspections of unsuitable and high-risk product sales.

Incomplete Sales Inspection for 2017

Category Description

Target All branches

Points of Inspection

- Inspection of 26,065 financial products’ sales· Intensive inspection of high-risk groups (elderly persons,

high-risk products, unsuitable sales, etc.)- A total of 215 special on-site inspections

Training History

- Branch training for sluggish Mystery Shopping performance- Video training for sales process at all branches- Concurrent training for complete sales during the on-site

inspection

34 35


127.28 billionKRW

KRW KRW

Total Product Scale

58.03 billion billion

Governance

69.25Environmental

Governance Products In response to corporate governance improvement efforts at home and abroad, Samsung Securities is searching for undervalued com-panies with exceptional governance and selling related funds. For newly-added funds in 2017, we included dividend payout ratios, governance improvements, and company-wide ESG levels in cor-porate evaluations.

Governance 58.03

Samsung Governance Plus Specialized Private No. 1 (Equity) 28.85

Samsung Responsible Investment Securities Investment Trust No. 1 (Equity) 18.55

High Social Responsibility Securities Investment Trust (Equity) 0.49

ABL Corporate Value Enhancement Securities Investment Trust (Equity) 4.32

ABL Active SRI Securities Investment (Equity) A 0.28

SHBNPP Tops Beautiful SRI Asset Allocation Private No. 1 (Mixed) 1.71

SHBNPP Tops Beautiful SRI Securities Investment Trust 1 (Equity) 0. 91

SHBNPP Tops Beautiful SRI Securities Investment No. 2 (Equity) 2.19

SHBNPP Corporate Governance Private Equity Investment No. 1 (Mixed) 0.62

SHBNPP Corporate Governance Private Equity Investment No. 1 (Equity) 0.11

Social Capital


Fund Samsung Responsible Investment Fund

SummaryInvestment in companies with exceptional responsible management reflecting sustainability management standards (eco-friendly, socially responsible, sound governance, etc.)

Trading Method

Fund composed by screening companies with exceptional governance, sustainability, and high dividends via evaluation by an external advisory agency

Fund High Social Responsibility Investment Fund

Summary An Investment strategy that considers non-financial ESG fac-tors in addition to financial analysis

Trading Method

Exceptional ESG grade within benchmark (KRX ESG Leaders 150) with high financial indicators; 80% best-in-class weight-ing, approx. 20% exceptional ESG factors for a safe margin

(Unit: KRW billion)

Product Launch ProcessSamsung Securities manages consumer risks from the planning and development stages of financial products via an enhanced review process. When a new operating strategy is introduced or assets are newly-incorporated, we review the suitability through the deliberative transaction review body and product committee. Products with a high probability of loss (derivatives-linked securities, commodities, unlisted stocks, etc.) are flagged as cautious recommendations, and we have introduced a heightened investment solicitation and sales processes accordingly. Samsung Securities' financial products are based on close cooperation between business and risk management departments. Thus, stability and soundness are reviewed and evaluated, and we implement thorough follow-up management for such products.

Financial Consumer ProtectionOf all securities firms in Korea, Samsung Securities was the only company to receive satisfactory assessments in all categories of the Financial Consumer Protection Evaluation conducted by the Financial Supervisory Service in 2016. In addition, Samsung Securities was awarded the Grand Prize for four consecutive years in the Financial Consumer Protection Awards in recognition of its industry-leading customer-centric management system.

Financial Consumer Protection Evaluation – Categories and Results

Category Results

1 Number of Disputes

Satisfactory in all

categories

2 Processing Time

3 Number of Cases

4 Sales Sustainability

5 Financial Incidents

6 Consumer Protection Organization and System

7 Consumer Protection in Product Development

8 Consumer Protection in Product Sales

9 Dispute Management System

10 Consumer Information Disclosure

Qualitative EvaluationWhen evaluating trading companies and funds, Samsung Securi-ties reflects qualitative elements such as management philosophy and governance in addition to quantitative factors. Through such measures, we manage non-financial risks and invest in consider-ation of sustainability.

Qualitative Evaluation Criteria

Trade Approach • Trade strategy sustainability• Investment process compliance

Trading Organization • Trading manager changeability• Trading organization changeability

Miscellaneous• Management philosophy, departmental

investment opinion• Possible compliance issues

Product Committee

3

Product Launch Process for Newly-Incorporated Assets

Transaction Review

Committee

2

Business/RM Department

Review

1

Samsung Securities considers environmental, social, and governance (ESG) factors of a company in project financing and fund-raising. Among the 109 cases reviewed for funding in 2017, one case was withdrawn from investment examination in consideration of social soundness, environmental impact, and inherent risk. For deals with high ESG risk, Samsung Securities applies its investment exclusion principle, which excluded cases from consideration in advance, and thus, only a few cases are withdrawn from the actual examination process.

A mortgage for Hotel X was stable with a loan-to-value ratio (LTV) of 53%. However, suspicions of embezzlement by the CEO and ethics violations emerged during the screening process. The case was therefore rejected during loan review due to governance and CEO risks.

Case 1

For the sale of derivatives-linked securities (DLS) to be invested in a German real estate loan, the competencies of the developer and the contractor, as well as compliance with relevant laws and regulations, were not sufficiently verified even after departmental review and local due diligence planning. We stopped preparing the product for sale.

Case 2

Responsible ESG Investment Cases

Expanding Responsible Investment

Social Responsibility in FinanceSocially-responsible investment is a global trend that is expanding in Europe, and recently, it has been showing a high rate of growth in North America and other emerging markets. Stewardship codes are anticipated to be introduced in Korea in accordance with new governmental policies, and a growing demand for corporate social responsibility exists in the form of heightened disclosure require-ments among others.

Stewardship CodesThrough the revision of the National Pension Act, stewardship codes in consideration of ESG elements are expected to be enacted with respect to the National Pension Fund. When said codes are intro-duced, institutional investors (National Pension, wealth manage-ment companies, etc.) will be able to exercise active voting rights, and the importance of ESG-related activities is also expected to increase. In addition, the scope of information disclosure related to socially-responsible investments in Korea is expected to expand. Investors' interest in issues related to Capital Market Law (executive compensation), the Employment Information Disclosure System, and the Environmental Information Disclosure System is growing, as is the general need for information disclosure.

ESG InvestmentSamsung Securities recognizes the need for ESG-related informa-tion disclosure and expanded investment, and we will strengthen communication with institutional investors to broaden mutual un-derstanding. In particular, we plan to enhance the monitoring of social and environmental risk factors that may damage the value of the company. In 2017, the scale of Samsung Securities' sustainable products reached KRW 127.3 billion, a two-fold increase from 2016. Three new governance-related products were added for qualitative and quantitative expansion, and we invested KRW 5 billion into the Samsung Responsible Investment Fund to expand related invest-ments. We plan to implement ESG factors when investing in equity.

36 37


Venture Capital InvestmentsSamsung Securities contributes to corporate ecosystems and long-term growth through the expansion of venture capital investments (SMEs and start-ups). We are striving to capture new growth opportunities as the industry, enterprise, and technology investments related to the Fourth Industrial Revolution (4IR) increase. We plan to bolster our business opportunities by expanding investments in venture capital opportunities and IB deals.

Growth Ladder Konex Activation FundA growth ladder fund is a venture fund that finances SMEs in the start-up phase by supplying policy and capital and providing a foundation for the flow of private funds. In September 2017, Samsung Securities actively supported trading on KONEX, a securities exchange exclusively for SMEs, by investing in the KONEX Activation Fund. We also invest in the Technology Finance Fund to discover and cultivate SMEs having outstanding technology.

4IR FundSamsung Securities invests in the 4IR Fund, a baby fund of Korea Fund of Funds that fosters policy industries, provides investment resources for SMEs and venture companies, and supports domestic companies engaged in 4IR-related businesses. We plan to actively leverage the fund to expand into new business opportunities (ROI realization, KOSDAQ listings, M&As, block deals, etc.) according to the growth of investment target companies.

Investment in and Alliance with CrowdySamsung Securities has invested KRW 100 million of equity in Crowdy, a crowdfunding company, and established a compre-hensive business alliance. Together with Crowdy, we will discover promising start-ups, provide initial funding opportunities, and offer total financial solutions and management advisory services for the medium- to long-term growth of promising companies. Through such efforts, we plan to build a network with upstarts, contribute to the creation of an ecosystem, and generate IB deals with up-and-coming start-ups. We expect these efforts to link with the development of alternative investment products for custom-ers.

Fund Scale (KRW 100 million)

Samsung's Commitment

(KRW 100 million)

SBI Growth Ladder KONEX Activation Fund No. 2

364 30

LB Technology Finance Fund No. 1 540 30

Stick 4IR Fund No. 1 1083 30

Fund Samsung F&T Global Megatrend Fund

SummaryCreating investment opportunity by analyzing mega-trends in the economy, society, environment, and technology (popula-tion change, polarization, globalization, etc.)

Trading Method

Investment in eight themes including agriculture, clean en-ergy, water (resources), etc.

Fund Samsung Global Clean Energy Fund

Summary Investment in companies engaged in alternative energy-related businesses (future growth engines)

Trading Method

Investment in energy efficiency, low-carbon energy, and renewable energy

Social Capital


Alternative Investment - Solar Power Plant

Samsung Securities is also pursuing eco-friendly businesses in areas of alternative investment. We purchased $66.7 million (approx. KRW 76 billion) of construction-related senior bonds for a solar power plant (SPP) in California, securing a new growth engine and contributing to environmental issues. The large-scale project ranks in the top ten SPP constructions in the U.S., and the 250 MW plant is expected to be completed by the end of 2018. Samsung Securities plans to transfer the bonds to Samsung's wealth management fund and expects a mid-4% ROI for 20 years. Going forward, we will continue to fulfill our social responsibilities as a financial company and invest in the development and expansion of eco-friendly technologies.

Crowdy equity investment

Environmental ProductsSamsung Securities offers products related to the environment (renewable energies, carbon credits, etc.) to raise awareness and reduce impacts attributable to climate change.

Environmental 69.25

Water, renewable energy 52.45

Samsung F&T Global Megatrend Specialized Investment H (Equity - Fund of Funds) C 43.89

Samsung F&T Global Megatrend Securities Holder H (Equity - Fund of Funds) 6.45

Samsung F&T Global Megatrend Securities Holder UH (Equity - Fund of Funds) 2.11

Water 2.73

Samsung Global Water Securities 1 (Equity - Fund of Funds) 2.61

Samsung Global Water Securities 2 (Equity - Fund of Funds) 0.10

Samsung Classic Global Water Pension Holder H (Equity - Fund of Funds) 0.02

Renewable Energy 3.03

Samsung Global Clean Energy 1 (Equity - Fund of Funds) 2.54

Samsung Global Clean Energy 2 (Equity - Fund of Funds) 0.03

Samsung Retirement Pension Global Clean Energy 40 Secu-rities Holder 1(Bond-Mixed) 0.31

Samsung Retirement Pension Global Clean Energy 40 Secu-rities Holder 1(Bond-Mixed) 0.05

Samsung Classic Global Clean Energy Pension Holder H (Equity - Fund of Funds) 0.10

Samsung Global Clean Energy 30 Securities No. 1 (FX Hedge) (Bond-Mixed) 0.0

Low Carbon 11.04

Korean Private Carbon Special Asset No. 1 Investment Company (Monetary Rights) 11.04

(Unit: KRW billion)

38 39


Heightening transparency

in our business practices

to ensure greater trust

with our stakeholders.

38 39


Our Management

Governance

Risk Management

40

44


40 41


Board Expertise and Independence

Role and Governance Principles of the BoardSamsung Securities has established a stable and efficient gover-nance structure to ensure continuous company growth and protect the interests of stakeholders. The board of directors complies with the requirements set forth in the bylaws and articles of incorpora-tion and determines key issues concerning management policies and matters delegated from general meetings of shareholders. As the highest permanent decision-making authority of the company, the board facilitates sound management-level decision-making and performs internal checks and balances.

Soundness of GovernanceIn 2006, Samsung Securities established and declared the Corporate Governance Charter with the aim of enhancing trust in and efficiency of corporate management. To enhance information transparency with respect to the activities and compensation of the board of di-rectors, we publish the Annual Corporate Governance and Remu-neration System Report on the company website and disclose the results of internal and external evaluations related to governance. Through such efforts, we protect the interests of various stakehold-ers, including shareholders, and improve external communications.

Board StructureTo manage and supervise potential conflicts of interest, Samsung Securities operates its board of directors through various proce-dures in accordance with relevant laws and regulations, including, but not limited to, the Commercial Act, Financial Investment Ser-vices and Capital Market Act, and Fair Trade Act. We organize the board to review and support informed decision-making to meet the

interests of shareholders and stakeholders and allow management to carry out responsible management practices. The board of direc-tors is comprised of seven members (three executive directors and four non-executive directors).

Independence and Transparency of the BoardThe board of directors of Samsung Securities has established a transparent governance structure to ensure independence. The board has the right to appoint and remove the CEO as a means to enhance the checks and balances of management. As measures to prevent conflicts of interest, 4 out of 7 members are non-executive directors representing a 57% majority, and the board is required to appoint a non-executive director as its chair.

Governance

Board Structure

Management Committee

Risk Management

Committee

Board of Directors

Nomination Committee

Compensation Committee

Internal Trading Committee

Audit Committee

CEOSecretariat of

the Board

Board Expertise and DiversityThe board of directors of Samsung Securities is replete with expertise and a diversity of perspectives. We aim to form and operate a balanced board when appointing non-executive directors by defining diversity in a comprehensive manner, selecting and appointing candidates with experience and knowledge in a wide range of fields such as finance, accounting, economics, management, and law. Samsung Securities is committed to efficiently addressing challenges by holding periodic and non-periodic meetings among members to ensure that the expertise of the board is maximized and deficiencies are complemented.

Director Election ProcessSamsung Securities operates a Nomination Committee to appoint a competent CEO with expertise, insight, and leadership in the securities industry; non-executive directors with expertise and independence that meet strategic objectives; and members of the Audit Committee with the ability to independently supervise management and conduct audits (internal control,

financial activities, etc.). We select experts from various fields who demonstrate independence, impartiality, ethicality, and responsibility to be nominated for preliminary candidacy, and those who satisfy eligibility requirements are condensed into a group of final candidates. The qualifications of confirmed candidates are once again verified, and the final candidates are introduced via a general meeting of shareholders upon resolution by the board of directors.

Board Activities and SubcommitteesIn 2017, Samsung Securities held twelve board meetings with a 100% director participation rate. Proposals are shared and reviewed before a board meeting is held, and if required, the board member in charge explains the agenda in advance. Notably, we operate six subcommittees within the board for quick and efficient decision-making. The board is responsible for the establishment and operation of the committees, as well as appointments and dismissals of committee members, and each committee is responsible for determinations regarding matters delegated by the board.

Subcommittee Status (Mar. 2018)

Subcommittee Chairperson Members Responsibility and Role

Management Committee Sung-Hoon Koo Jae Hun Sa Resolution of urgent or high-frequency issues

Nomination Committee Sung Jin Kim Sung-Hoon Koo, Bu-Kyun Jeong Search, audit, and selection of candidates for recommendation at general meetings of shareholders

Internal Trading Committee Sung Jin Kim Kyung-Tae Moon, Bu-Kyun Jeong Objective preliminary inspection of internal trading (unfair funneling of work, etc.)

Risk Management Committee Kyung Soo Kim Sung-Hoon Koo, Kyung-Tae Moon Establishment of general risk management policies regarding business and sales

Compensation Committee Kyung Soo Kim Seok Hoon Chang, Kyung-Tae Moon Adequacy assessment of the employee compensation system

Audit Committee Sung Jin Kim Kyung Soo Kim, Bu-Kyun Jeong Audit of general business/financial and director affairs; Assessment of the internal control system

Non-executive Directors Election Process

Nomination

Independence, Diversity, and Expertise Review by

the Nomination Committee

SelectionDirector Appoint-

ment

General Meeting of

Shareholders

Disclosure of Results

Governance


Board Independence Disqualification Criteria

· Directors, auditors, executives, and employees engaged in business with the company currently or within the past two years

· Largest shareholder, his/her spouse, and surviving lineal descendants· Corporate directors, auditors, executives, and employees if the larg-

est shareholder is a corporation· Spouses of directors, auditors, and executives and surviving lineal

descendants· Parent company of the company or directors, auditors, executives,

and employees of a subsidiary· Corporate directors, auditors, executives, and employees with sig-

nificant interest, such as a business relationship with the company· Directors, auditors, executives, and employees of other companies

in which the company's directors, executives, and employees are its directors or executives

42 43


Director Status (Mar. 2018)Board and Director EvaluationsThe evaluation of the board of directors includes its structure, role, responsibilities, and operations. We conduct annual internal evalu-ations regarding expertise, comprehension, and independence, and quantitative (participation rate, etc.) and qualitative assessments (professionalism, loyalty, contribution, etc.) are performed to be summated and evaluated. Through such evaluations, the role and responsibilities of the board are regularly reviewed to ensure proper performance.

Governance


Sung-Hoon Koo

Sung Jin Kim

Seok Hoon Chang

Kyung Soo Kim

Jae Hun Sa

Kyung-Tae Moon Bu-Kyun Jeong

Executive Director CEO (President)

- Head of Investment Business, Samsung Life Insurance

- Head of Wealth Management HQ, Samsung Life Insurance

- CEO/President, Samsung Wealth Management

- Area of expertise: Finance, management

- Appointed: Mar. 21, 2018

Non-executive Director Chairman of the Board

- Minister of Oceans and Fisheries- Chair Professor, Graduate School

of International Studies, Pusan National University

- Chancellor, Hankyong National University

- Area of expertise: Economy, accounting

- Appointed: June 7, 2013

Executive DirectorHead of Management Support

- Head of Product Support, Samsung Securities

- Head of Strategy & HR Support, Samsung Securities

- Area of expertise: Finance, management

- Appointed: Mar. 21, 2018 - 3,196 treasury shares

Non-executive Director

- Director, Economic Research Institute, Bank of Korea

- Vice Chairman, Korea Money and Finance Association

- (Current) Professor, Department of Economics, Sungkyunkwan University

- Area of expertise: Finance, economy - Appointed: Mar. 14, 2014

Executive DirectorHead of WM HQ

- Head of Domestic Corporate Business, Samsung Securities

- Head of Wholesale HQ, Samsung Securities

- Area of expertise: Finance, economy - Appointed: Mar. 24, 2017- 2,326 treasury shares


- Head of Policy and PR, Ministry of Health and Welfare

- Full-Time Vice-Chairman, Korea Pharmaceutical and Bio-Pharma Manufacturers Association

- Advisor, The Law Firm of Shin & Kim

- Area of expertise: Law, policy- Appointed: Mar. 11, 2016


- Vice Minister of Strategy and Finance

- Director, Korea Center for Interna-tional Finance

- Chief, World Futures Forum

- Area of expertise: Finance, economy - Appointed: Mar. 21, 2018

1. Seok Hoon Chang, Executive Director 2. Jae Hun Sa, Executive Director 3. Bu-Kyun Jeong, Non-executive Director4. Kyung Soo Kim, Non-executive Director 5. Sung Jin Kim, Non-executive Director6. Sung-Hoon Koo, Executive Director 7. Kyung-Tae Moon, Non-executive Director

Board Evaluation Criteria

- Propriety- Diversity- Independence- Representation of shareholders/stakeholders

- Comprehension of agenda- Active participation- Provision of materials for decision-making- Exclusion of private interests

- Regulatory compliance- Timely provision of materials for decision-making- Adequacy of deliberation processes- Rationality of procedures

Structure

Role & Responsibilities

Operations

Remuneration of Directors and Auditors

Type of Remuneration Total Calculation Criteria and Method

CEO**

Salary 745

Determined in consideration of rank, nature of deleｇated duties, and results of said duties in accordance with Executive Compensation Regulations

Bonus* 1,403 Target incentive, long-term incentive, performance incentive

Other earned income 82

Benefits: Compensation provided in accor-dance with Executive Compensation Regula-tions (resolution of the board of directors)

Board Meeting Status

Round 2017 Major AgendaNon-executive

Directors Attendance

Regular/Q1 2/23

Report on 2016 company-wide internal control system evaluation results and six others

100%

Regular/Q2 5/18

Split approval of payment limit on retirement pension with Samsung Wealth Management and one other

100%

Regular/Q3 8/17 Q2 Management performance report

and three others 100%

Regular/Q4 11/23 Q3 Management performance report

and seven others 100%

1 2 3 4

5 6 7

* Calculation breakdown· Target incentive: Payout determined by the corporate/individual-level target achieved;

biannually paid within the range of 0 to 100% of monthly salary (depending on indi-vidual performance)

· Long-term incentive: Payout based on the 3-year ROI, return per share and pretax re-turn; 4-year deferred payment within the range of 0 to 225% of yearly salary

· Performance incentive: Payout determined after deducting the required return of shareholders from the company's annual profit/loss; annually paid within the range of 0 to 50% of annual salary (depending on individual performance)

※ In the occurrence of violating the Company's regulations, disrupting the company's busi-ness activities, acting against the company's interests, or incurring the company losses, the variable amount of compensation can be canceled or reduced with adjustments.

Performance indicators for executives- financial indicators: Profitability indicators (pre-tax profit, operating balance, return

on equity, return per share), Financial soundness indicator (net operating capital ratio), productivity indicator (sales per person)

- non-financial indicators: financial customers protection, compliance, etc.

(Unit: KRW million)

Number of Persons

Total Remuneration

Per-Person Average

Executive Director 3 3,365 1,122

Non-executive Director 1 87 87

Audit Committee Member 3 263 88

(Unit: KRW million)

Board CompensationSamsung Securities operates an independent Compensation Committee to evaluate performance and determines remuneration for the board of directors and management. Remuneration ceilings for board members are determined by the resolution of the general meeting of shareholders, and remuneration is provided in accordance with relevant regulations. To enhance transparency, Samsung Securities has been disclosing the individual remuneration of directors and auditors who are paid more than KRW 500 million via the annual report since 2014. Additionally, performance remuneration is partially deferred depending on the evaluation results, and we are strengthening its link to long-term performance.

**former CEO Yong Am Yoon

44 45


Financial Risk Management

Market RiskMarket risk refers not only to the trading of a variety of products but also the possibility of losses to the company due to changes in factors (stock price, interest rate, exchange rate, etc.) affecting market prices in sales-related transactions such as acquisition and brokerage.To mitigate market risk, Samsung Securities measures risk levels in various ways assuming extreme market stress conditions, using maximum loss risk and value-at-risk (VaR) values as primary risk indicators. Market risk is then managed by setting acceptable limits for the calculated maximum losses. We measure maximum loss by observing financial market changes (stock price, interest rate, exchange rate, volatility, credit spread, etc.), including the 2008 financial crisis, and considering the product-specific duration of crisis. For VaR, we measure the amount of potential loss at 95% of maximum one-day losses from the past four years as the financial market re-emerged.To compensate for maximum loss limits, we perform a variety of sensitivity analyses according to product-specific price fluctuation factors such as stock price, interest rate, exchange rate, volatility, correlation, and credit spread. Using this as an auxiliary index, we manage market risk by setting an acceptable sensitivity limit for each operational strategy.

Integrated Risk Management

Risk Management SystemSamsung Securities' risk management decision-making system consists of the Board of Directors, Risk Management Committee, and Risk Management Executive Committee. As part of the division-specific decision-making structure, the Risk Management Executive Committee operates the Investment Acquisition Committee and Product Committee as subcommittees.Subcommittee approval cases are reported to the parent commit-tee for further review (if required) and re-approval. The operation of a conference system for each stage of the decision-making process enables immediate bilateral communication regarding risk-related issues in the general management of risks by the board of directors.The Chief Risk Officer is responsible for the operation of each com-mittee and company-wide risk management, including limit man-agement, monitoring, and reporting. Asset risks are reported regu-larly to the Risk Management Committee and Risk Management Executive Committee. For independence in risk management, Sam-sung Securities prevents the head and deputy head of trading from holding an additional post as the Chief Risk Officer or Head of Risk Management. Independence from other departments is maintained by having the Chief Risk Officer operate directly under the CEO.

Credit RiskCredit risk is defined as the risk of loss that counterparties may suffer due to a breach of contract or bankruptcy and the risk of decline in securities value due to the stock issuer's credit decline.Samsung Securities strictly manages credit risk by assigning credit ratings and limits to each counterparty via credit assessment. We monitor the exhaustion of total credit exposure, including counter-party exposure for OTC derivatives, on a daily basis via an integrated risk management system, and the status of each counterparty's ex-haustion limit is verified prior to credit exposure for effective limit management.We prevent the concentration of credit risk by separately managing large credit limits and are developing efficient response measures for the expansion of business related to credit risk via a group- and country-specific limit management system.

Risk Management System Diagram

Risk Management Committee

Risk Management Executive Committee

Investment Acquisition Committee

CEO Chief Risk Officer

Contingency Plan Committee

Risk Management Team

BCP Management Committee

Commitment Committee

Product Committee Transaction Review Council

Board of Directors

Type-Specific Risk Management

RiskFinancial Market Credit Liquidity

Non-Financial Operational Legal & Regulatory

Compliance

Sales & Reputation

VaR Value (Unit: KRW billion)

CategoryFY 2017 FY 2016

Daily Avg Min Max EoY EoY

Total VaR 3.7 2.6 4.6 4.1 7.4

Securities 2.0 1.4 2.7 2.5 6.0

Interest Rate 2.5 2.0 2.9 2.8 4.2

FX 0.1 0.1 0.2 0.1 0.1

Dispersion Effect 0.9 0.8 1.1 1.3 2.9

OTC Derivative Risk Management

Samsung Securities utilizes the ISDA Master Agreement (standard OTC derivatives agreement) published by the In-ternational Swaps and Derivatives Association (ISDA) as well as a derivative Korean-language agreement, and we are en-hancing stability in OTC derivative trading by only allowing transactions with counterparties with whom an ISDA Master Agreement has been entered. Moreover, we manage credit risk at an appropriate level by securing collateral for each counterparty via the Credit Support Annexes (CSA) and are proactively responding to possible credit events based on CDS premiums and monitoring of related news.

Risk Management


Risk Management

Type-Specific Risk ManagementThe risks that a securities company faces can be largely divided into financial and non-financial risks. Financial risk refers to those that can be quantified, such as market, credit, and liquidity risks, and non-financial risk refers to those that are difficult to quantify, such as operational, legal, regulatory, and reputation risks. Samsung Securi-ties manages risks by category and has developed an industry-first integrated risk management system (SIRIS: Samsung Integrated Risk Intelligence System) to meet global risk management standards.SIRIS provides market, credit, and operational risk data and features a built-in proprietary derivative-linked securities calculation engine that meticulously measures company-wide risk levels by reflecting domestic and international market information as well as global best practices. In addition, the level of risk management is continu-ally improved via monitoring and simulation.Since 2013, the domestic ELS market has expanded to become in-ternational index-oriented. As the scale of the trading operations increased, we advanced sensitivity index calculations and various scenario analysis functions independent of the front system. Based on this, we enhanced the analytical power of the risk management system and improved calculation speeds by adopting a cloud-based system.

46 47


Non-Financial Risk Management

To mitigate operational risk that may arise while con-ducting business, reputational risk that may arise from negative public opinion, and legal risk that may arise due to a lack of understanding of contracts, Samsung Securities' Risk Management, Compliance, Legal, In-formation Security, and PR departments organically coordinate with each business division to analyze the company-wide impact of certain activities and establish a system that can preemptively manage potential risks at appropriate levels.

Operational RiskOperational risk refers to the risk of loss to the company attributable to improper business processes and external factors such as person-nel, systems, or disasters. Samsung Securities operates a company-wide systematic management and control structure to prevent loss-es pertaining to operational risk.Samsung Securities operates three lines of defense for operational risk management. As the first line of defense, the respective depart-ment conducts its own risk management. Then, the internal control department (Risk Management, Information Security, Compliance, HR, Business Innovation, etc.) verifies and monitors the situation as the second line of defense. Finally, the Audit Department indepen-dently verifies the adequacy of the activities and management sys-tems of the respective department and internal control department. Routine operational risk management information is reported to the Risk Management Executive Committee and BCP Management Com-mittee on a periodic and non-periodic basis.

Liquidity RiskLiquidity risk is attributed to a maturity mismatch in funding and trading and is defined as the risk of inability to trade at the previ-ous or similar price due to poor trading or obstacles in the market or the risk of being in a state of insolvency due to a temporary increase in demand for funds or tightening of the money market. Samsung Securities is planning for emergency funding by preparing crisis-specific plans for emergency liquidity risks.

Capital AdequacyCapital adequacy is aimed at protecting investors and stabilizing the company in a rapidly-changing market. As a measure of capital adequacy, Samsung Securities introduced net capital ratios in 2015.As the net value of company assets able to be immediately liqui-dated is based on the date of net capital ratio calculation, net op-erating capital is calculated by excluding assets that are difficult to immediately liquidate, such as fixed assets, from net assets (assets-liabilities) on financial statements and adding liabilities without re-payment obligations.Total risk amount is a predicted and quantified potential loss that a financial investor would incur. Risk of loss is quantified by calculat-ing various financial risks such as market, credit, and operational risk.

Samsung Securities' net capital ratio as of December 31, 2017 was 1,160%, down 441%p YoY. The decrease in the net capital ratio was attributed to an increase in the total risk amount by KRW 579 bil-lion compared to the previous fiscal year. In detail, the market risk amount was KRW 269.1 billion, credit risk amount was KRW 281.6 billion, and operational risk amount was KRW 28.3 billion.

Sales & Reputation RiskSamsung Securities thoroughly examines sales and reputation risks during the investment process. We avoid potentially-problematic companies involved in management disputes or the gambling in-dustry and invest in companies that actively fulfill social responsi-bilities in consideration of ESG criteria in an effort to minimize sales and reputation risks.

(See p. 34 - Qualitative Evaluation)(See p. 35 - ESG Investment)

Legal & Regulatory RiskTo manage legal and regulatory risks attributable to changes in re-lated supervisory laws and regulations, Samsung Securities reviews in-progress and completed legal enactments and revisions to be re-flected as necessary in the management system.

Policies for Fostering Large-Scale Securities FirmsFinancial supervisory authorities are promoting corporate finance businesses of securities firms while at the same time announcing plans to foster large-scale securities firms and expand the scope of new businesses according to the equity scale. Samsung Securities has completed registration as a large-scale IB firm of over KRW 4 tril-lion via equity expansion and is responding to regulatory changes by enhancing capital utilization through increased investments in corporate finance and management using increased funds.

Tightening Financial RegulationsWith the introduction of stewardship codes, regulations on the fi-nancial industry are tightening, and Samsung Securities is continu-ally making management and communication efforts in response to ongoing discussions on the separation of banking and commerce as well as a revision of the Commercial Act.

(See p. 35 - Social Responsibility in Finance)

Net Capital Ratio (Unit: %, %p, KRW billion)

Category FY 2017 FY 2016 YoY

Net Operating Capital 2,787 2,782 5

Risk Amount 1,277 698 579

Required Equity 130 130 0

Net Capital Ratio 1,160% 1,601% -441%p

Information Security

Samsung Securities manages information security and cy-bersecurity risks as operating risks. To prevent losses at-tributable to operational risk, we maintain a company-wide systematic management and control structure, and privacy matters are included as fundamental risk factors in our op-erational risk management system.

Monthly reporting of the liquidity ratio on the FSS report

Quarterly posting of IFRS liquidity disclosure notes

Semi-annual liquidity stress testing


Risk Management

48 49


Medium- to Long-TermRisk Management

Digital Innovation in the Financial SectorPlatforms for attracting customers are becoming increasingly im-portant as digital technologies such as big data, blockchain, and AI alter the financial landscape. The use of digital authentication and remittances are becoming commonplace in the domestic financial sector, and the scope of advisory and advisory services using digital technology is expanding.

Strengthening Compliance Management

Internal Control SystemSamsung Securities is developing an internal control system to be one step ahead of potential financial incidents such as money laundering and unfair trade. We are committed to minimizing risk by regularly monitoring employee compliance and suspicious trans-actions using individual internal guidelines as a foundation. We are continuing to develop and operate processes to enhance day-to-day monitoring, while HQ departments and branches conduct daily self-checks to inspect business procedures. In recognition of such efforts and as a model for the industry, Samsung Securities was selected as an Outstanding Company in the Ethics Management category of the Market Leader Awards in 2016 and awarded the Presidential Award of the Korea Financial Investment Association.

Employee Compliance TrainingSamsung Securities conducts annual compliance training for all employees regarding fair trade, public disclosure, conflict of inter-est, money laundering prevention, deliberate market disturbance, and more. The program consists of collective and online training courses, and we conduct special programs when social issues arise. In addition, we designate a Compliance Day each month to check pending concerns, share internal control issues, and increase em-ployee interest in compliance in an effort to internalize compliance awareness.

Emergence of Direct BanksCompetition for customers who are looking for high-yield deposits and mid-range interest rate loans is intensifying with the emergence of direct banks, or online-only banks, such as K-Bank and Kakao-Bank. Although direct banks currently do not offer financial prod-ucts traditionally provided by securities firms, Samsung Securities is preparing countermeasures since financial products are planned to be offered starting in 2018.

Independent Financial AdvisorsIFAs, introduced to protect financial consumer rights, are advisors who provide neutral, professional advice independent from the seller. Although advisory services were limited to investment prod-ucts when first introduced in 2017, all financial products, including insurance and loans, are expected to be eligible for consultation after 2020 should the pending Financial Consumer Protection Act bill be passed by the National Assembly. Such an increase in sales channels may intensify competition within the industry, and there may be a risk of profitability deterioration due to decreased com-pensation for product sales.

To respond to rapid digital innovation, Samsung Securities is preparing to expand related organizations and

integrate digital technologies.

Samsung Securities participates in the Korea Financial Investment Association's Blockchain Consortium and is reviewing business

opportunities in blockchain-based OTC stocks, bond trading, and P2P. We plan to launch a chatbot service in 2018 for simple customer

inquiries, and we are developing speech recognition and product-related processing services for 2019.

Samsung Securities is examining online platform ecosystems via an affiliate or proprietary development. To this end, we are

investigating potential alliances with ICT companies with a large customer base, synergies with partners in the insurance and

payment card industries, and self-developed platform models that combine our wealth management competitiveness with new digital

technologies.

1

2

Samsung Securities has been providing advisory services since 2018 after a decision was made to participate in the business and a platform was

developed to leverage IFAs as a channel for attracting new customers and assets.

In the short term, Samsung Securities is strengthening associations via alliances with IFA-hopeful general agents

and preparing for future IFA participation.

In the medium- to long-term, Samsung Securities plans to continue advancing the advisory platform to build and

provide differentiated services against competitors.

1

2

As a response to areas of the market in which direct banks have a competitive advantage (easy remittance, 24/7 customer service,

etc.), Samsung Securities plans to provide effective customer consultation services with the launch of an AI-based chatbot

solution.

Based on competitive product sourcing capabilities, Samsung Securities plans to respond to the imminent sale of financial products by direct banks by developing medium risk/return

products that utilize overseas assets.

1

2

Compliance Performance

Reporting and Audit SystemsSamsung Securities operates a reporting channel available to all stakeholders including employees and customers. Employees may report internal financial irregularities and incidents via the company intranet, and external stakeholders may report unfair business prac-tices by employees and various financial irregularities via the Sam-sung Securities website (Ethical Management ▷ Reporting Illegal Activities).We are firmly committed to ethical management to improve trans-parency and soundness of the organization based on a thorough in-ternal audit system. The Audit Department prevents fraud through-out the company and reports audit results to the board of directors through periodic and non-periodic audits of all business sites and branches, as well as on-demand special audits of specific sectors.

Compliance LetterSamsung Securities expressed its strong commitment to compli-ance management by sending a 'compliance letter' to all employees. Notably, we encourage the proliferation and practice of compliance management throughout the company by reflecting the execution of compliance risk management measures as factors in executive evaluations.

1Regulatory violation*

2,183Anti-corruption trainees

3,703 Hours

Anti-corruption training

Internal Control System

- Anti-Money Laundering System Extracts customer classification and suspicious transactions according to risk based on statistical methods Additionally, established and operates an internal guideline and manual that reflects the international organization’s internal control standards- Unfair Transaction Monitoring System Checks for and prevents suspicious transactions (wash sales,

matched orders, closing price manipulation, etc.)- Investment Preference Deliberation System Reflects changes in the following day according to customer

investment propensity- Early Warning System Manages and self-checks the level of risk associated with

incomplete sales at the business division and branches

Risk Management


* The company was penalized KRW 12.5 million for violation of the prohi-bition on the provision and/or receipt of improper property benefits by an employee of the head office sales department. The employee was notified of the disciplinary action of retirement status at the time the sanction was disclosed.

50 51


50 51


Our Information

Financial MD&A

Financial Data

Position Paper

Non-Financial MD&A


GRI Standard Index




52

56

61

64

70

72

74

76

52 53


Financial Data

Economic Environment

In 2017, the global economy continued to improve in line with the strong growth of the US and the Eurozone led by domestic demand, as well as the recovery of investments and exports in Japan. As for emerging economies, China registered sound growth, and ASEAN, India and Brazil made gains. The domestic economy showed a modest gain on rising private spending, exports and facility investment. Private consumption picked up pace on expectations of the government’s economic policies, and exports also showed an upward swing due to the economic recovery in advanced countries, including the US and the Eurozone, as well as emerging countries such as China emerging from recession. Market Environment

Stock MarketThe KOSPI continued to rise since the presidential election in May, after which political uncertainties that had persisted from the beginning of the year faded. After August, when geopolitical risks emerged on the Korean peninsula, the KOSPI dropped to as low as 2,330 in early September, but rebounded past 2,500 in October aided by reduced geopolitical risks, the global economic recovery and upticks in companies’ performance; and in November, reached an all-time high of 2,558. performance; and in November, reached an all-time high of 2,550. The year-end closing price figure increased by 30.6% from the previous year to 2,467. The daily turnover of the KOSPI and KOSDAQ markets increased by 15% to KRW 5.3 trillion and 18% to KRW 3.7 trillion, respectively. In particular, individual investors’ average daily turnover rose from KRW 3.1 trillion to KRW 6.5 trillion on growing expectations for the Korean government’s policies to boost the KOSDAQ.

Bond Market In 2017, the total amount of South Korean bond issuance decreased by KRW 2.8 trillion over the previous year as only KRW 93 trillion worth of government bonds were issued, down KRW 47 trillion, or 33%, from the previous year. Financial bond issuance amounted to KRW 171.7 trillion, which is a whopping KRW 28.4 trillion increase from a year ago, propelled by the rise in household debts. Corporate bonds also grew by KRW 13.6 trillion to KRW 64 trillion. On the other hand, interest rates during the first half of 2017 increased by a small margin due to two Fed rate hikes and domestic and international

political instabilities. In the latter half of the year, interest rates soared, followed by a slight decrease attributable to rising geopolitical risks, foreign investors selling bonds and bond futures, and a hike in the benchmark interest in line with the booming Korean economy.

Fund MarketIn 2017, the return on domestic stock funds was 24.6%, exceeding the KOSPI index of 21.8%. Fund investments fell by KRW 2 trillion to KRW 44 trillion, as fixed assets increased by KRW 4 trillion while active equity funds dropped by KRW 6 trillion. Compound and equity fund investments in Korea posted KRW 16 trillion and KRW 17 trillion, respectively, a KRW 2 trillion decrease from last year. Overseas equity funds’ yield recorded the highest return at 26.7%, and fund investments also grew by KRW 3 trillion from last year to KRW 21 trillion. Investments in overseas compound funds and bond funds rose by KRW 1 trillion to KRW 4 trillion and by KRW 2 trillion to KRW 8 trillion, respectively.

OTC Derivatives MarketIn 2017, ELS/ELB issuance hit all-time highs of KRW 65 trillion and KRW 16 trillion, respectively. Since the issuance of KRW 77 trillion in 2015, the amount plunged to KRW 49 trillion in 2016 in line with the adjustment of the global stock market. However, the figure reached the highest in history, spurred by the strong stock market in 2017. Redemption amounts also recorded an all-time high of KRW 95 trillion while the unredeemed balance of ELS/ELB declined from KRW 69 trillion at the end of 2016 to KRW 55 trillion at the end of 2017 due to over-redemption. DLS and DLB issuance in 2017 amounted to KRW 18 trillion and KRW 12 trillion, respectively, reaching KRW 30 trillion for the first time in history. Unlike ELS, the unredeemed balance of DLS and DLB increased from KRW 32 trillion at the end of 2016 to KRW 35 trillion a year later, since their issuance exceeded redemption. Instruments linked to interest rates accounted for 44% of the total issuance, followed by instruments linked to credit risk (25%), ETF/stock (16%) and raw materials (5%).

Investment Banking MarketThe IPO market amounted to KRW 8 trillion, the highest figure since 2010, in line with the emergence of multi-trillion-won IPOs including Netmarble Games and Celltrion Healthcare. Institutional investors participating in demand forecast increased, and the 4th Industrial

Revolution-related IT, electric vehicle and bio industries led the IPO market. The M&A market recovered from its stagnation of 2016 thanks to the active participation of PEF. The number of transactions reached 183, a decrease from the previous year’s 226, but transaction volume increased by 23% from 2016 to KRW 36 trillion. The DCM market increased by 31% from the previous year to KRW 144 trillion due to preemptive fund procurement in line with the Fed’s interest rate hike and increased demand for corporate bonds with a rating of A or higher. Corporate bonds issued via public

offering amounted to an all-time high of KRW 103 trillion, while the issuance volume of SB, bonds issued by credit-specialized financial companies and ABS posted KRW 42 trillion, KRW 35 trillion and KRW 14 trillion, respectively.

Consolidated Separated

FY2017 FY2016 YOY FY2017 FY2016 YOY

Balance Sheet Summary

Total assets 37,948.3 33,229.9 +14.2% 36,168.6 31,941.4 +13.2%

Total liabilities 33,536.6 29,403.0 +14.1% 31,792.3 28,148.4 +12.9%

Total equity 4,411.6 3,827.0 +15.3% 4,376.3 3,793.1 +15.4%

Controlling interests 4,409.6 3,826.9 +15.2% 　Earnings Summary

Net revenue 967.0 794.2 +21.8% 917.0 745.5 +23.0%

Brokerage commissions 340.2 306.5 +11.0% 313.3 274.8 +14.0%

Sales commissions on financial products 408.9 313.2 +30.6% 409.0 313.4 +30.5%

Underwriting and advisory commissions 67.6 31.1 +117.8% 66.2 32.6 +103.1%

Trading and interest income 142.4 139.8 +1.8% 124.3 126.8 -1.9%

Other income 32.4 23.5 +37.4% 37.9 27.0 +40.2%

Commission expenses (24.5) (19.9) +23.1% (33.8) (29.2) +15.8%

Operating expenses 606.7 582.6 +4.1% 573.0 548.5 +4.5%

Personnel expenses 326.2 300.9 +8.4% 310.0 283.8 +9.2%

Amortization and depreciation expenses 39.6 41.0 -3.4% 38.1 39.9 -4.4%

General management expenses 240.9 240.6 +0.1% 224.9 224.8 +0.1%

Operating income 360.3 211.7 +70.2% 344.0 197.0 +74.6%

Non-operating income (4.3) 18.2 -123.7% (3.4) 17.3 -119.8%

Pretax income 356.0 229.9 +54.9% 340.5 214.3 +58.9%

Income tax expenses 85.0 55.6 +52.7% 83.7 51.0 +64.2%

Net profit 271.0 174.2 +55.5% 256.9 163.3 +57.3%

(Controlling interests) 271.6 174.2 +55.9% - - -

Financial Ratios and Common Share Data

Return on equity 6.6% 4.7% +1.9% 6.3% 4.5% +1.8%

Return on assets 0.8% 0.5% +0.3% 0.8% 0.5% +0.3%

Earnings per share 3,135 2,531 +23.9% 2,964 2,373 +24.9%

Dividends per share 1,000 650 +53.8% 1,000 650 +53.8%

Financial MD&A

　(Unit: KRW billion)

54 55

Growth, Collaboration, PassionFinancial MD&A


Revenue Breakdown

Equity Brokerage Commissions In FY 2017, Samsung Securities recorded KRW 340.2 billion in broker-age commissions (up 11.0% year-on-year). The company’s domestic equity brokerage market share (in terms of commitment, excluding ETFs and ELWs) stood at 5.8%, down 0.1%p from FY 2016. A closer look at the market breakdown reveals that our retail market share inched up by 0.5%p to 6.6% over the same period, while our whole-sale market share dropped 0.9%p to 3.8%. Conversely, our overseas stocks brokerage commission income increased 72.9% from the pre-vious fiscal year to KRW 17.4 billion in FY 2017.

Operating Expenses

Operating expenses for FY 2017 (sum of personnel expenses, amor-tization & depreciation expenses, and SG&A expenses) reached KRW 606.7 billion because of increased flexible personnel expenses stemming from the company’s improved business results (up 4.1% YoY / consolidated). The cost-to-income ratio (operating expenses / net revenue) improved from 73.3% in FY 2016 to 62.8% in FY 2017, thanks to increased revenue and improved cost efficiency.

Assets Under Management (AUM)

As of the end of FY 2017, our total assets under management (total of securities and deposits received) stood at KRW 279.1 trillion (up by 17.2% over the previous fiscal year). The total AUM for individual clients was valued at KRW 188.3 trillion at the end of FY 2017, up 16.9% from KRW 161.1 trillion in the previous year. Samsung Securi-ties is strategically concentrating on high net worth individuals with deposits of more than KRW 100 million, and as a result, net inflows and increased valuation have boosted total deposits from KRW 84.2 trillion in FY 2016 to KRW 103.7 trillion in FY 2017.

Fund SalesFund sales revenue totaled KRW 55.1 billion in FY 2017 (-1.3% year-on-year). The net asset value of fund sales (excluding MMFs) grew by 21.9% from KRW 9.6 trillion in FY 2016 to KRW 11.7 trillion in FY 2017. However, the net asset value of new fund sales (excluding MMFs) of stock and real-estate rose by 13.4% to reach KRW 516 billion for the same period.

Wrap AccountsWrap account revenue recorded KRW 17.0 billion in FY 2017 (-26.5% from the previous fiscal year). Total AUM posted a 1.9% gain from KRW 3.1 trillion in FY 2016 to KRW 3.2 trillion in FY 2017.

Securitized DerivativesRevenue from securitized derivatives jumped to KRW 314.2 billion in FY 2016 (up by 53.1% over the previous fiscal year). The securitized derivatives balance increased 54% from the previous fiscal year to KRW 12.7 trillion by the end of 2017 thanks to increasing balances in DLS and ELS. The percentage of index-linked ELS to overall ELS sales was 92%, similar to FY 2016.

Trading and Interest IncomeTrading and interest income reached KRW 142.4 billion (up 1.8% year-on-year) on expanding fluctuations in global stock markets spurred by internal and external uncertainties. Credit line balances expanded from KRW 1.7538 trillion in FY 2016 to KRW 2.4807 trillion in FY 2017.

Underwriting and Advisory CommissionsUnderwriting and advisory commission income at the end of FY 2017 stood at KRW 67.6 billion (up 117.8% from the previous fis-cal year). All areas, including M&As (122.7%) and structured finance (192.9%), gained momentum and posted improved performance.

Brokerage Commissions

Sales Commissions on Financial Products

Breakdown of Operating Expenses Breakdown of Client Assets by Client Group

Domestic Equity Brokerage Market Share

Description FY2017 FY2016 (YoY)

Consolidated 340,185 306,463 +11.0%

Separated 313,331 274,830 +14.0%


Consolidated 408,900 313,200 +30.6%

Separated 408,984 313,390 +30.5%

Funds 55,121 55,837 -1.3%

Trusts 22,208 28,703 -22.6%

Wrap accounts 16,959 23,081 -26.5%

Securitized derivatives 314,202 205,201 +53.1%

Others 493 568 -13.1%


Consolidated 606,695 582,551 +4.1%

Non-Consolidated 573,047 548,452 +4.5%

Personnel expenses 310,030 283,836 +9.2%

Amortization and depreciation expenses 38,097 39,857 -4.4%

SG&A expenses 224,919 224,759 +0.1%

IT expenses 69,737 67,140 +3.9%

Rental expenses 31,122 28,807 +8.0%

Advertising 11,186 9,020 +24.0%

Sales promotions 13,361 18,797 -28.9%

Other 99,513 100,995 -1.5%

Operating expenses / Net revenue 62.5% 73.6% -11.1%

Personnel expenses / Operating expenses 54.1% 51.8% +2.3%


Wealth management AUM 188.3 161.1 +16.9 %

HNWI clients 103.7 84.2 +23.2 %

Individual clients 11.1 10.7 +3.2 %

Corporate clients 56.9 47.7 +19.2 %

No. of HNWI clients (persons) 101,392 90,003 +12.7 %


By turnover 5.8% 5.9% -0.1%

Retail market share 6.6% 6.1% +0.5%

Wholesale market share 3.8% 4.7% -0.9%

(Unit: KRW million)

(Unit: KRW million)

(Unit: KRW million) (Unit: KRW trillion )

Breakdown of Client Assets by Asset Type


Wealth management AUM 188.3 161.1 +16.9 %

Equity assets 135.6 108.2 +25.3 %

Financial instruments 51.5 51.5 +0.0 %

Funds 14.9 14.0 +6.4 %

Fixed-income 6.8 6.7 +0.5 %

RP (repurchase agree-ments) 7.5 8.2 -7.9 %

Trusts 13.5 14.5 -6.3 %

Securitized derivatives 2.4 2.5 -3.6 %

Retirement pensions 3.4 2.8 +22.2 %

Other 2.9 2.8 +4.7 %

Cash deposits 1.2 1.3 -11.5 %

(Unit: KRW trillion )

56 57

Growth, Collaboration, PassionFinancial Data


Items Separate

2017 2016

I. Cash and cash equivalents 1,145,622,517,190 1,020,364,666,107

II. Financial assets at Fair Value through profit or loss 20,006,727,768,944 19,478,373,337,875

III. Financial assets available for sale 6,831,537,955,528 5,713,670,650,337

IV. Loans and receivables 7,717,873,976,078 5,264,159,415,135

V. Financial assets held to maturity 0 0

VI. Investments in associates 319,255,344,140 255,366,738,549

VII. Fixed assets 46,327,855,883 48,177,258,100

VIII. Property investment 2,442,974,196 0

IX. Intangible assets 86,951,684,215 97,548,124,115

X. Prepaid tax 0 50,280,709,825

XI. Deferred income tax assets 0 0

XII. Other Assets 11,830,488,206 13,507,849,108

Total assets 36,168,570,564,380 31,941,448,749,151

I. Financial liabilities at Fair Value through profit or loss 10,586,063,690,417 10,311,366,685,672

II. Deposits 4,329,846,298,746 3,302,148,574,850

III. Borrowings 14,109,916,789,122 12,979,014,104,825

IV. Debenture issued 749,152,553,897 499,318,764,689

V. Defined benefit liabilities 7,354,427,867 5,329,783,282

VI. Reserve for contingent liabilities 12,508,385,900 12,294,982,760

VII. Accrued income taxes 34,633,879,828 0

VIII. Deferred income tax liabilities 69,683,795,011 66,702,154,021

IX. Other liabilities 1,893,133,738,389 972,222,200,576

X. Liabilities held for divestiture 0 0

Total liabilities 31,792,293,559,177 28,148,397,250,675

I. Share capital 458,478,080,000 394,153,905,000

II. Capital surplus 1,743,470,991,091 1,470,724,215,440

III Capital adjustment (36,410,301,212) (36,410,301,212)

IⅤ. Accumulated other comprehensive income (loss) 176,554,055,072 119,768,753,927

V. Other comprehensive income (loss) held for divestiture 0 0

VI. Retained earnings 2,051,998,167,532 1,844,814,925,321

VII. Minority Interest 0 0

Total equity 4,376,277,005,203 3,793,051,498,476

Total liabilities and equity 36,168,570,564,380 31,941,448,749,151

Items Separate

2017 2016

I. Net commision fees 472,672,442,584 410,787,942,266

1. Commissions received 557,048,670,925 495,985,846,444

2. Commissions expense 84,376,228,341 85,197,904,178

II. Net Interest Income 408,747,513,540 392,029,951,468

1. Interest Income 607,534,785,109 591,606,448,975

2. Interest expenses 198,787,271,569 199,576,497,507

III. Net Trading Income (Loss) 34,621,851,520 (86,132,363,582)

1. Trading income from trading instruments 396,096,186,753 521,201,413,703

2. Trading income from derivatives 2,150,914,894,223 2,134,246,579,280

3. Income from financial instruments designated at fair value 432,273,669,720 317,914,267,736

4. Trading loss from trading instruments 443,188,396,301 515,859,080,265

5. Trading loss from derivatives 1,437,726,943,234 1,831,088,581,480

6. Loss on financial instruments designated at fair value 1,063,747,559,641 712,546,962,556

IV. Other operating profit and loss 980,906,560 28,771,270,251

1. Other operating revenue 279,546,892,074 300,165,408,857

2. Other operating expenses 278,565,985,514 271,394,138,606

V. Net Operating Revenue 917,022,714,204 745,456,800,403

VI.Personnel expenses 310,030,422,226 283,835,669,980

VII. General and administrative expenses 263,016,233,587 264,616,501,201

VIII. Operating profit 343,976,058,391 197,004,629,222

IX. Non-operating Income_Gain 2,161,790,905 24,849,829,417

X. Non-operating Income_Loss 5,595,636,567 7,540,499,937

XI. Net income (loss) before income tax from continuing operations 340,542,212,729 214,313,958,702

XII. Income tax expense from continuing operations 83,676,113,268 50,971,373,399

XIII. Net income (loss) from continuing operations 256,866,099,461 163,342,585,303

XIV. Net income (loss) from discontinued operations 0 0

XV. Net income (loss) before reserve for bad debts 256,866,099,461 163,342,585,303

XVI. Minority interest from continuing operations 0 0

XVII. Minority interest from discontinued operations 0 0

XVIII. Net income (consolidation) 256,866,099,461 163,342,585,303

SAMSUNG SECURITIES CO., LTD.As of December 31, 2017 and 2016

SAMSUNG SECURITIES CO., LTD. As of Dec. 31st, 2017; From January 1st, 2017 to December 31st, 2017As of Dec. 31st, 2016; From January 1st, 2016 to December 31st, 2016

(Unit: KRW) (Unit: KRW)

Financial Data

Separate Financial Position Separate Comprehensive Income

58 59

Growth, Collaboration, PassionFinancial Data


Items Consolidated

2017 2016

I. Cash and cash equivalents 1,157,098,370,929 1,034,451,438,408

II. Financial assets at Fair Value through profit or loss 19,995,546,762,658 19,389,248,678,421

III. Financial assets available for sale 6,920,560,570,467 5,755,044,764,807

IV. Loans and receivables 9,704,366,268,080 6,821,635,886,599

V. Financial assets held to maturity 0 0

VI. Investments in associates 12,224,859,024 12,345,049,420

VII. Fixed assets 49,101,777,796 51,244,342,903

VIII. Property investment 2,442,974,196 0

IX. Intangible assets 90,245,770,744 100,996,938,397

X. Prepaid tax 1,496,980,935 50,280,710,296

XI. Deferred income tax assets 1,913,446,473 291,584,463

XII. Other Assets 13,262,231,713 14,396,627,764

Total assets 37,948,260,013,015 33,229,936,021,478

I. Financial liabilities at Fair Value through profit or loss 10,586,079,935,233 10,313,252,499,586

II. Deposits 5,627,621,271,000 4,557,070,192,216

III. Borrowings 14,503,592,160,672 12,954,844,104,825

IV. Debenture issued 749,152,553,897 499,318,764,689

V. Defined benefit liabilities 7,506,310,861 5,619,553,668

VI. Reserve for contingent liabilities 12,508,385,900 12,294,982,760

VII. Accrued income taxes 36,470,127,717 3,168,508,067

VIII. Deferred income tax liabilities 70,128,388,362 67,355,117,502

IX. Other liabilities 1,943,562,184,520 990,058,746,619

X. Liabilities held for divestiture 0 0

Total liabilities 33,536,621,318,162 29,402,982,469,932

I. Share capital 458,478,080,000 394,153,905,000

II. Capital surplus 1,743,464,342,352 1,470,717,566,701

III Capital adjustment (58,577,164,985) (58,577,164,985)

IⅤ. Accumulated other comprehensive income (loss) 173,690,010,007 131,195,710,185

V. Other comprehensive income (loss) held for divestiture 0 0

VI. Retained earnings 2,111,390,397,796 1,889,445,009,503

VII. Minority Interest 1,996,228,743 18,525,142

Total equity 4,411,638,694,853 3,826,953,551,546

Total liabilities and equity 37,948,260,013,015 33,229,936,021,478

Items Consolidated

2017 2016

I. Net commision fees 508,807,331,023 449,987,513,980

1. Commissions received 596,636,920,239 542,392,892,302

2. Commissions expense 87,829,589,216 92,405,378,322

II. Net Interest Income 436,991,743,629 404,410,896,372

1. Interest Income 642,186,322,294 607,718,303,073

2. Interest expenses 205,194,578,665 203,307,406,701

III. Net Trading Income (Loss) 22,202,475,791 (87,217,916,239)

1. Trading income from trading instruments 385,074,346,950 525,404,334,703

2. Trading income from derivatives 2,151,405,196,587 2,134,723,838,730

3. Income from financial instruments designated at fair value 432,117,134,965 319,088,983,259

4. Trading loss from trading instruments 444,017,046,378 516,679,107,991

5. Trading loss from derivatives 1,438,629,596,692 1,837,209,002,384

6. Loss on financial instruments designated at fair value 1,063,747,559,641 712,546,962,556

IV. Other operating profit and loss (992,659,690) 27,040,831,678

1. Other operating revenue 278,042,119,887 299,198,597,214

2. Other operating expenses 279,034,779,577 272,157,765,536

V. Net Operating Revenue 967,008,890,753 794,221,325,791

VI.Personnel expenses 326,219,423,810 300,946,503,375

VII. General and administrative expenses 280,476,062,537 281,604,900,678

VIII. Operating profit 360,313,404,406 211,669,921,738

IX. Non-operating Income_Gain 1,670,053,661 25,047,871,629

X. Non-operating Income_Loss 5,989,811,515 6,850,344,895

XI. Net income (loss) before income tax from continuing operations 355,993,646,552 229,867,448,472

XII. Income tax expense from continuing operations 84,959,979,838 55,625,094,096

XIII. Net income (loss) from continuing operations 271,033,666,714 174,242,354,376

XIV. Net income (loss) from discontinued operations 0 0

XV. Net income (loss) before reserve for bad debts 271,033,666,714 174,242,354,376

XVI. Minority interest from continuing operations (594,578,829) 71,254

XVII. Minority interest from discontinued operations 0 0

XVIII. Net income (consolidation) 271,628,245,543 174,242,283,122

SAMSUNG SECURITIES CO., LTD. AND ITS SUBSIDIARIESAs of December 31, 2017 and 2016

SAMSUNG SECURITIES CO., LTD. AND ITS SUBSIDIARIESAs of Dec. 31st, 2017; From January 1st, 2017 to December 31st, 2017As of Dec. 31st, 2016; From January 1st, 2016 to December 31st, 2016

(Unit: KRW) (Unit: KRW)

Financial Data

Consolidated Financial Position Consolidated Comprehensive Income

60 61


Independent Auditor's Report Tax Policy

Deloitte Korea has audited the attached financial statements of Samsung Securities Co., Ltd. These financial statements include statements of financial position, comprehensive income, change in capital, and cash flow, as well as a summary of significant accounting policies and other explanatory information for reporting periods ending on December 31 of 2016 and 2017.

Management's Responsibility for Financial StatementsSamsung Securities' management was responsible for the preparation and fair presentation of these financial statements in accordance with Korean International Financial Reporting Standards (K-IFRS), as well as internal controls deemed necessary for the preparation of financial statements free of material misstatements attributable to fraud or error.

Auditor's ResponsibilityDeloitte Korea's responsibility was to express our opinion on these financial statements based on our audit, which was conducted in accordance with relevant Korean auditing standards. Such standards demand that we comply with ethical requirements and plan and perform audits to obtain reasonable assurance about whether financial statements are free of material misstatements.

An audit includes procedures for obtaining evidence of the amounts and disclosures in financial statements. The choice of procedure may vary depending on the auditor's judgment, which reflects factors such as the risk of significant material misstatements attributable to fraud or error. When evaluating such risks, the auditor considers internal controls relevant to the entity's preparation of financial statements and fair presentation to design audit procedures appropriate to the situation. Note, however, that this is not intended to express an opinion on the effectiveness of internal controls. An audit not only includes an assessment of the overall presentation of financial statements, but also an assessment of the conformity of accounting policies applied by management and rationality of accounting estimation derived by management in the process of preparing financial statements. We firmly believe that the audit evidence we obtained is sufficient and appropriate for the provision of our professional opinion.

Auditor's CommentsIn our opinion, the financial statements of Samsung Securities Co., Ltd., including statements of financial position, performance, and cash flow for reporting periods ending on December 31 of 2016 and 2017, are fairly presented in terms of materiality in accordance with K-IFRS.

This audit report is effective as of March 12, 2018. Accordingly, certain events or circumstances having a material impact on the accompanying financial statements may occur after the effective date, which may result in a revision of the audit report.

To the Shareholders and Board of Directors of Samsung Securities Co., Ltd.,

10 Gukjegeumyung-ro, Yeongdeungpo-gu, Seoul

Deloitte (Anjin) Korea

Jeong-hui Lee, CEO

March 12, 2018

Position PaperThird-Party Assurance

Tax Reporting 2017 2016 2015

Reported Taxes KRW 83.6 billion KRW 51.0 billion KRW 86.2 billion

Reported Tax Rate 24.55% 23.78% 25.07%

Cash Taxes Paid KRW 103.6 billion KRW 19.8 billion KRW 58.0 billion

Cash Tax Rate 30.43% 9.22% 16.86%

Position Paper


Tax PolicySamsung Securities fulfills its tax obligations in accordance with the Legal and Ethical Compliance provisions of Samsung Group's management principles and complies with all relevant tax laws and regulations of the respective countries in which we operate.

1. Transparent Policy EnforcementThe effective tax rates of the respective countries in which we operate shall be observed. The transfer of value out of low-tax jurisdic-tions in which it was generated is prohibited, as is the exploitation of said areas for tax evasion purposes.

2. Risk ManagementVarious tax-related legal and regulatory risks shall be preemptively managed to mitigate risks and promptly adapt to changes in relevant laws and regulations.

3. Unfair Internal Transactions and InvestmentsUnfair internal transactions between Samsung affiliates are strictly prohibited. Should such a transaction occur, an advance review of the relevant department shall be obtained, and the case shall be processed in a transparent manner in accordance with pre-established procedures.

4. Information DisclosureSamsung Securities shall disclose tax payment details in full transparency and aim for a sound tax payment culture.

External ActivitiesSamsung Securities prohibits participation in political activities as an enterprise. Although individual employees may engage in pri-vate political activities, any activity that may be misconstrued as the Company's official position is strictly prohibited. As stipulated under Chapter 6, Article 31 of the Political Funds Act, foreign persons and domestic and foreign corporations or organizations are prohibited from donating political contributions, and no person may donate political contributions in connection with such entities. Thus, Samsung Securities does not participate in any political activities in observance of relevant laws and regulations.

62 63


Position Paper

Samsung Securities respects the human rights of all stakeholders involved in business and strives to prevent potential human rights issues. 1. CustomersA. Only provide products and services that are suitable for investment and prohibit discrimination based on age, sex, race, etc.B. Only collect the minimal information necessary for the provision of services and safely manage those data.C. Do not discriminate against customers whose financial access is limited due to physical constraints.

2. ShareholdersA. Protect the rights of shareholders via voting rights protection measures (ESOA, exercising of write-in voting rights, etc.).B. Establish a trust relationship with shareholders via transparent disclosure and active communication.

3. EmployeesA. Adopt a fair recruitment and evaluation/compensation system, and respect employee diversity.B. Operate an HR system that takes into account the life cycles of employees via benefit and employee training programs.C. Prevent unfair labor practices in accordance with UN Global Compact labor standards principles and the ILO's Worst Forms of

Child Labour Convention. D. Strive to improve working conditions by creating safe and pleasant work environments for employees.E. Define necessary actions to protect customer-facing employees from abuse, sexual harassment, and assault by customers in ac-

cordance with the Protective Obligations for Customer-Facing Employees. (See Appendix)

4. Government, Related Organizations, and PartnersA. Comply with domestic and international laws and regulations and strive for management compliance by strengthening internal

controls.B. Respect the rights of partners involved in purchasing and other contractual relationships and aim for mutual growth.

5. Communities, Social Organizations, and Future GenerationsA. Conduct social contribution activities in consideration of local communities and future generations based on a culture of good

corporate citizenship.B. Provide various protective measures and fulfill social responsibilities (improve systems and services, implement financial educa-

tion, etc.) to improve financial accessibility for the underprivileged in local communities.

Human Rights Policies

Protecting Stakeholder Interests by Implementing Human Rights PoliciesSamsung Securities respects the basic rights of all stakeholders and strives to protect human rights. We have established and are in compliance with our human rights policies that prevent human rights violations. Any issues are identified and updated as needed or additional preventive measures are implemented to ensure the protection of stakeholders from potential human rights violations.Samsung Securities conducts annual and general audits of a total of 155 teams from the headquarters as well as 68 branches. We implement improvements for and monitoring of human rights violations in the workplace and potential violations that may occur during customer consultations via condition surveys at the time of auditing.

Preemptive Measures for the Human Rights Protection of EmployeesTo prevent human rights violations, Samsung Securities operates dispute resolution and communication channels for all employees and executives, as well as the contracted employees of partners. Any employee may report violations of human rights in the work-place at any time, and the details of such reports are maintained under strict confidentiality. Incidences of human rights violations occur at a particularly high rate for customer-facing employees who handle customer consultations. Thus, we have established and have been operating protection standards specifically for customer-facing employees since 2016. Samsung Securities monitors hu-man rights situations during employee training and via internal corporate culture surveys, and the collected feedback is utilized for training related employees.

Human Rights Protection

Employees and Partners Samsung Securities is committed to respecting the human rights of each employee, executive, and partner in the supply chain.

CustomersAs a rule, Samsung Securities collects only the minimum required amount of customer informa-tion generated during the course of conducting business, and the information collected is se-curely managed. The company's security is han-dled exclusively by S-1 Corporation, an affiliated company, and all respective employees have completed safety and human rights training.

Information-Disadvantaged GroupsSamsung Securities recognizes financial accessi-bility as a very important human rights issue and makes efforts to improve the inclusion of vulner-able groups via preferential fees and financial education.

1 2 3

Type Activity Details Target

Online Protective measures guidance for customer-facing employees Notice of protective measures

All Family Center consultantsAll employees

Group training

CS training CS training per customer type and situation CSPBs of all branches

Protective measures refresher training for customer-facing employees

Refresher training on protection and response measures All Family Center consultants

Human Rights Issues

‧ Human rights violations in the workplace

‧ Possible human rights violations during customer consultations

‧ Risk of personal information leakage

‧ Financial incidents following the leakage of personal information

‧ Limited access to financial services

Stakeholder

General Employees

Customer-Fac-ing Employees

Customers

Underprivi-leged Local Community Members

Protection Activity and History

Activity Scope Track Record

‧Dispute resolution channel‧Sexual harassment prevention 100% ‧ 2,327 hours of sexual harassment

prevention training

‧ Establishment/operation of protective measures for customer-facing employees - ‧ Enacted and in operation since

2016

‧On-site inspections of PII management systems‧Inspections of information security operations‧Security audits of information systems‧ Security audits of subsidiaries’ security operations‧Anomaly detection system

100%

‧ On-site inspections of HQ and satellite locations handling customer information

‧ Biannual information protection/security training for all employees

‧Preferential fees for the disabled‧Visible ARS‧Financial Education for Youth

100%

64 65


Employee Data

Employee DiversitySamsung Securities manages its employees based on the principles of diversity and equality. In 2017, the total number of employees was 2,242, 40% of whom were women. There were two female executives and the percentage of female managers stood at 23%. Samsung Se-curities hires the highest percentage of full-time workers (92%) in the securities industry to ensure employment security.

BenefitsSamsung Securities strives to promote employees’ work-life balance and increase their motivation and satisfaction at work by offering a wide range of welfare benefits. The company provides employees with welfare points that can be used for their education, health, and cultural life; supports employees’ regular medical checkups and their families’ medical expenses; and assists with employees’ club activities. Moreover, it has laid the foundation for a healthy work-family balance through the expansion of a maternity protection system.

Evaluation and CompensationSamsung Securities raises employees’ competencies and improves organizational performance on the basis of its fair evaluation and compensation system. Employee evaluation consists of the ‘com-petency evaluation’ and ‘performance evaluation.’ To protect em-ployees’ rights and interests from unfair evaluations, we operate a system whereby employees can lodge a formal objection to the evaluation results. Compensation is made for each employee indi-vidually according to his/her evaluation results and performance contribution in two forms - an annual salary and performance incen-tives. For employees at the section chief-level and above, we take into consideration the 360° diagnosis results from their colleagues and junior employees through a ‘multilayered diagnostics’ system and offer opportunities for aptitude development.

Non-Financial MD&A

Employment Status

Gender diversity (by position)

Gender diversity (by age group)* The turnover rate, no. of retirees and retirement rate include voluntary and involuntary retirement and resignation.

* “Managers” refer to employees who hold a position of the section chief-level and above

** Minority groups include veterans.

2017 2016 2015

Total no. of employees

Male 1,366 1,309 1,322

Female 876 829 855

Total 2,242 2,138 2,177

No. of new recruits

Male 112 102 47

Female 67 45 15

Total 179 147 62

No. of resignees

Male 52 59 64

Female 13 12 10

Total 65 71 74

Turnover rate

Male 4.0% 4.5% 4.6%

Female 1.6% 1.4% 1.1%

Total 3.0% 3.3% 3.3%

No. of retirees*

Male 69 101 114

Female 30 56 30

Total 99 157 144

Retirement rate*

Male 5.3% 7.6% 8.2%

Female 3.6% 6.5% 3.4%

Total 4.6% 7.3% 7%

2017 2016 2015

ExecutivesMale 25 25 25

Female 2 2 2

Managers (General Manager/Deputy General Manager/ Manager)

Male 941 863 835

Female 289 268 255

Employees (Assistant Manager/Associate Manager/Employee)

Male 400 421 462

Female 585 559 598

TotalMale 1,366 1,309 1,322

Female 876 829 855

2017 2016 2015

Under 30Male 131 127 109

Female 251 248 253

30-39Male 530 494 514

Female 400 409 440

40~49Male 567 583 611

Female 219 168 157

Over 50Male 138 105 88

Female 6 4 5

TotalMale 1,366 1,309 1,322

Female 876 829 855

The ratio of female-to-male base salary and compensation

2017 2016 2015

Associate Manager 98 98 98

Assistant Manager 104 100 98

Manager105

(Managers total)

99 105

Deputy General Manager 108 109

General Manager 105 128

Employment Classification

Maternity leave and childcare leave

2017 2016 2015

Employ-ment type

Regular 2,055 1,985 2,039

Temporary 187 153 138

Local employ-ment

Locally hired managers* 10 8 9

The company's total number of managers 1,257 1,158 1,117

The ratio of locally hired managers 1% 1% 1%

Female employees

Female managers 291 270 257

The company's total number of managers 1,257 1,158 1,117

The ratio of female managers 23% 23.3% 23%

Minority groups

The disabled 59 59 61

Other minority groups** 51 52 54

2017 2016 2015

Maternity leave

No. of employees expected to return after maternity leave 11 11 8

Childcare leave

Male employees on paternity leave 8 5 5

Female employees on maternity leave 71 77 81

No. of employees who returned after childcare leave 59 69 74

The ratio of returned employees 89% 92% 96.1%

No. of employees that contin-ued to serve after returning 74 69 81

The ratio of continued service 86.2% 93.2% 87.1%

Evaluation System

Evaluation methods

Performance evaluation

Competency evaluation

Multi-layered evaluation

Frequency Two times a year Once a year Once a year

Subjects All employees All employees Managers and above

Methods Relative evaluation using MBO

Evaluation of each competency item Peer evaluation

Benefits

Statutory benefits

Occupational health and safety insurance, health insur-ance, national pension benefits, employment insurance

Employee assis-tance benefits

Housing assistance, medical benefits, children’s educa-tion, and a financially secure retirement

Leisure-time benefits

Subsidized stays at vacation resorts and support for cul-tural and club activities

Other Support for family events, vehicles used for commuting, and operation of the Marriage Assistance Room

Employee Benefit Systems

Family Day Encouraging employees to leave work on-time and partici-pate in cultural activities every Wednesday

Family Week Encouraging employees to take an annual holiday of at least five consecutive business days

Club support Encouraging various club activities and offering support for their operating expenses

Health checkupsSupporting employees' biennial mandatory checkups and annual checkups for employees aged 30 years old and older

Fitness Center Operating a dedicated fitness center of around 21350 sq. ft.

Maternity Support

Expansion of parental leave Increased the period up to 2 years

Subfertility leave of absence

Providing up to a one-year leave of absence to married women who are over 35 years of age or those that have been married for over 5 years and received a diagnosis of subfertility

Operation of in-house daycare centers

Operation of two daycare centers in the head office building

Non-Financial

MD&A


(Unit: Persons)

(Unit: Persons)

(Unit: Persons)

Status of Performance Evaluation Operation

2017 2016 2015

Number of employees subject to performance evaluations 2,329 2,246 2,187

Number of employees who received performance evaluations 2,236 2,153 2,089

The ratio of employees that received performance evaluations 96% 96% 96%

(Unit: Persons)

(Unit: %)

(Unit: Persons)

(Unit: Persons)

66 67


DirectionProvide creative and reasonable financial solutions to support sound capital market growth and sustainable social develop-ment.

Support for the Future Scholarship Fund and Youth Study Room initiative as well as operation of a retirement school for elderly couples.

Non-Financial

MD&A


Labor-Management CultureSamsung Securities respects the labor unions’ autonomous activi-ties and is building a sound labor-management relationship based on dialogue and cooperation. Currently, the company has two labor unions whose membership reached 274 as of the end of 2017. The company recognizes the three constitutional labor rights of work-ers as stipulated in the collective bargaining agreements concluded with two unions. The Labor-Management Council holds quarterly meetings to discuss major labor-management issues, such as work-ing conditions, training and education, wages and salaries, materni-ty protection, employee benefits, and health & safety. In the event of any significant changes to operations including restructuring, tem-porary shutdowns or closures, spinoffs, business transfers, mergers and acquisitions, a 50-day notice is given to the unions to allow time for discussion.

Youth Study Rooms Vision Maru The Youth Study Room ‘Vision Maru’ set up in 2012 in Nowon-gu, Seoul is a youth-dedicated space designed to provide safe after-school care and learning support for the youth from low-income families. In addition to the physical support required for their studies in the facility, the company’s employees provide a mentoring service to the youth to help further their economics studies and emotional stability.

Local Childcare CentersSince 2014, Samsung Securities has selected dilapidated local child-care centers and offered a safe shelter for children from low-income families in local communities by providing regular maintenance and repair services for these facilities. In 2016, the company conducted maintenance and repair services on 8 local childcare centers that made a significant contribution to educational activities for the chil-dren and increased program participation rates. Moreover, we are continuously expanding the scope of maintenance and repair ser-vices through affiliation with nearby branches.

Economics and Securities Education for YouthThe Economics and Securities Education is a customized economics education program designed for financially marginalized youth. The Youth Economics & Securities Academy is operating in partnership with 10 social welfare centers nationwide and a social assistance foundation called Kids & Future. The Academy also recruits mem-bers of YAHO, a college student volunteer group, and provides them with an opportunity to offer mentoring to children and youth. In 2017, the total amount used was KRW 1.6 billion, and in 2018, the number of beneficiary children will be doubled to support more than 1,000 students. Moreover, a new scholarship program will be launched for college students participating in YAHO activities.

Future Scholarship FundSamsung Securities offers scholarships to selected students who par-ticipate in the Economics and Securities Education for Youth program and provides them with financial and emotional support so that they can work for a better future without having to give up their dreams for economic reasons. In 2018, we are increasing the scholarship fund since we have raised the number of annual recipients to 15.

Health and SafetySamsung Securities looks to ensure workplace health and safety through regular labor-management agreements. We abide by the Labor Standards Act and the Occupational Safety and Health Act. We also prevent unfair labor practices in accordance with the UN Global Compact’s labor principles and ILO Conventions and Recommendation on child labor.

Retirement PlanThe company’s retirement plan was launched in 2006. Since the Re-tirement Pension Operations Committee was set up in December 2010, the plan has been run in a more transparent manner. Avail-able as either a defined benefits (DB) plan or a defined contribution (DC) plan, the company’s pension fund totaled KRW 118.99 billion - KRW 72.3 billion in DB and KRW 46.69 billion in DC - in December 2017. The company also commissions multiple operators including Samsung Life Insurance, Shinhan Bank, and Mirae Asset Daewoo to manage the fund in a bid to heighten the quality and stability of the corporate retirement pension service.

Labor-Management Communication Channels

Channels Frequency Key issues

Labor-Management Council Quarterly (4 times a year)

Wages, working conditions, personnel

management and other relevant issues

Labor-Management meetings

Monthly or randomly (at least 12 times a year)

Collective bargaining Every 2 years

Wage negotiations Annually Wage conditions

Status of Labor Union Operation

Corporate Pension Plan

2017 2016 2015

Membership of the labor unions 274 292 306

Employees eligible for membership in a labor union 2,242 2,138 2,177

The ratio of membership in a labor union 12% 14% 14%

2017 2016 2015

Pension fund amount (DB type) 723.0 665.0 610.9

Pension fund amount (DC type) 466.9 396.5 372.7

DB plan participants 1,489 1,514 1,614

DC plan participants 755 695 716

Issues covered by the Health and Safety Agreement

‧ Worker representatives’ participation in health and safety inspections, auditing, and accident investigations

‧Whether a complaint handling system exists

‧The right to refuse unsafe work

‧Compliance with ILO Conventions

‧ Implementation of an independent verification program for worksite safety

Social Contribution System for Local Communities and the Environment

Samsung Securities makes continuous efforts to have a positive so-cial influence through the social contribution system for local com-munities and the environment. Accordingly, the company carries out businesses based on three directions: the establishment of a social safety net, dissemination of a sharing culture, and implementation of green management. We are aware of the importance of social contribution activities and plan to expand related projects both in quality and quantity in 2018.

1. Social Safety Net Support

Economics and Securities Education for Youth

2017 2016 2015

Economics and Securities Education for Youth

Accumulated no. of participants 192,991 184,351 177,361

Accumulated no. of classes 7,110 7,058 7,011

YAHO College Volunteers

No. of college participants 151 132 167

Samsung Securities‧

Kids & Future‧

Social welfare centers

YAHO ‧

Samsung Securities

employees

Participating institutions

(social welfare institutions and

facilities)

Activity support

Volunteer activities

Education support

(Unit: Persons)

Industrial Accidents

2017 2016 2015

No. of disaster victims 0 0 0

The ratio of leave days 0 0 0

No. of full-time workers 2,242 2,138 2,177

Total working hours 17,936 17,104 17,416

Absence rate (%) 0 0 0

(Unit: Persons)

(Unit: Persons)

(Unit: KRW billion/Persons)

Safety & Healthy Training

2017 2016 2015

CPR training 475 1,000 1,100

Evacuation drills 589 950 1,000

(Unit: Sessions)

Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all

68 69


Results of Financial EducationFinancial Education for Youth raises financial awareness in young people and provides economic education designed specifically for students from fourth grade to junior- and high-school. The Short-Term Financial Education Department administers differentiated education via a one-year curriculum and continually supports the growth of participating youth, helping students attain sound economic ideas and grasp financial concepts through real-life examples such as allowance management, savings, and credit. So far, we have developed and are providing 11 high-quality economic education curricula that were also selected by the Financial Supervisory Service in 2015 for inclusion in Excellent Financial Education Textbooks.

Enhancing the Company’s Image through Volunteer ActivitiesSamsung Securities provides educational experiences and scholarships to college students through YAHO College Volunteers, thereby raising the image of the company as well as the financial industry as a whole. Since its inception in 2009, YAHO College Volunteers has invited eight different student bodies with 1,179 college-student participants to provide economic education and mentoring twice or more per month to low-income children and adolescents throughout ten educational centers nationwide. Ten students from YAHO College Volunteers have gone on to join Samsung Securities, allowing us to confirm first-hand that our volunteer activities are serving an important role in enhancing the company’s image and uncovering talented new employees.

2. Spreading a Culture of Sharing 3. Practicing Green Management

Community VolunteeringSamsung Securities' volunteer group is comprised of 116 individual teams nationwide as of 2017. We operate a paid volunteer service system to facilitate voluntary activities during work hours and even provide paid leave for emergency and disaster relief work. To maxi-mize effectiveness, the leader of each team selects a social contribu-tion theme that matches the unique characteristics of the team’s re-gion, and the group engages in activities in cooperation with related local government agencies and NGOs to maximize the benefit to the community.

Nanumi Fund Nanumi Fund is a voluntary social contribution fund operated by participating Samsung Securities employees who donate a certain amount of money to the fund each month. Funds raised through Nanumi are used for social contributions and to support volunteer activities for the underprivileged in local communities.

Green ManagementSamsung Securities is actively engaged in green management to minimize the risks of climate change. We systematically manage a variety of environmental data and participate in international cli-mate change responsibility initiatives such as the Carbon Disclosure Project (CDP).

Green Management InitiativeSamsung Securities' efficient Green Management Initiative prevents the unnecessary use of energy in activities such as commuting, work, and customer contact. What's more, we promote specific, pro-active green management practices in our employees via the com-pany-wide Work Diet campaign. We are consistently implementing resource and energy conservation strategies through the provision of specific action points including self-restraint regarding unneces-sary printing to reduce paper use, as well as suggestions for black-and-white and 2-up* printing. As a result, we've continually reduced usage in measurable areas of resource and energy, such as paper, water, and waste.

* Printing two pages per side of the paper (A4)

Unit 2017 2016 2015

Rawmaterial (Paper)

Reports Company-wide

10,000 sheets 655 583 580

Att'd tables Company-wide

10,000 sheets 217 253 470

Photocopy paper

Company-wide

10,000 sheets 1,500 1,638 2,020

Subtotal Company-wide

10,000 sheets 2,372 2,474 3,070

Energy

Natural gas HQ ㎥ 209,656 65,048 68,274

Gasoline Company fleet ℓ 170,075 184,329 186,147

Diesel Company fleet ℓ 11,100 15,626 9,546

ElectricityHQ MWh 1,133 1,752 1,472

IT Center MWh 60 183 6,942

Electricity bill

HQ KRWmillion 138 295 182

IT Center KRW million 33 108 783

Energy intensity (Usage per unit area)

Natural gas HQ 8.3 4.0 4.2

Electricity HQ 0.04 0.11 0.09

Emissions (GHG)

Scope 1(Direct)

HQ tCO2e 464 144 151

Company fleet tCO2e 402 445 433

Scope 2(Indirect)

HQ tCO2e 528 817 686

Company fleet tCO2e 0.03 85 3,237

GHG intensity (Emissions per unit area)

Natural gas(Scope1) HQ 0.02 0.01 0.01

Electricity(Scope2) HQ 0.02 0.05 0.04

Water Waterworks HQ ㎥ 19,999 16,861 15,203

Waste Landfill waste

Company-wide Ton 8 313 193

Business travel

Total dis-tance

Company-wide km 4,858,103 5,032,312 4,941,388

GHG emissions

Company-wide kg CO2e 302,207 318,626 307,896

Social Contribution KPIs

2017 2016 2015

Total amount of social contributions 3,280 3,113 3,140

Direct costs of activities

Education 1,638 591 573

Social welfare 743 706 765

Other* 619 1,536 1,528

Nanumi Fund Amount raised 280 280 274

Participating employees 3,991 4,100 2,861

Participation time (hours) 10,730 11,969 9,346

Non-Financial

MD&A


Periodic volunteer community service activities performed by and donations from employees

Spreading a green corporate culture through practices, such as saving energy and recycling resources

* Charities, NGOs, educational/research institutions, etc.

Take urgent action to combat climate change and its impacts

Reduce inequality within and among countries

Future Green Management Plans

- Expanded investment in environmental responsibility 20% increase in environmental product portfolio by 2022

- Green management for eco-friendly corporate culture 2% YoY reduction in energy use by 2025

(Unit: KRW million)

70 71


Category Key Issues M/L-Term and Potential Issue

FinancialCapital 1

IntellectualCapital 2 10

HumanCapital

6 9

SocialCapital

11

ManagementIssue 4

MethodologySamsung Securities annually conducts a materiality assessment to identify key sustainability and business-related issues and reports the findings effectively. We refer to the Five-Part Materiality Test methodology from AccountAbility for the assessment and have adopted the definition of "significance" from the respective reporting guidelines of the International <IR> Framework and GRI.

Issue Pool and Stakeholder FeedbackUsing sustainability reporting guidelines of the GRI and other relevant international institutions as a fundamental basis, Samsung Securities selected key issues to be reflected in the Sustainability Report, taking into consideration stakeholder interests and other factors affecting management activities. We examined the importance and trends of strategically-important KPIs and conducted an external environment analysis to create an issue pool for reflecting key industry issues in the materiality assessment.

Materiality Matrix and Issue SelectionThere are six key issues of the impact that were derived by graphing a materiality matrix based on ESG (x-axis) and stakeholder impact (y-axis). Issues of high importance on a single axis were identified as medium- to long-term issues, while the remaining issues were classified as potential issues.We applied the Capital Model to report key issues in the Samsung Securities Report 2017, and the issues were classified as Financial, Intellec-tual, Human, and Social Capital in consideration of the business details and key issues facing Samsung Securities. Medium- to long-term and potential issues were combined in consideration of the specificities of each respective capital. Among said issues (except key issues), those of significance considered by Samsung Securities in conducting business and engagement-related factors for internal and external stakeholders were reported via the comments and opinions section of the management analysis.

Materiality Assessment and Validity ReviewWe quantified and prioritized environmental, social, and governance (ESG) impact as well as the business impact on stakeholders for each of the 20 issues selected for the pool. ESG impact was assessed by taking into account financial and non-financial impacts and strategic linkages, and stakeholder impact was assessed by identifying affected stakeholders and their categories.

Materiality

Assessment



Stak

ehol

der I

mpa

ct

ESG Impact

Achieving stable performance anddiversifying the business model

Strengthening business and financial risk management

Developing employee competencyand enhancing professionalism

Protecting financial consumers andmanaging customer relationshipsEnhancing the expertise and

transparency of the BOD

Promoting stakeholders’ participation

Reinforcing compliance and ethical management

Employee recruitment, compensation and job security

Expanding responsible investmentproducts and services

Protecting customer PII and preventing crime

Innovation and development of finance-related IT

Key Issues (High)Hig

h

High Low

1

2

3

3

4

5

5

6

7

7

8

8

9

1011

- Analyze key sustainability management issues faced by prime examples of sustainably-man-aged domestic/international companies

- Analyze domestic/international sustainability reports and activity trends

- Articles and press releases from 2017 (1,355 and 5,510, respectively)

- Articles receiving national press coverage by 110 organizations (daily newspapers, TV news, etc.)

- Review international standard indicators and guidelines related to sustainability manage-ment

- GRI Standards, DJSI, SDGs/Agenda, etc.

- Review internal issues, mid-term managementstrategies, and direction

- Review KPIs and internal performance data

Global Benchmarking

Media Research

International Standards Analysis

Policy and Strategic Linkage Review Issues Identified

20

- Analyze management strategy and KPIs- Assess financial and risk-related impact- Review social/environmental importance via

an internal TF survey

- Quantify benchmark results- Analyze media/reputation impact- Review issue impact per stakeholder group

ESG Impact Stakeholder Impact

Key Issues Identified

6

Key Issues Why it matters Long-term Targets Target Year

1. Achieving stable performance and diversifying the business model

Reduced profitability due to heightened industry competition

Better synergy including cooperation between business units to carry out IPOs 2023

2. Protecting customer PII and preventing crime

Financial losses due to client information leakage and financial incidentsGreater non-financial reputational risks

Enhanced customer convenience with additional financial security certifications and IT innovation

2023

3. Protecting financial consumers and managing customer relationships

Financial and non-financial losses due to financial incidents

Expanded ethics education among employees and more customer-oriented management 2020

4. Strengthening business and financial risk management

Financial incidents caused by careless risk management, Decline in customer trust

Updated risk management structure and sys-tems, Enhanced operational risk management 2025

5. Expanding responsible investment products and services

Improved corporate image, expanding sustainable investments

Portfolio diversification using responsible investment products 2022

6. Developing employee competency and enhancing professionalism

Decline in customer trust due to the outflow of hu-man resources and a lack of expertise

Expanded support for professional training and obtaining advanced certifications, Improved employee compensation and job security

2020

72 73

Growth, Collaboration, PassionGRI Standard

Index


GRI Standard Index

TopicDisclosure

소제목 페이지No. Title

GRI 102 : Organizational Profile

102-1 Name of the organization About Samsung Securities 4

102-2 Activities, brands, products, and services About Samsung Securities 4

102-3 Location of headquarters About Samsung Securities 4

102-4 Location of operations About Samsung Securities 4

102-5 Ownership and legal form About Samsung Securities 4

102-6 Markets servedAbout Samsung Securities Our Business

4, 8-11

102-7 Scale of the organization About Samsung Securities 4

102-8 Information on employees and other workers Employee Data 64

102-9 Supply chain About Samsung Securities 4

102-10 Significant changes to the organization and its supply chain About Samsung Securities 4

102-11 Precautionary Principle or approach Risk Management 44-48

102-12 External initiatives Practicing Green Management 69

101-13 Membership of associations External Activities 61

GRI 102 : Strategy

102-14 Statement from senior decision-maker CEO Messsage 2-3

102-15 Key impacts, risks, and opportunitiesMedium- to Long-Term Risk Management

48, 70-71

GRI 102 : Ethics and integrity

102-16 Values, principles, standards, and norms of behavior Compliance 49

102-17 Mechanisms for advice and concerns about ethicsComplianceHuman Rights Protection

49, 63

GRI 102 : Governance

102-18 Governance structure Governance 40-43

102-20 Executive-level responsibility for economic, environmental, and social topics CEO Messsage 2-3

102-21 Consulting stakeholders on economic, environmental, and social topics How we share value 15

102-22 Composition of the highest governance body and its committees Governance 40

102-23 Chair of the highest governance body Governance 40

102-24 Nominating and selecting the highest governance body Governance 40-41

102-25 Conflicts of interest Governance 40

102-26 Role of highest governance body in setting purpose, values, and strategy Governance 40-41

102-27 Collective knowledge of highest governance body Governance 40-41

102-28 Evaluating the highest governance body’s performance Governance 42

102-29 Identifying and managing economic, environmental, and social impacts Governance 40-43

102-30 Effectiveness of risk management processes Risk Management 44-48

102-31 Review of economic, environmental, and social topics How we share value 14-15

102-32 Highest governance body’s role in sustainability reporting Governance 40-43

102-33 Communicating critical concerns Materiality Assessment 70-71

102-34 Nature and total number of critical concerns Materiality Assessment 70-71

102-35 Remuneration policies Governance 42

102-36 Process for determining remuneration Governance 42

102-37 Stakeholders’ involvement in remuneration Governance 42

102-38 Annual total compensation ratio Governance 42

GRI 102 : Stakeholder Engagement

102-40 List of stakeholder groups Our capital 18-19

102-41 Collective bargaining agreements Employee Data 66

102-42 Identifying and selecting stakeholders Our capital 18-19

102-43 Approach to stakeholder engagement Our capital 18-19

102-44 Key topics and concerns raised Our capital 18-19

102-46 Defining report content and topic Boundaries Our capital 18-19

102-47 List of material topics Materiality Assessment 70-71

102-50 Reporting period Cover (Back) Cover (Back)

102-51 Date of most recent report Cover (Back) Cover (Back)

102-52 Reporting cycle Cover (Back) Cover (Back)

102-53 Contact point for questions regarding the report Cover (Back) Cover (Back)

TopicDisclosure

소제목 페이지No. Title

GRI 102 : Stakeholder Engagement

102-54 Claims of reporting in accordance with the GRI Standards Cover (Back) 표지(뒷면)

102-55 GRI content index GRI INDEX 72-73

102-56 External assurance Third Party Assurance 74-75

GRI 103: Management Approach103-1 Explanation of the material topic and its Boundary

Our CapitalMA page for each CapitalMateriality Assessment

18-19, 20, 24, 28, 32, 70-71

103-2 The management approach and its componentsOur CapitalMA page for each Capital

18-19, 20, 24, 28, 32

GRI 201 : Economic Performance

201-1 Direct economic value generated and distributed How we share value 14-15

201-2 Financial implications and other risks and opportunities due to climate change Expanding Responsible Investment 35-36

GRI 203 : Indirect Economic Impacts

203-1 Infrastructure investments and services supported Social Contribution System for Local Communities and the Environment 67-69

203-2 Significant indirect economic impacts How we share value 14-15

GRI 205: Anti-corruption

205-1 Operations assessed for risks related to corruption Compliance 49

205-2 Communication and training about anti-corruption policies and procedures Compliance 49

205-3 Confirmed incidents of corruption and actions taken Compliance 49

GRI 206 : Anti-competitive Behavior 206-1 Legal actions for anti-competitive behavior, anti-trust, and monopoly practices Compliance 49

GRI : 301 Materials

301-3 Reclaimed products and their packaging materials Practicing Green Management 69

301-2 Recycled input materials used Practicing Green Management 69

301-3 Reclaimed products and their packaging materials Practicing Green Management 69

GRI : 302Energy

302-1 Energy consumption within the organization Practicing Green Management 69

302-2 Energy consumption outside of the organization Practicing Green Management 69

302-4 Reduction of energy consumption Practicing Green Management 69

302-5 Reductions in energy requirements of products and services Practicing Green Management 69

GRI : 303Water

303-1 Water withdrawal by source Practicing Green Management 69

303-2 Water sources significantly affected by withdrawal of water Practicing Green Management 69

GRI : 305Emissions

305-1 Direct (Scope 1) GHG emissions Practicing Green Management 69

305-2 Energy indirect (Scope 2) GHG emissions Practicing Green Management 69

305-4 GHG emissions intensity Practicing Green Management 69

305-5 Reduction of GHG emissions Practicing Green Management 69

305-6 Emissions of ozone-depleting substances (ODS) Practicing Green Management 69

GRI : 306 Effluents and Waste 306-2 Waste by type and disposal method Practicing Green Management 69GRI : 308 Supplier Environmental as-sessment

308-2 Negative environmental impacts in the supply chain and actions taken Expanding Responsible Investment 35-37

GRI 401 : Employment401-1 New employee hires and employee turnover Employee Data 64

401-3 Parental leave Employee Data 65

GRI 402 : Labor/Management Relations 402-1 Minimum notice periods regarding operational changes Employee Data 66

GRI 403 : Occupational Health and Safety

403-1Workers representation in formal joint management–worker health and safety committees

Employee Data 66

403-2Types of injury and rates of injury, occupational diseases, lost days, and absen-teeism, and number of work-related fatalities

Employee Data 66

403-4 Health and safety topics covered in formal agreements with trade unions Employee Data 66

GRI 404: Training and Education

404-1 Average hours of training per year per employee Human Capital 28-31

404-2 Programs for upgrading employee skills and transition assistance programs Human Capital 28-31

GRI 405: Diversity and Equal Opportuni

405-1 Diversity of governance bodies and employees Governance 41

405-2 Ratio of basic salary and remuneration of women to men Human Capital 65

GRI 406 : Non-Discrimination 406-1 Incidents of discrimination and corrective actions taken Human Rights Protection 63

GRI 412 : Human Rights Assessment

412-1Operations that have been subject to human rights reviews or impact assess-ments

Human Rights Protection 63

412-2 Employee training on human rights policies or procedures Human Rights Protection 63

412-3Significant investment agreements and contracts that include human rights clauses or that underwent human rights screening

Human Rights Policies 62

GRI 413 : Local Communities 413-1Operations with local community engagement, impact assessments, and development programs

Spreading a Culture of Sharing 68

GRI 414 : Supplier Social Assessment 414-2 Negative social impacts in the supply chain and actions taken Expanding Responsible Investment 35

GRI 419: Socioeconomic Compliance 419-1 Non-compliance with laws and regulations in the social and economic area Compliance 49

74 75

Growth, Collaboration, PassionThird Party

Assurance



PrefaceKFQ was engaged by Samsung Securities to provide limited assurance on the ‘SAMSUNG SECURITIES REPORT 2017’ (further ‘the Report’). Our responsibility is to perform a limited assurance engagement and to express a conclusion based on the work performed. We conducted its assurance based on completeness of the data and information provided by Samsung Securities. Samsung Securities is responsible for all contents within the Report including the reporting principles and standards.

Independence KFQ is not involved in the preparation of any part of the Report, other than providing an assurance opinion, and there has been no interest between Samsung Securities and us. We have no biased opinion on stakeholders of Samsung Securities.

Assurance StandardsKFQ has designed and implemented assurance according to the following standards.• AA1000 Assurance Standard (2008)• AA1000 Accountability Principles Standard (2008)• GRI Standards• UN SDGs (Sustainable Development Goals)

Assurance ScopeKFQ identified the followings as its scope:• Sustainability management activities and achievements for Samsung Securities headquarters and all domestic sites described in the Report• Compliance with the guidelines according to GRI Standards Core Option• GRI Standards compliance assessment regarding contents of the Report and assurance principles of reporting quality • Application of Type 1* assurance approach according to AA 1000 APS 2008 and AA 1000 AS 2008 to assess compliance with inclusiveness,

materiality and responsiveness principles and reliability of sustainability performance information. The term ‘Moderate Assurance’ used in AA 1000 AS is designed to be consistent with ‘Limited Assurance’ as articulated in ISAE 3000. * For some environmental data, Type 2 method verification was performed.

• Core subjects and linkages with UN SDGs

Assurance ProceduresKFQ designed procedures to have reasonable assurance of the Report's critical errors or inappropriate information. We verified the reliability of the contents, processes and systems of data generation and report preparation.

• Document ReviewWe reviewed the reliability of non-financial data in respect of the ‘Sustainability’ by cross-checking the Report with GRI Standards, quantita-tive data of Samsung Securities, and internet & media research information. We also confirmed that the financial information has been ap-propriately extracted from the internal documents and the financial statements of the business report of the following system (http://dart.fss.or.kr).

• On-site VerificationWe visited Samsung Securities headquarter and conducted on-site verification to confirm reliability of the sustainability activities and per-formance data contained in the Report and to evaluate the effectiveness of the reporting process. We performed verification in the accuracy topic of the aggregated data from Samsung Securities. These procedures included the following:- Materiality assessment process, stakeholders inclusiveness, key issues, internal response procedures, and etc.- Assessment of data analysis and descriptions and sustainable management performance in the Report- Consistency between the financial data contained in the Report and the audited financial statements 2017- Interviews with relevant staff responsible for providing information in the Report

• Resolution of FindingsWe confirmed that some errors, inappropriate information, and ambiguous expressions found during on-site visit were properly reflected in the final Report. In addition to evaluating the reporting principles for the Samsung Securities’ report as described above, we conducted a reliability check of data and information on some specific performance indicators (Greenhouse Gas Emissions, Water Consumption, Waste Volume).

• LimitationsThe Report has been prepared solely for Samsung Securities in accordance with the terms of our engagement. We do not accept or assume responsibility to anyone other than Samsung Securities for our conclusions we have reached in the statement. Completeness and responsive-ness of sustainability performance information presented in the Report have inherent limitation due to their nature and the methodology used for determining, calculating and estimating such data.

OpinionBased on the verification activity stated herein, KFQ confirmed that the Report meets the GRI Standards ‘Core Option’. According to the prin-ciples of AA 1000 APS 2008 and AA 1000 AS 2008, inclusiveness, materiality and responsiveness, sustainability performance information were assessed and we could secure reasonable grounds to provide Type 1 level of assurance with the following confirmation:

1. (Stakeholders Inclusiveness) Samsung Securities subdivided eight stakeholders into five groups related to the major issues of sustain-able management. To hear any concerns and opinions from them, Samsung Securities had a customized communication strategy for each stakeholder group and reflected their responses and opinions to its sustainable management activities.

2. (Sustainability Context) In terms of sustainability, Samsung Securities has utilized sustainable economic performance by efficiently utiliz-ing financial capital based on business areas and core competencies in accordance with its mid- to long-term strategies. These achieve-ments are in line with the UN SDGs, and are also satisfying international principles.

3. (Materiality) Samsung Securities established issue pools and reviewed by internal guidelines and external assessment criteria (GRI Stan-dards guideline, DJSI, UN SDGs, media coverage, benchmark, and issue analysis) incompliance with the materiality assessment process. As a result, Samsung Securities appropriately reflected that six key topics derived from the process along with key performance in 2017.

4. (Completeness) Samsung Securities applied reporting scope, boundary and temporal criteria. We confirm that the Report is suitable for stakeholders to assess sustainability performance.

Recommendation for ImprovementFor Samsung Securities' sustainable management, it is necessary to strengthen the systematic management system for responding to im-portant issues raised by stakeholders and responding to risks. Ethical management systems are being strengthened around the world. We recommend that Samsung Securities establish a global-level ethical management system and raise ethical awareness among its employees to further strengthen its social sustainability management system.

June 2018Seoul, Korea

Korean Foundation for Quality (KFQ) CEO Nam Dae Hyun

Independent Assurance Statement on the ‘SAMSUNG SECURITIES REPORT 2017’

76 77


About this Report

Reporting PeriodThe reporting period for financial performance and sustainability management activities of this report is from Janua;ry 1 to December 31, 2017. Quantitative data requiring trend reporting includes three years of results (2015 - 2017), and Board of Directors data is current as of March 2018.

Scope and BoundariesThe scope of this report consists of all Samsung Securities business sites including the headquarters, branches in Korea, and overseas subsidiaries. However, some social and environmental indicators of overseas business sites that have physical restrictions on data collection were excluded from the scope.

Reporting and Documentation PrinciplesThis report was created in accordance with the Global Reporting Initiative (GRI) Standards and GRI Financial Services Sector Supplement (FSSS) and prepared in accordance with the 'Core' option of the GRI G4 Sustainability Reporting Guidelines.

AssuranceThe financial information contained within this report was independently audited by Deloitte (Anjin) Korea, and a third-party assurance was performed by Korean Foundation for Quality to ensure the accuracy, objectivity, and reliability of non-financial information based on AA1000AS (2008) assurance standards. Information regarding compliance with GRI Standards and the third-party assurance are available on GRI Standards Index (pp. 72~73) and Third-Party Assurance (pp.74~75), respectively.


Headquarters

IR Consultation

Overseas Subsidiaries and Offices

Samsung Securities Co., Ltd.

Address: Samsung Electronics Building, 11 Seocho-daero 74-gil, Seocho-gu, Seoul, 06620

Tel: 82-2-2020-8000

Tel: 82-2-2020-7862 Fax: 82-2-2020-8586

E-mail: [email protected]

New York

Address: 1330 Avenue of the Americas (10th fl.),

New York, NY 10019, USA

Tel: +1-212-972-2454

Fax: +1-212-972-2704

London

Address: 30 Gresham Street (1st fl.), London

EC2V 7PG, UK

Tel: +44-20-7776-4311

Fax: +44-20-7776-4303

Sustainability Management Inquiry

Tel : 82-2-2020-7969 Fax : 82-2-2020-8586

E-mail: [email protected]

Beijing

Address: The Exchange Beijing, No. 118 Jian

Guo Lu Yi (Rm. 910), Chao Yang District, Beijing,

China

Tel: +86-10-6522-1855 (ext. 7891)

Fax: +86-10-6522-1855 (ext. 7889)

Hong Kong

Address: Two International Finance Centre, 8

Finance Street (Suite 4511), Central, Hong Kong

Tel: +852-3411-3888

Fax: +852-2114-0290

Tokyo

Address: Iidabashi Grand Bloom, 2-10-2 Fujimi,

Chiyoda-ku, Tokyo 102-0071, Japan

Tel: +81-3-6333-2952

Fax: +81-3-6333-2953

Samsung Securities Co., Ltd.11, Seocho-daero 74-gil, Seocho-gu, Seoul 06620, KoreaTel: +82-2-2020-8000 www.samsungsecurities.com

This report is printed using soy-based oil on eco-friendly paper made from FSC-certified wood.

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