samsung asset m

anagement 2018 pro

file boo

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samsung asset

management2 0 1 8 p r o f i l e b o o k

16F~18F, 11, Seocho-daero 74-gil, Seocho-gu, Seoul

TEL: 82-2-3774-7600 FAX: 82-2-3774-7633www.samsungfund.comwww.Kodex.com

eng

Samsung Asset Management opened a new era in

2011 by becoming the first company in Korea to

exceed KRW 100 trillion in assets under

management. Since then, it has continued to grow

and solidify its position as the nation’s foremost

asset manager with KRW 230 trillion in AUM.

Our aim is to take the lead in all business fields and

achieve our vision of making the leap into a global

asset manager.sa

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2018

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Contents

IntroductIon

Financial Highlights

01 Intro

02 Message from the CEO

06 Samsung Asset Management’s Investment Philosophy

- Winning Investments for All

10 Vision

11 Investment Philosophy

BusIness overvIew

14 Investment Pool Operations

15 Industrial Accident Compensation Insurance Fund Operations

16 Pension Fund Operations

17 Fixed-Income Investments

18 Passive Investments

19 ETF Solutions

20 Global Investments

21 Multi-Asset Solutions

22 Liability-Driven Investments

23 Alternative Investments

24 Investment Research Center

26 Samsung Active Asset Management

27 Samsung Hedge Asset Management

28 Overseas subsidiaries (Hong Kong, New York and London)

stay ahead together

32 Ethical Principles

33 Internal Control System

34 Strengthening Employee Education and Awareness

35 Reporting on Unethical Practices

36 Risk Management

38 Client Satisfaction

40 Social Outreach

FInancIal sectIon

42 Independent auditor’s audit report

43 Consolidated Financial Statement

44 Consolidated Statements of Comprehensive Income

45 Consolidated statement of changes in Shareholders’ equity

46 Consolidated Statements of Cash Flows

48 Chronology

open

financial Highlights

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Financial Highlights

Samsung Asset Management first surpassed KRW 60 trillion in AUM in 2004, and as of the end of 2017, the figure more than tripled to KRW 230 trillion, setting a new record for the largest amount entrusted to a single company in Korea. We continue to post robust results with total assets amounting to KRW 574.7 billion, operating revenue of KRW 198.7 billion and net income of KRW 48 billion.

Operating revenue

Operating expenses

2SHUDWLQJ�SURÀW

Income before tax

Corporate tax

Net income

Cash and cash equivalents

Other assets

Total assets

&XVWRPHU�GHSRVLWV�IRU�EHQHÀFLDULHV

Other liabilities

Total liabilities

Total shareholders’ equity

FY2016

181,703

111,944

69,759

70,009

20,183

49,826

37,342

2,485

678,509

245,609

671

348,118

330,391

(Unit: KRW million) Fy2017

198,664

130,226

68,438

67,709

19,709

48,000

50,928

2,582

574,682

64,682

1,422

202,029

372,653

assets under management (KRW trillion)

2014 2015 2016 20172013

127.4 123.7

198.1206.7

221.5250

200

150

100

50

0

Fund sales (KRW trillion)

2014 2015 2016 20172013

40.1 43.349.4

60.566.470

60

50

40

30

20

10

0

assets (KRW 100 million)

2014 2015 2016 20172013

4,9245,197 5,271

6,7855,747

7,000

5,000

3,000

1,000

0

capital (KRW 100 million)

2014 2015 2016 20172013

2,119 2,348

2,8413,304

3,7274,000

3,000

2,000

1,000

0

operating revenue (KRW 100 million)

2014 2015 2016 20172013

1,1001,385

1,6641,817

1,9872,000

1,500

1,000

500

0

Income before tax (KRW 100 million)

2014 2015 2016 20172013

383

545

675700 677

800

600

400

200

0

Samsung Asset Management opened a

new era in 2011 by becoming the first company in

Korea to exceed KRW 100 trillion in assets under

management. Since then, it has continued to grow

and solidify its position as the nation’s foremost

asset manager with KRW 230 trillion in AUM.

Our aim is to take the lead in all business fields

and achieve our vision of making the leap

into a global asset manager.

Message from the CeoOver the past year, we at Samsung Asset Management have, yet again, striven WR�IXOÀOO�RXU�UHVSRQVLELOLWLHV�DV�.RUHD·V�OHDGLQJ�DVVHW�PDQDJHPHQW�FRPSDQ\��%\�PDQDJLQJ�$80�RI�.5:�����WULOOLRQ��WKH�ODUJHVW�DPRXQW�HQWUXVWHG�WR�D�VLQJOH�FRPSDQ\�LQ�WKH�FRXQWU\��ZH�GHPRQVWUDWHG�RXU�LQGXVWU\�OHDGLQJ�SHUIRUPDQFH�E\�DFKLHYLQJ�.5:�������ELOOLRQ�LQ�UHYHQXH�DQG�.5:������ELOOLRQ�LQ�SUH�WD[�LQFRPH�

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Dear Clients,

I would like to express my sincere gratitude for your interest and encouragement for our

company, Samsung Asset management. I am pleased to state that we have once again made

remarkable progress in the year 2017, thanks to your support.

As one of our outstanding track records, KODEX ETF reached KRW 20 trillion. Recognition for

KODEX ETF, positioned as the no. 1 in market share, extended beyond the domestic market to

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management capabilities in the ASEAN and Chinese markets.

We also excelled across other business segments. Samsung Asset Management was appointed

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pension fund market, Target Date Fund (TDF) reached approximately 50% in market share.

Accordingly, we attained domestic record high AUM of KRW 230 trillion, and. demonstrated our

industry-leading performance by achieving KRW 198.7 billion in revenue and KRW 67.7 billion in

pre-tax income.

Samsung Asset Management will not remain complacent with the current performance and

stance as the no.1 asset management company in Korea, but will aim higher to compete

in the pan-Asia and global market. We will pursue this mission with a great sense of pride

and responsibility as Korea’s leading asset manager. Hence, in order to enhance our global

competitiveness, we will enforce the following three management objectives.

Firstly, we will focus on developing products and services apt for the global market competition.

Samsung Asset Management currently retains a 24-hour global operation network. Our

headquarters is located in Seoul and the subsidiaries are present in Hong Kong, London and

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our research and investment capabilities under global equity, bonds and alternative investments.

At the same time, we will exert greater effort to develop products such as global asset allocation

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JOREDOO\�UHQRZQHG�DVVHW�PDQDJHPHQW�ÀUPV�WR�LQWURGXFH�LQQRYDWLYH�SURGXFWV�DQG�EHQFKPDUN�

their advanced investment know-hows.

In fact, we have already attained some positive outcome by working with Capital Group under the

area of TDF, and Dimensional Fund Advisors (DFA) under the area of new active funds advised

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with our partners worldwide to create the synergy of expanding investment opportunities and to

offer globally-competitive products.

Secondly, we will deliver pension funds and targeted solution products to bring prosperity to

post-retirement life.

In 2016, Samsung Asset Management introduced a new paradigm in the Korean asset

management industry by launching an innovative pension fund, Target Dated Funds (TDF). It was

part of our efforts to improve the quality of pension funds and develop innovative products that

help to secure a prosperous life for clients in their post-retirement years.

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market growth, which reached over KRW 1 trillion. Sales of our product, Samsung Korean TDF,

alone have accumulated around KRW 430 billion. TDF is a type of pension solution that focuses

on an investor's target retirement date and automatically distributes set investments under a

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goals. This product is ideal for those who are unfamiliar with managing pensions on their own.

We are also pushing ahead with development of ETF investment solution services that make the

most of our ETF capabilities.

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�*RDO�%DVHG�,QYHVWPHQW�6ROXWLRQ���ZKLFK�IDFLOLWDWHV�LQYHVWRUV�WR�WDLORU�WKHLU�LQYHVWPHQW�SODQV�

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cost, long-term investment, which we hope to provide investors with a favorable return.

Lastly, we will remain committed to promoting a sound investment culture by proactively

communicating with our clients.

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asset managers should provide guidance for appropriate investment practices at the industry

wide level. In line with this responsibility and our founding philosophy, we are promoting an

investor education campaign called ‘Winning Investments for All’.

‘Winning Investments for All’ does not seek short-term results nor does it favor thematic

investments. Instead, it aims to nurture an investment culture that supports individuals’

LQYHVWPHQW�JRDOV�FRQVLGHULQJ�WKHLU�ÀQDQFLDO�VWDWXV��2XU�FRPSDQ\�ÀUPO\�EHOLHYHV�WKDW�VRXQG�

investment principles can overcome investment risks, market volatilities and uncertainties via

SXUVXLQJ�LQYHVWPHQW�XQGHU�D�ORQJ�WHUP�KRUL]RQ��LQYHVWPHQW�XQGHU�JOREDOO\�GLYHUVLÀHG�DVVHWV��

investment considering an individual’s lifecycle and investment that requires low cost. To this

end, we are providing several services that facilitate our clients’ investment. As an example, we

established and continue to upgrade a sales support platform that helps Financial Advisors (FAs)

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Furthermore, we are providing investor-friendly fund marketing materials and investment reports.

Our in-house Investment Research Center provides regular education to investors and fund

distributors, in addition to executing and delivering those materials. Through our efforts, not

only do we want to promote our fund sales, but we hope to satisfy investors by answering their

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On behalf of all employees at Samsung Asset Management, I would like to say that we will do

our utmost to reach the set management goals for this year, and hopefully Samsung Asset

Management will be able to deliver outperforming results next year. We will continuously seek

every opportunity to grow our clients’ wealth, provide comfortable post-retirement life and

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along the way so that Samsung Asset Management, as the leading Korea’s most trusted asset

management, will make a further step towards becoming a truly global competitive asset

manager.

Thank you.

Youngmuk JeonCEO

SAMSUNG ASSET MANAGEMENT

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Dollar cost averaging is a method of investment that entails continuous and consistent investments in the market over the long term.

The graph below shows the actual results of investing KRW 100,000 every month into the KOSPI from 1980 to 2017. The cumulative investment principal amounts to rather a mere KRW 45.6 million, but the NAV at maturity is KRW 350 million, approximately 7.8 times the principal. Although the market continues to experience volatilities, one’s investment using this method over the long term will yield greater returns, under the assumption of eliminating irrational emotional decisions.

samsung asset management’s investment pHilosopHY

Winning investments for all

With the passage of time, the cost of goods rises and the value of money falls. Investments are no longer considered as a choice but a necessity.

In the US, inflation has pushed up prices 13-fold for over 90 years. However, if one invested in risk-free assets like Treasury bills, their original investment would have grown 21-fold. The same investment in under a risky asset such as a small cap index would have yielded returns of 16,743 times.

In Korea, the pension market is still dominated by bank deposits at 60% and funds only account for 16% of the total. However, the average return for products that are ‘principal guaranteed’, which are mostly invested in bank deposits, is just 3.54% (based on the most recent 8 years’ results), while funds, which do not guarantee principal, generate an average return of 5.58%.

※ Past results are for simple reference purposes only and do not guarantee future performance

•Source: Dimensional Fund Advisors, assuming investment of $1 in each asset in 1926 (Jan. 1926~Dec. 2015)

•�6RXUFH��6DPVXQJ�$VVHW�0DQDJHPHQW��%ORRPEHUJ��63�����-DQ����������a�'HF��������������������GD\V��7KH�63����comprised 90 stocks between 1926 and 1957.

06 07

1. why invest in funds?

Investment Returns of Risk-Free and Risky Assets (US)

Loss/Gain on Investment in KOSPI by Investment Period2. Principles for fund investment

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tDespite the growing size of the capital market, few individual investors have succeeded in accumulating their assets. After suffering losses, many come to view the equity and fund markets with skepticism. As Korea’s leading asset manager, Samsung Asset Management is determined to regain investors’ trust and advance the investment culture by guiding individual investors to succeed with our philosophy of ‘Winning Investments for All.’

100,000

10,000

1,000

100

1

0

1926 1936 1946 1956 1966 1976 1986 1996 2006 2015

$16,743US Small Cap Index

$5,386US Large Cap Index$132 86�*RYW�%RQGV�,QGH[

$2186�7UHDVXU\�%LOOV

$13Inflation

(frequency)

(%)

6,000

5,000

4,000

3,000

2,000

1,000

0

-7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7

Daily Return of S&P500

※ The gains posted above are pre-tax basis and based on past results and do not guarantee future performance.

•Source: Samsung Asset Management, KOSPI TR monthly data from 1980~2017

• 6RXUFH��6DPVXQJ�$VVHW�0DQDJHPHQW��%ORRPEHUJ��-DQ����������a�'HF������������PRQWKO\�LQYHVWPHQW�RI�KRW 100,000 on 1st of every month

100

80

60

40

20

0

-20

-40

-60

92.6

-50.9

14.7 10.6 9.5

49.6

-10.8

24.7

-4.5

16.8

0.0

12.6

2.2

12.2

4.2

1year 15year 5year 20year 10year 25year

8.0 8.6

(KRW 10,000)

Loss (%)

Gain (%)

1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2017

40,000

30,000

20,000

10,000

0

Average return 0.03%

Rise53.3%

Fall46.7%

•�6RXUFH��6DPVXQJ�$VVHW�0DQDJHPHQW��%ORRPEHUJ��KOSPI (Jan. 1, 1980~Dec. 31, 2017), 10,222 days

Daily Return of KOSPI

(frequency)

(%)

2,500

2,000

1,500

1,000

500

0-7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7

Average return 0.03%

Rise51.3%

Fall48.7%

Historical data shows that the probability of stock prices rising or falling was approximately even. This shows the limit of market timing which predicts tomorrow’s market prices. However, over the long term, the likelihood of losses decreases along with the volatility of stock prices.

,I�RQH�LQYHVWHG�LQ�WKH�63����IRU�ORQJHU�WKDQ�15 years, the chances of recording a loss is 0%, regardless of when the initial investment was undertaken. The Korean market is also similar in the sense that the longer the investment period, the lower the volatility and the chances of recording a loss. Investment into the KOSPI for over 15 years also shows the chance of recording a loss being 0%.

8.4

Cumulative investment principal

NAV

Investors participating in the fund market without a set of investment principles will only increase their chances of seeing a ‘failed investment’.

Dollar cost averagingWe begin by looking at the historical daily UHWXUQV�RI�WKH�63�����WKH�UHSUHVHQWDWLYH�stock index for dollar cost averaging in the US, and the KOSPI of Korea. As shown in the JUDSK�EHORZ��WKH�63����DGYDQFHG�������RI�the days during the analysis period and fell during the remaining 46.7%. For the KOSPI, higher finishes were recorded on 51.3% of the total days and lower closes were seen on the remaining 48.7%.

① Global diversificationThere are no assets that can consistently yield superior returns. However, diversifying investments across several assets can reduce the overall risk and volatility of one’s investment portfolio and deliver a stable rate of return. Furthermore, the introduction of various overseas assets can yield similar returns to those that invest only in Korean assets while also lowering volatility.

② Asset Management considering one’s lifecycle and diversified investmentLong term, diversified investment along with consideration for an individual’s lifecycle is essential for asset managers. Depending on an individual’s age and lifecycle, the assets each holds, the investment timeline (i.e. the timeline when one requires money) they seek are different. Moreover, asset allocation taking into account an individual’s investment preference over risky or risk-free assets along with their lifecycle must take place.

② ETF Portfolio RecommendationA diversified portfolio can be constructed by investing in a combination of recommended ETFs, per asset category, according to an individual’s investment preference.

③ Public Fund Portfolio Recommendation

① Smart Asset Management: 3-Part Portfolio According to an individual’s investment preference and financial situation, investments are made in selected funds under each of the following categories: equity, income, and bond. The portfolio is rebalanced at approximately 6-month intervals by selling assets that have appreciated in price WR�UHDOL]H�JDLQV�ZKLOH�EX\LQJ�DVVHWV�ZKRVH�SULFHV�KDYH�IDOOHQ�DW�ORZHU�FRVW��

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3. how to invest in funds

Portfolio 1 Diversification by Asset

Example of Asset Allocation

Portfolio 2 Diversification by Region

BM Weight Return Volatility

Equity Korea Equity 50%

4.8% 9.9%

%RQGV .RUHD�%RQGV 50%

BM Weight Return Volatility

EquityKorea Equity 25%

4.3% 7.7%.RUHD�%RQGV 25%

%RQGVKorea Equity 25%

.RUHD�%RQGV 25%

Portfolio 3 Diversification by Item

BM Weight Return Volatility

Equity

Korea Equity 10%

4.7% 6.8%

Global Equity 7.5%

US Equity 15%

Europe Equity 7.5%

Japan Equity 6%Emerging

Market Equity 4%

%RQGVKorea Equity 25%

Global Equity 25%

Portfolio 4 Including Real Assets

BM Weight Return Volatility

Equity

Korea Equity 10%

4.7% 6.5%

Global Equity 5%

US Equity 15%

Europe Equity 7%

Japan Equity 5%Emerging

Market Equity 3%

AI Commodities 5%

%RQGVKorea Equity 25%

Global Equity 25%

※ Past results are for simple reference purposes only and do not guarantee future performance •�6RXUFH��%ORRPEHUJ��6DPVXQJ�$VVHW�0DQDJHPHQW��-DQ�������a�-DQ��������DQQXDOL]HG�DYHUDJH�UHWXUQ�EDVHG�RQ�ZHHNO\�UHWXUQ�

calculated from pre-tax daily return and average volatility • %0�,QGH[��.RUHD�HTXLW\��.263,���*OREDO�HTXLW\��06&,$&:,���86�VWRFNV��63������(XURSHDQ�VWRFNV��06&,�(XURSH���-DSDQHVH�VWRFNV��723,;���(PHUJLQJ�PDUNHW�VWRFNV��06&,(0���.RUHD�%RQGV��.7%�,QGH[���*OREDO�ERQGV��-30�*OREDO�$JJUHJDWH�%RQG���&RPPRGLWLHV��63�*6&,�(TXDO�:HLJKW�6HOHFW�

•Source: Samsung Asset Management ※The above example should be used for reference only and may be subject to change.

(%) 100

90

80

70

60

50

40

30

20

10

0

35 30 25 20 15 10 5 5 10 15 20 25 30

Years before retirement

Asset Accumulation Asset Conversion Asset Recovery

Years after retirementRetirement

3:3:3 equal allocation

equity33%

Bond 33%

Income33%

Low-cost product (total fees 0.15%)

High-cost product (total fees 1.5%)

(%) 100

80

60

40

20

0

1year 5year 10year 20year 30year

4.22.81.40.70.1

(%) 100

80

60

40

20

0

35.1

25.0

13.4

6.9

1.4

■ Investor returns ■ Fee deductions

Goal: Preserve assets and increase incomeInvestment asset: Global sovereign bonds and corporate bondsBond

Goal: Increase and preserve income and assetsInvestment asset: Global equity and bondsHybrid

Goal: Increase assets and incomeInvestment asset: Global dividend equity

Dividend growth stock

Goal: Increase assetsInvestment asset: Global growth equity

Growth stock

3-Part Portfolio

40s~50s: Neutral

equity33%

Bond 33%

Income33%

20s~30s: Aggressive

equity50%

Bond 20%

Income30%

Over 60: Stable

Bond 50%

equity20%

Income30%

Asset Portfolio Recommendation by Age Group

As we have mentioned, dollar cost averaging, global diversification, lifecycle and low-cost investments represent our principle of ‘Winning Investments for All.’ Rather than short-term results or thematic investments, we aim to foster an investment culture that is customized to each client’s investment goals and financial situation. Samsung Asset Management’s flagship funds that embody the principle of ‘Winning Investments for All’ and enhancing the value of clients’ assets are outlined below.

samsung asset management fund portfolio recommendation

ModelETF

Portfolio

KODEX 20033%

KODEX KRW Cash

33%

KODEX��<�)�/.7%

33%

ModelFund

PortfolioSamsung

1HXEHUJHU�%HUPDQ�Short Duration

Emerging Market Plus

33%

Samsung Global Developed

Country 33%

Samsung Dividend Stock

Long-term

33%

③ Importance of low-cost investmentInvestors should consider the various related fees and costs when investing into funds.

A long-term investment in a fund that has relatively high costs may lead to overall investment results that may differ significantly from the expectation.

The chart below shows a difference of 12% in returns over a 10-year investment period, which grows to approximately 31% when the investment period is extended to 30 years.

1year 5year 10year 20year 30year

vision

investment pHilosopHY10 11

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tAs Korea’s representative asset management firm, Samsung Asset Management is boldly going forward to make the next leap into a truly global top-class asset manager. In the fast-changing financial environment, we will draw upon our scientific investment techniques, industry-leading personnel, systematic risk management and global marketing prowess to increase the value of client assets. Our aim is to always remain a step ahead with preemptive measures and ideas to answer clients’ expectations and trust with unrivalled products and services.

At Samsung Asset Management, each division follows sophisticated investment processes and scientific investment methods based on the findings of our industry-leading in-house research group. We also prioritize risk-prevention over profits to ensure professional, exceptional, and advanced investment practice. By faithfully adhering to our process, we hope to continue to yield stable excess returns for our clients and contribute to their prosperity.

① We always put our clients’ interests first.

② We satisfy client needs with the best possible products and services.

③ We view asset management as risk management.

④ We practice value-focused management and pursue management by principle.

⑤ We are an ethical company that commands respect from the public.

⑥ We do our best to secure and retain talented people.

⑦ We strengthen our competitiveness through outstanding infrastructure systems.

⑧ We value teamwork in all our activities.

사업원칙

Excellent track record• Samsung India Fund No. 3 (Launch Mar. 2010)

rate of return: 1 year 7.09%, 2 years 44.43%, since inception 123.78%• Samsung ASEAN Fund No. 2 (Launch Apr. 2007)

rate of return: 1 year 10.63%, 2 years 26.98%, since inception 200.19%• Samsung Korea TDF2045 (Launch Apr. 2016) rate

of return: 1 year 8.64%, 2 years 19.16%

※ As of end of April 2018

Differentiated investment system•Industry-leading in-house research•Team approach system• Advanced risk management and compliance

system• Risk management system covering pre, interim

and post stages of investment process

Korea’s largest AUM • Investments tailored to fund characteristics using

superior infrastructure and excellent track record

- Total AUM of over KRW 230 trillion - Lead manager of Pension Fund Investment Pool - Lead manager of Industrial Accident

Compensation Insurance Fund - KODEX ETF net assets exceeding KRW 20 trillion

Spearheading globalization

•Overseas ETF listing• Secured footing in global business hubs with

subsidiaries in Hong Kong, London and New York City• Established strategic ties with global asset PDQDJHUV�LQFO��&DSLWDO�*URXS��5RWKVFKLOG��&R���5HOLDQFH��DQG�&&%�3ULQFLSDO�$VVHW�0DQDJHPHQW• Secured investments from prominent overseas

sovereign wealth funds

global top-class asset Manager

differentiated asset

management

global expansion of business

platform

Samsung Asset Management will secure differentiated asset management competitiveness

in the Asian market, and through growth of local subsidiaries and overseas clientele, we will expand our business foundation overseas

and make the leap into a global top-class asset manager.

A team-based investment approach, backed by the industry’s best research

capabilitiesA bottom-up approach

seeking to generate excess returns

A corporate culture that puts risk management before profitability

A comprehensive risk management system, covering pre, interim, and post-

stages of the investment process.

exceptional Management

Investment process tailored to each asset

Industry-leading research infrastructure and

personnelA culture of prioritizing

risk-prevention over profitsrisk Management

team approach

An advanced investment decision-making process that combines the

competencies of specialists in various fields

value-oriented Investments

pursuing stable eXcess

returns on client assets

Samsung Asset Management has a

specialized investment management

process based on each department’s own

advanced investment process, methodical

investing rooted in the industry’s best in-

house research capabilities, and a culture

of risk prevention that prioritizes profits. By

drawing upon our differentiated

competencies, we will realize stable

excess returns for our clients and realize a

more prosperous future.

14 Investment Pool Operations

15 Industrial Accident Compensation Insurance

Fund Operations

16 Pension Fund Operations

17 Fixed-Income Investments

18 Passive Investments

19 ETF Solutions

20 Global Investments

21 Multi-Asset Solutions

22 Liability-Driven Investments

23 Alternative Investments

24 Investment Research Center

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OCIO conceptIndustrial Accident Compensation Insurance Fund (As of end of December 2017)

investment pooloperations

industrial accident compensation insurance fund operations

lead manager for Industrial accident compensation Insurance FundThe Industrial Accident Compensation Insurance (IACI) Fund was adopted by the Ministry of Employment and Labor in July �����WR�UHDOL]H�PRUH�HIILFLHQW�PDQDJHPHQW�of fund assets and enhanced returns as well as improved asset management expertise.

Samsung Asset Management was selected as the lead manager to manage the IACI Fund’s surplus assets and provide consulting services.

We manage the assets based on a strict and thorough understanding of the IACI Fund, which is a valuable source of income for workers, in order to maintain and safely preserve the fund.

With over 15 years of unrivalled experience and know-how in fund of funds, verified infrastructure and talented professionals, we carry out the comprehensive role of the outsourced chief investment officer (OCIO).

Not only have we been entrusted with the management of a KRW 17 trillion fund, we conduct a wide-ranging analysis of the Fund’s assets and liabilities. Having established a mid- to long-term asset allocation plan, we are diversifying investments and pursuing systematic investment processes and risk management so that we can provide optimal asset management solutions.

We will keep improving investment systems to ensure the Fund continues to fulfill its mission efficiently and seek out optimal strategies for the growth of the OCIO business.

14 15

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Equity28.2%

Overseas Equity5.7%

Alternative Investment 8.8%

Short-term Funds 4.1%

Fixed Income 53.2%

FiduciaryManager

Investment advice

Investment execution

+

+

OCIO ≧

Industrial Accident Compensation Insurance Fund Operations

Strengthentactical

asset

Diversifyportfolio

Risk Dispersal

Expandalternative investment

Investment Pool Operations

investmentmanager

Increase returns on government pension pool

Contribute to advancing

domestic financial market

Achieve long-term stability

of Investment Pool

solutionprovider

Enhance asset management

expertise

fiduciarY

Investment Pool AUM (as of end of 2017) (unit: KRW 100 million)

Equity2.4% MMF

11.5%

Fixed Income41.3%115,568

AUM

■ MMF

■ Hybrid

■ Fixed Income

■ Equity

Re-selected as the lead manager

5consecutive terms

*Selections made every 4 years

lead Manager for Pension Fund Investment PoolThe Pension Fund Investment Pool was adopted by the Ministry of Strategy and Finance in December 2001 to promote higher investment yields, transparency, and expertise in the management of pension IXQGV�DQG�RWKHU�SXEOLF�RUJDQL]DWLRQV·�DVVHWV��Samsung Asset Management has been selected as the lead manager for five consecutive terms since the practice was implemented.

We currently manage the capital entrusted to us by some 60 different pension funds in the form of fund of funds, manage risks through performance analysis and monitoring, and offer comprehensive consulting services on asset management systems.

We will contribute to advancing Korea’s Pension Fund Investment Pool based on pension management systems exclusive to Samsung Asset Management which reflect over 16 years of experience and know-how in managing the investment pool. We will enhance consulting services based on years of acquired insight and pursue diversification through new overseas and alternative investment products.

We seek to provide the most favorable investment solutions for the whole fund portfolio through the adoption of advanced investment techniques and optimal consulting services, and will contribute to promoting integrated management of surplus assets.

2017

2001

2005

2009

2013

Hybrid 44.8%

* OCIO (Outsourced Chief Investment Officer) model

OCIO moves beyond the past outsourcing patterns of the past which only involved investment advice or execution. It entails the provision of professional services in good faith on behalf of internal personnel across the entire investment process and sound governance, including asset allocation, selection/supervision of managers, execution of investments, performance evaluation, and investment strategies that incorporate the results of the evaluations.

fiXed-income investments

auM growth on outstanding services and client diversificationWe build a differentiated portfolio based on not only macroeconomic indicators like economic and interest rate forecasts but in-depth research including analysis of relative industry and credit values, which enables us to meet the needs of the client’s risk profile.

In 2017, due to the market-wide cash outflow from fixed-income funds, our AUM from publicly offered funds and short-term MMFs decreased slightly to KRW 18 trillion, down KRW 1.4 trillion from 2016 (end of year basis, excluding affiliates’ advisory/discretionary assets). However, we increased institutional discretionary AUM by KRW 1.2 trillion based on our track record of superior performance despite the unfavorable conditions created by a hike in global interest rates. Furthermore, to meet the needs of investors while interest rates are ascending, we introduced an absolute return fund (ARF) that established itself as one of our division’s key products by reaching KRW 400 billion in AUM within eight months.

%DVHG�RQ�RXU�GLVFUHWLRQDU\�DGYLVRU\�NQRZ�how, we will maintain our first place position in the discretionary market (market share of 45%) in addition to satisfying needs in terms of performance. We will also adopt a factor- and rule-based model paradigm to absorb clients seeking quantifiable investments, and in doing so, continue growing through innovation.

Investment Philosophy

Research-based approach Achieving excess returns

Pioneering market change Strict specialization of functions

Provide clients with steady returns that exceed the benchmark Secure differentiated advantage over competition among

advanced asset management companies to lead the market

Securing a competitive edge and pioneering change in the fixed-income market

Pension Fund Division’s AUM (As of end of March 2018)

FLAGSHIP PRODUCT

Samsung Korea RIF Series

Korea’s first withdrawal-type solution aimed at providing regular cash flow and securing ending wealth

���(QKDQFH�HQGLQJ�ZHDOWK���PDLQWDLQ�HQGLQJ�wealth as much as possible to guard against long-term risks

���*HQHUDWH�VWHDG\�FDVK�LQFRPH���VHFXUH�LQFRPH�source that can be used like salary after retirement

���0DQDJH�ULVN�YRODWLOLW\���ULVN�PDQDJHPHQW�YLD�global bond diversification and rebalancing

���6HFXUH�OLTXLGLW\���RSWLRQ�IRU�VXGGHQ�ZLWKGUDZDO�of large sums for weddings, medical costs, etc.

Samsung DB Integrated Solution

6ROXWLRQ�RSWLPL]HG�IRU�PDQDJHPHQW�RI�FRUSRUDWH�'%�SHQVLRQ�IXQG�UHVHUYHV

���3UHGLFW�IXWXUH�OLDELOLWLHV�E\�DQDO\]LQJ�IDFWRUV�that affect corporate retirement liabilities and providing corresponding strategies

���$LP�IRU�PLG��WR�ORQJ�WHUP�VROXWLRQV�WKURXJK�periodic analysis and rebalancing

pension fund operations

comprehensive pension solutions rooted in professionalismAt the Pension Fund Operations Division, we KHOS�WR�VHFXUH�SHQVLRQ�DVVHWV�E\�DQDO\]LQJ�investment needs in the corporate pension and private pension markets and developing VROXWLRQV�FXVWRPL]HG�IRU�FOLHQWV�

In April 2016, we launched the Korean Target Date Fund (TDF) series in strategic partnership with the Capital Group of the United States. TDF satisfies the three requirements of pension investments: long-term investing, diversification, and clients’ lifecycle. With TDF, we reached a milestone in domestic pension investment by successfully promoting new products with differentiated marketing strategies.

In 2018, we developed a Retirement Income Fund (RIF) to provide solutions for retirees making withdrawals from their retirement savings. RIF was designed to provide a

regular cash flow after retirement and counter the increasingly significant longevity risk by allowing clients to leave a portion of the assets past the scheduled withdrawal period.

Going forward, our goal is to manage FRUSRUDWH�GHILQHG�EHQHILWV��'%��SHQVLRQ�reserves. We have already begun a FXVWRPL]HG�'%�SHQVLRQ�IXQG�EXVLQHVV�ZLWK�the real world application of strategies and SRUWIROLRV�VXLWDEOH�IRU�WKH�PDQDJHPHQW�RI�'%�pension reserves.

Hope for the future gives us the strength to endure the present. Pensions are not simply a financial product but a reliable foundation for life after retirement. We seek to help Korea overcome the risks of low interest rates and an aging population with comprehensive pension solutions based on our deep understanding of the pension market and professional expertise.

2016.10 2016. 12 2017.2 2017. 4 2017. 6 2017. 8 2017. 10 2017. 12 2018.2 2018.4

5,000

4,000

3,000

2,000

1,000

0

2,912

2,345

1,972

1,5431,179

724629531

Source: FnGuide (based on figures at end of each month)

TDF AUM Growth (unit: KRW 100 million)

16 17

3,7404,297

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Corporate Pension Private Pension

KRW2.3trillion KRW8.9trillion

Unrivalled Leader in the Domestic TDF Market

Company AUM 2018 IncreaseSamsung Asset Management 4,057 +1,124

A Asset Management 2,197 +519

%�$VVHW�Management 1,640 +414

C Asset Management 746 +120

D Asset Management 296 +10

(As of March 30, 2018, unit: KRW 100 million)

Fixed-Income Investment Division’s AUM

KRW18trillion

Samsung Korean TDF Series (launched April 2016)

��'HYHORSPHQW�RI�JOREDO�DOORFDWLRQ�SRUWIROLR�RSWLPL]HG�IRU�OLIHF\FOH�LQYHVWPHQW

��)HDWXULQJ�UHEDODQFLQJ�IXQFWLRQ�WKDW�automatically reduces the weight of risky assets as target date approaches

��$80�UHDFKHG�.5:�����ELOOLRQ�LQ���\HDU�DQG��9 months after release and KRW 400 billion in 2 years and 1 month

18 19

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tMarket leader and the best etF solutions provider in KoreaThe ETF Solutions Division oversees the development and marketing of ETF products, the creation and implementation of strategies XWLOL]LQJ�(7)V��DQG�WKH�GHYHORSPHQW�RI�ZHDOWK�PDQDJHPHQW�VROXWLRQV��%DVHG�RQ�WKH�(7)�know-how we have accumulated through years of experience in the domestic market, we are expanding our ETF business into Hong Kong, China, and other overseas markets.

Samsung Asset Management has been at the forefront of progress in the domestic ETF market with innovative products since the listing of KODEX 200, Korea’s first ETF in 2002. We then launched the first Korean overseas ETF in 2007 and the first Korean IL[HG�LQFRPH�(7)�LQ�������%HWZHHQ������

and 2010, we launched Asia’s first inverse and leverage ETFs to establish our presence as a pioneering ETF operator not only in Korea but in Asia. Furthermore, we recently developed factor-based smart beta ETF as a new growth engine.

The ETF Solutions Division quickly expanded its lineup of factor-based smart beta ETFs, refuting the idea of ETFs as a traditionally passive investment method and attesting to their inexhaustible potential.

As in advanced overseas markets, the financial market in Korea has recently seen the establishment of ETF managed portfolios (EMP) as an important axis in asset allocation. In response, we are devoting the best expertise Korea has to offer as well as

ceaseless research to the development and implementation of EMP strategies. We continuously seek innovative use of ETFs to provide wealth management solutions and FXVWRPL]HG�VROXWLRQV�WKDW�FRQVLGHUV�WKH�lifecycle and investment purposes.

We will carry out innovative investor training and marketing activities to broaden the base of ETF investors and solidify our position as a pioneer in the domestic ETF market. We will also go beyond the domestic market to raise KODEX ETFs’ standing and trustworthiness in the overseas market.

etfsolutions

KODEX ETF Total Net Assets by Type (As of April 2018) (unit: KRW 100 million) KODEX ETF Products by Type (As of April 2018) (unit: no. of products)

■ Domestic - Market Index

■ Domestic - Leverage/Inverse

■ Domestic - Sector, Theme

■�'RPHVWLF���6PDUW�%HWD��6WUDWHJLHV

■ Domestic Fixed Income

■ Foreign Equity

■ Hybrid

■ Commodity and Currency

■ Domestic - Market Index

■ Domestic - Leverage/Inverse

■ Domestic - Sector, Theme

■ Domestic - Smart beta, strategies

■ Domestic Fixed Income

■ Foreign Equity

■ Hybrid

■ Commodity and Currency

49,509 25%

17,7769%

31,66116%

88,841 44%

18

148

20

12

115

2

5,2523%

3,963 2%

292 0%

2,4531%

KODEX HISTORY

passive investments

Practing the philosophy of index investmentAs the industry’s top specialist in passive investment, our Passive Investment Division manages index funds and exchange-traded funds (ETFs) investing in both domestic and JOREDO�LQGLFHV��:H�UHDOL]H�RXU�LQYHVWPHQW�philosophy by operating on a system based not on fund managers’ personal intuition or experience, but on a scientific quant-based DSSURDFK�DQG�E\�XWLOL]LQJ�DQ�DGYDQFHG�investment decision-making process grounded in a team-based approach.

Since being the first in Korea to adopt ETFs in 2002, we have introduced innovative products each year to lead the market. As a pioneer in the domestic ETF market, we continue to carry out diverse investor training and marketing activities to broaden the base of ETF investors.

We launched KODEX China H, Korea’s first overseas ETF, in 2007 followed by KODEX Samsung *URXS��WKH�(7)�EDVHG�RQ�D�WKHPH�UDWKHU�WKDQ�D�PDUNHW�LQGH[�LQ�������%HWZHHQ������DQG�������ZH�RSHQHG�XS�KRUL]RQV�IRU�WKH�(7)�PDUNHW�ZLWK�WKH�ODXQFK�RI�$VLD·V�ILUVW���[�LQYHUVH�(7)��7KH�QHW�assets for ETFs reached KRW 10 trillion in 2014 and passed the KRW 15 trillion mark in 2017 on the fifteenth anniversary of KODEX ETF. As of early 2018, net assets have reached KRW 20 trillion while we continue to achieve quantitative and qualitative growth.

• Listing of KODEX 200, first ETF in Korea, setting the foundation for the domestic ETF market

• Listing of KODEX Samsung Group, first theme-based ETF in Korea

⇀ Proved ETF based on theme not market index could succeed, paving the way for diversified product lineup in Korea’s ETF market

• Listing of KODEX Inverse, Asia’s first -1x inverse ETF and KODEX Leverage, Asia’s first 2x leverage ETF

⇀ 2SHQHG�XS�QHZ�KRUL]RQV�IRU�.RUHDQ�ETF market and inspired greater awareness of ETFs’ varied utility

• Listing of KODEX KOSDAQ 150, KODEX KOSDAQ 150 Leverage, and KODEX KOSDAQ150 Inverse ETFs, contributing WR�WKH�SRSXODUL]DWLRQ�RI�.26'$4�investment• Listing of KODEX KOSPI and KODEX MSCI

Word (2 types), Korea’s first broad market index products

• Total net assets reach KRW 20 trillion

2002

2008

20102009

20162015

• Listing of KODEX China H, Korea’s first overseas ETF following Honk Kong’s +6%&�LQGH[

• Listing of first fixed-income ETF in Korea

• Diversification to products such as overseas sector ETFs and leveraged overseas stock ETFs based on adoption and development of diverse investment methods

• KODEX net assets reach KRW 15 trillion• Expansion of factor-based smart beta

ETF lineup, completion of ETF wealth management platform, • Listing of KODEX 200 TR, KODEX MSCI

Korea TR (2 types), Korea’s first total return equity products•�/LVWLQJ�RI�.2'(;�$FWLYH�%RQG��WKH�ILUVW�

Korean ETF tracking the KAP Korea 7RWDO�0DUNHW�%RQG�,QGH[

2007

2009

2014

20182017

ETF

No. of Products

Net Assets

90Index Funds

71ETF

KRW20.5trillion

Index Funds

KRW7.3trillion

Passive Investment Division’s Key AUM (As of end of March 2018)

TotalKRW 20trillion

Total 90

%DVHG�RQ�GRPHVWLF�OLVWLQJV

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generating stable excess returns through overseas investment The Global Investment Division is comprised of Global Equity Investment Team, Global Fixed Income Investment Team, and Global Marketing Team.

As investment targets expanded to cover global assets, the Global Equity Investment Team has been developing global equity investment products to meet various investors’ needs. Close cooperation with SAM HK has allowed us to gain a competitive edge in Asia and contributed to growing AUM in Korea as well as in Europe and the US.

Meanwhile, we are working with leading global partners to build a lineup of differentiated fund offerings that include high-yield, small- and mid- cap funds that target the advanced markets such as US, Europe, and Japan. In addition, we are

responding effectively to changing market trends by launching theme-based funds. Going forward, we will continue to strengthen organic management capabilities of our Asian funds, solidify partnerships with global asset managers, and offer more diverse products that meet the market needs.

The Global Fixed Income Investment Team is investing in overseas bonds to improve portfolio stability and returns, and reduce volatility. From government bonds of both advanced and emerging economies to investment grade bonds, the team is building a diversified portfolio by incorporating bonds of various countries, industries and sectors.

The team will continue to work closely with global asset managers to expand the fund line-up and generate stable excess returns for domestic investors.

The Global Marketing Team’s main work involves establishing marketing strategies and conducting relevant activities for major institutional investors including sovereign wealth funds to secure inbound investment from overseas.

In collaboration with the overseas partner DQG�E\�XWLOL]LQJ�WKH�ILUP·V�$6($1�LQYHVWPHQW�strategy, the team was able to launch a public fund in Europe for the first time. Since then, Samsung Asset Management built a foundation for increasing overseas AUM and the inbound business. The team plans to launch more local funds abroad and continues to secure commitments for existing funds to expand inbound AUM and diversify the overseas client base.

evolving and innovating for clients, answering to investor needs The Multi-Asset Solution (MAS) Division is a VROXWLRQ�IRFXVHG�RUJDQL]DWLRQ�WKDW�LGHQWLILHV�and caters to emerging needs of investors. Currently, it is actively pursuing the emerging global asset allocation business as a new growth engine.

8WLOL]LQJ�VRSKLVWLFDWHG�ILQDQFLDO�SURGXFWV�OLNH�ETFs and hedge funds as well as offshore funds with concentrated resources of global investment powerhouses, the Division has the capability and system to offer innovative investment solutions.

In-depth analysis of a client’s risk profile and financial goals allows the team to provide the most appropriate and compatible combination of investment methods and strategies. Managing funds for global asset allocation for individual clients as well as many institutional investors, the MAS Division is building credibility. In addition, it manages the Target Date Fund, a core investment solution for retirement pension funds, and operates a fund platform system that DQDO\]HV�DQG�HYDOXDWHV�(7)V�DQG�JOREDO�

funds in order to offer the best financial products to clients.

The MAS Division has been responding to demand for low-cost global investments from long-term institutional investors like pension funds and insurance firms through stable management of Fund of ETF portfolio.

%\�PDQDJLQJ�IXQG�RI�IXQGV�WKDW�FRYHUV�D�variety of assets like hedge funds and active equity funds, we are able to offer global asset allocation solutions for individual investors as well as institutional clients. For the past two years, the Division has evaluated more than 230,000 global funds through its fund platform.

Quantitative evaluation coupled with qualitative evaluation by overseas subsidiaries has helped us to expand the global fund universe. For the OCIO business, currently limited to management of absolute return discretionary assets for insurance and securities firms, the Division plans to gradually grow its client base to include non-financial companies such as manufacturers and offer comprehensive solutions, from

DQDO\]LQJ�FOLHQW·V�OLDELOLWLHV�DQG�LQYHVWPHQW�goals to making final investments.

Through continued IT upgrades and investment solution offerings, the Division aims to become a trustworthy manager and innovative leader that protects the core principles of diversified and long-term investing and generates stable excess returns for clients.

Investment Philosophy

Samsung ASEAN

Samsung Mainland China Small-Mid Cap FOCUS

Samsung India

Samsung Japan Small-Mid Cap FOCUS

Samsung US Core Bond

Samsung Neuberger Berman Emerging Short Term Bond

KEY PRODUCTS

global investments

Offer investment solutions One-stop service

Overseas investment

Generate stable excess returns through overseas investment

Expand investment opportunity

Improve investment efficiency

Pursue excess returns

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%XLOG�RSWLPDO�SRUWIROLR�by pooling company and

team resources

Put emphasis on qualitative and quantitative research E\�LPSOHPHQWLQJ�V\VWHPL]HG�

process

0LQLPL]H�PDUNHW�DQG�investment risks

by carrying out rigorous risk management

Team Approach Systematic Investment Total Risk Management

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multi-asset solutions

Multi-Asset Solution Division Organizational Chart

Asset Allocation Team

Offers medium risk/medium return XWLOL]LQJ�GRPHVWLF�DQG�JOREDO�(7)V�IRU�

multi-asset allocation.Provides stable excess returns beyond a preselected benchmark with investment portfolio allocation across various assets.

Fund Strategy Team

Verifies stability and performance sustainability based on quantitative

and qualitative fund research on active index funds and pursues stable excess

returns through fund allocation.

Pension Management Team

Offers optimal asset allocation VROXWLRQV�E\�XWLOL]LQJ�GRPHVWLF�DQG�global assets, taking into account client needs through analysis of a FRPSDQ\·V�'%�SHQVLRQ�OLDELOLWLHV���

· · ·

Producing long-term stable excess returns based on clear knowledge of liability features 1HZO\�RUJDQL]HG�LQ�-DQXDU\�������WKH�Liability-Driven Investment (LDI) Division manages KRW 118 trillion in assets of general and retirement accounts of Samsung Life Insurance as of the end of 2017.

Under the asset-liability matching strategy that takes into account liability characteristics of the life insurer, the LDI Division is working to implement strategic asset allocation from a long-term perspective and build the basis for stable returns by securing high-yield healthy assets. On account of the long-term liabilities of the life insurance industry, much of the investments are in domestic bonds, and investments are simultaneously made in domestic and global equities and overseas bonds to enhance the rate of return.

Meanwhile, The FX Strategy Team was newly

established to implement FX hedge strategy, creating a more professional and efficient overseas investment environment.

Moving forward, the LDI Division will build its reputation as a LDI specialist by further strengthening its insurance asset management capability while tapping into the aging and retirement markets.

ldI domestic Fixed-Income team The team is pursuing stable cash flows and returns by investing in long-term healthy bonds based on the ALM principle that is in line with the characteristics of the liabilities.

ldI overseas Fixed-Income team With the goal to produce excess returns vs. domestic bonds, the team is investing in Korean papers and in sovereign bonds issued by developed countries in Europe and the US in addition to expanding its regional portfolio to include Asian and South American countries.

ldI equity team The Equity Team is diversifying investments in domestic and overseas stock markets (public offering funds, ETFs, etc.) and contributes to improving returns through appropriate risk management combined with diverse investment styles.

ldI FX strategy team On top of responding to changes in the FX market through derivatives products like currency swap, the team is managing exchange risk through FX hedge strategy.

LDI Process

Infrastructure Team

Weighting of LDI Division Assets

PE Team

liabilitY-driven investments

utilizing market network and experience for selective investment in alternative assetsThe Alternative Investment (AI) Division offers investors various alternative investment opportunities through its Infrastructure Team and the Private Equity (PE) Team. It provides hard-to-access profitable AI opportunities to domestic investors and carries out in-depth analysis to select investment targets that can consistently generate higher returns than traditional assets.

As of the end of 2017, the AI Division recorded KRW 2.1683 trillion in AUM, up by KRW 691.3 billion from the previous year. It is managing alternative investment funds of GLYHUVH�DUHDV�VXFK�DV�GRPHVWLF�%7/��JOREDO�renewable energy, aircraft and ship financing, overseas PE blind funds, and domestic and international infrastructure projects, and real assets. It is now focusing on securing new overseas alternative investment assets to satisfy domestic investor needs.

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alternative investments

Global Renewable Energy (Solar Power, Biomass) Fund

���$�.RUHDQ�ZRQ�GHQRPLQDWHG�IXQG�LQYHVWLQJ�LQ�senior debt of solar power generation and biomass power generation projects in the UK and Japan

Long-term stable investment returns are expected from Japan and UK, advanced countries with a proven track record of success in managing solar power projects and where renewable energy receives stable government support. The Infrastructure Team plans to explore additional investment RSSRUWXQLWLHV�E\�XWLOL]LQJ�LWV�QHWZRUN�DQG�knowhow in global renewable energy fund management.

Signature Fund - Samsung Global PE Manager Fund #1

���7KH�ILUVW�.RUHDQ�ZRQ�GHQRPLQDWHG�EOLQG�IXQG�of funds investing in global PE funds

7KH�IXQG�IRFXVHV�RQ�EX\RXW�DQG�PH]]DQLQH�strategies with excellent long-term track records in the developed markets such as US and Europe. The fund also plans to invest in the secondary and special situation strategies by taking into account investing opportunities in the market. Samsung Asset Management, as a GP of the fund, is investing KRW 5 billion of its capital in the fund in order to align its interests with investors.

SIGNATURE FUND

The Infrastructure Team draws on its overseas network and investment experience to invest in advanced countries’ infrastructure projects and to aggressively pursue opportunities in emerging markets through hedging. It will also continue to seek investment opportunities in real assets such as ships and aircraft.

Harnessing the global network and investment experience of Samsung Life Insurance, the PE Team invests in private equities through fund of funds. The team also plans to provide new investment opportunities in connection with the fund of funds as well as overseas corporate loans and leveraged buyouts.

(Unit: KRW 100 million) (Unit: KRW 100 million)■ Domestic Infrastructure■ Overseas Infrastructure■ Real Assets ■ Other

■ Fund of funds ■�%OLQG�)XQG■ Life Insurance

discretionary assets

Samsung Asset Management LDI

Conduct discretionary/ advisory investment

(target selection, market timing, risk management)

Overseas bonds 10.6%

Stocks 1.6%

Domestic bonds 87.8%

16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

14,867 6,716

5,238

6,342

745

2,899

2017 20172016 20162015 20152014 2014

Investment in healthy assets centering on long-term bonds based on ALM principle

%XLOG�JOREDO�portfolio to generate excess returns vs. won-denominated bonds

Diversify investment in GRPHVWLF��overseas stocks and enhance returns

Implement overseas investment-related FX hedge strategy

LDI Domestic

Fixed-Income Team

LDI Overseas

Fixed-Income Team

LDI Equity Team

LDI FX Strategy

Team

$QDO\]H�OLDELOLW\�IHDWXUHV�Formulate asset

allocation strategy

Samsung Life Insurance

9,7453,749

LDI Division AUM

(Unit: KRW trillion)

130

125

120

115

110

105

100

118.5

113.3

111.2

2018(계획)201720162015

123.3

investmentresearcH center

Investment Research Process

Macro projection

Asset projection

Asset allocation/Model portfolio

Investment vehicle selection/ &XVWRPL]HG�SRUWIROLR

Performance analysis/Rebalancing

Investor training /Communication

Playing a central role in asset allocation and solution business The Investment Research Center was established in 2017 to strengthen the research function that provides in-depth analysis of economic and financial markets. ,WV�JRDO�LV�DOVR�WR�RIIHU�V\VWHPL]HG�LQYHVWRU�training to raise clients’ understanding of product management strategies.

The center is comprised of four teams – Macro, Investment Strategy, Investment Training and Information Planning. It plays a central role in companywide asset allocation and solution business.

Using comprehensive database to apply academic findings to actual investment strategy, the Investment Strategy Team continuously conducts verification and validation to come up with optimal methods to put theory into practice. The Investment Training Team trains both employees and investors on how to use products to achieve the principles of correct investment.

Investment Strategy Team/ Investment Training Team

The Macro Team provides optimal asset allocation strategies on the back of top-down financial market analysis and modern portfolio theory.

Macro Team

Set long-term view, propose big trend

��6HW�PLG��WR�ORQJ�WHUP�JOREDO�macro house view

��3URSRVH�DVVHW�SURMHFWLRQV�DQG�big trends in investment

��3URSRVH�GLUHFWLRQV�LQ�HVWDEOLVKLQJ�product development strategy

��3UHVHQW�VRSKLVWLFDWHG�DVVHW�allocation strategy that take into account diverse variables

��([SDQG�UHVHDUFK�VFRSH�IURP�Korea and G2 centered analysis to cover emerging markets

���$QDO\]H�LQYHVWPHQW�HQYLURQPHQW�per country and region

Expand asset class for macro analysis

Present cross asset projection Reinforce collaboration with companywide organization

24

Proactively accept

feedback

Investment training

Conduct research and develop

verified model Establish unified

message for clients

steP1 steP2 steP3 steP4

Continued quality

improvements

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26 Samsung Active Asset Management

27 Samsung Hedge Asset Management

28 Overseas subsidiaries

(Hong Kong, New York and London)

samsung active asset management

Implementing management principles based on firm risk management system and close alliance between the research and management departments, Samsung Active Asset Management will strive to create differentiated values, improve overall management processes, and reinforce synergy between research and management. Ultimately, Samsung Active Asset 0DQDJHPHQW�ZLOO�PD[LPL]H�LWV�DGYDQWDJHV�DV�an active investment-focused specialist to achieve excellent long-term performance and become a reliable partner for its clients.

growth equity InvestmentFund managers of the Growth Equity Investment Division manage funds that match their investment preferences and VWUHQJWKV��%\�SHUIRUPLQJ�LQ�GHSWK�DQDO\VHV�RI�information acquired through company visits on-site, fund managers focus on the business competitiveness of the investment target and invest in future values of their investment targets by evaluating changes of the world rather than those of the stock markets. The Growth Equity Investment Division also

pursues returns on investments through risk management.

Samsung Active Asset Management will endeavor to implement various strategies that cater to the different needs of clients in line with its investment principles.

value equity Investment The Value Equity Investment Division SULRULWL]HV�‘value investment’ and finds ‘companies with steady growth in cash flow’ to purchase at ‘reasonable prices’ and hold them long-term. The Value Equity Investment Division demonstrates stable long-term profitability through implementation of its strong investment philosophy of refusing to invest in temporarily popular trends of stock market by thoroughly verifying the risks rather WKDQ�SURILWDELOLW\�WR�PLQLPL]H�WKH�ORVVHV��

Samsung Hedge Asset Management has a variety of strategies including equity long-short and relative value strategies and manages absolute-income funds in pursuit of medium absolute returns against medium level of risk. Samsung Hedge Asset Management also strives to achieve absolute profits based on thorough risk management.

Samsung Hedge Asset Management has yielded long-term track records of absolute returns since 2009 in addition to having developed various strategies to achieve stable returns while lowering volatility. Furthermore, the best fund managers in each sector of macro, quant, long-short and hedge of hedge funds have been increasing client asset values through accumulated know-hows and thorough investment strategies.

samsung Hedge asset management26 27

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tPrioritize distinguished long-term performance and client partnership

samsung active asset Management was incorporated in 2017 by samsung asset Management with the top priority in “promoting distinguished long-term performance” and “building partnerships with its clients.”

leading company in the Korean hedge fund market

samsung hedge asset Management was incorporated in 2017 by samsung asset Management with its expertise in outstanding risk management and profitability preservation know-how.

seok YunSamsung Active Asset Management Co., Ltd.Chief Executive Officer

Yoon-Ho Heo Samsung Hedge Asset Management Co., Ltd.Chief Executive Officer

Investment Philosophy

To improve is to change, to pursue absolute returns

think with Balanced viewpoint

respond Flexibly

Balanced Thinking

Flexible Logic

Independent and inverse

thinking

Risk management

take one-step ahead

Leadership

think differently

Creativity

OVERSEAS SUBSIDIARIES(Hong Kong, New York and London)

Samsung Asset Management (New York), Inc.

As a step to its global expansion, Samsung Asset Management acquired Samsung Life Investment America headquartered in the center of global finance – Manhattan, New York – from Samsung Life in February 2015 and renamed Samsung Asset Management New York Inc. (“SAM NY”).

Established in 1994 as a local subsidiary of Samsung Life Insurance, SAM NY has been investing in equities and bonds in the local market as well as conducting market research as a listed company on the U.S. Securities and Exchange Commission. The Acquisition of SAM NY marked a significant step in attempts of Samsung Asset Management to complete a round-the-clock global trading platform covering all time ]RQHV�

As of the end of 2016, SAM NY has had USD 2.2 billion in AUM on consignment. SAM NY has been striving to enhance the investment returns not only by establishing optimal investment portfolios based on in-depth

analyses of the U.S. macro economy and industrial and corporate fundamentals, but also through strict risk management, such as expanding its investment markets including Canada.

8WLOL]LQJ�LWV�JHRJUDSKLF�DGYDQWDJH�RI�LWV�strategic location in the center of global finance, SAM NY will continue its endeavors WR�PD[LPL]H�VKDUHKROGHU�DQG�FXVWRPHU�values by taking proactive measures to changes in global financial conditions and investment and management trends.

Samsung Asset Management (London) Ltd.

Established as the first overseas asset management subsidiary of Samsung Life Insurance in April 1991, Samsung Asset Management (London) Ltd. (“SAM London”) was acquired by Samsung Asset Management in December 2015, completing SAM Korea's global asset management infrastructure. SAM London has been focusing on strengthening its investment management and research capabilities in its

effort to contribute to foreign financial asset management for the domestic individual and institutional investors.

In May 2016, SAM London launched the Samsung European Value and Dividend (TXLW\�)XQG�WKDW�SULRULWL]HV�VWDEOH�UHWXUQV�based on the advisory services provided by EDR(Edmond de Rothschild) Group. SAM London recently has been expanding its scope of work with licenses from the UK regulator as an Alternative Investment Fund Manager (AIFM) in order to better search and introduce exceptional European fund products to the domestic investors.

As the only Korean asset management company with regulated operation based in Europe, SAM London will continue to strive to satisfy foreign investment needs of its clients.

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Samsung Asset Management (Hong Kong) Limited

Established in November 2007, Samsung Asset Management (Hong Kong) Limited (“SAM HK”) has become the center of global fund management with its main focus on Asian market including mainland China, Greater China, Southeast Asia, and India. SAM HK fortified its market leadership in China with Korea’s first mainland Chinese small and mid-cap fund which showed successful performance. After the set-up of the Quant Investment Team in 2014 and introduction of the first quant model-based Asian equity long-short fund to expand its product lineups, SAM HK also launched its first Cayman hedge fund in January 2016.

Furthermore SAM HK solidified ETF business E\�OLVWLQJ�IRXU�QHZ�+6,�DQG�+6&(,�/,�(7)�products on the Hong Kong Exchanges in March 2017. SAM HK was the first mover to introduce leverage/inverse ETFs in Hong Kong market, and now it manages a total of 11 ETF products listed on the Hong Kong ([FKDQJHV��%\�6HSWHPEHU�������6$0�+.�

also established an asset management DGYLVRU\�ILUP�LQ�%HLMLQJ�WR�SURPRWH�D�V\QHUJ\�effect in mainland China market.

SAM HK has also steadily expanded its AUM and sales by having its independent local operation for various funds product line-ups of Asian ex-Japan market including mainland China, Greater China, ASEAN countries and showing excellent track records. As of the end RI�������WKH�$80�VL]H�RI�6$0�+.�LV�RYHU�.5:�2 trillion.

SAM HK plans to strengthen local marketing functions in continuing its endeavors to strengthen management capabilities of domestic funds on consignment and actively engage in local-to-local business, of which fund is raised and managed locally overseas.

SAM HK plans to actively engage in local-to-local business by enhancing its marketing ability and to strengthen its product line-ups to become one of the representative Asia fund management company.

HonG konG

new york

lonDon

Hong kong

new York

london

“Samsung Asset Management is

determined to achieve sustainable long-

term growth through ethical, transparent

and socially responsible management

practices.”

Samsung Asset Management is dedicated

not only to its inherent duty of protecting

and generating profits from client assets,

but also to leading future growth of next

generations through ethical investment

practices. By relentlessly embracing

innovation and change, Samsung Asset

Management will retain sustainability at

highest levels of business ethics,

transparency and social responsibility.

32 Ethical Principles

33 Internal Control System

34 Strengthening Employee Education and Awareness

35 Reporting on Unethical Practices

36 Risk Management

38 Client Satisfaction

40 Social Outreach

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etHical principles

6DPVXQJ�$VVHW�0DQDJHPHQW�UHFRJQL]HV�business ethics as a core asset of its corporate management in order to position itself as an asset management company trusted by all stakeholders including clients, shareholders, investors and local communities. Legal and internal control guidelines are always considered prior to $80�VL]H�DQG�RU�52$�LQ�DOO�GHFLVLRQV��

Samsung Asset Management takes every necessary step to ensures all employees carry out their work-affiliated decisions in accordance with the code of ethics and legal guidelines, comply with laws and regulations, reject misconduct and perform their duties based on high ethical and moral awareness.

As a member of the Samsung Group, Samsung Asset Management also abides by WKH�6DPVXQJ�%XVLQHVV�3ULQFLSOHV�SURYLGLQJ�guidelines to all Samsung employees in making decisions and performances. 6DPVXQJ�%XVLQHVV�3ULQFLSOHV�VXJJHVW�HWKLFDO�standards for all Samsung employees in terms of their business activities and social responsibilities.

Samsung Business Principles

Internal Control

internal control sYstems

samsung asset Management has set up the best internal control in the industrySamsung Asset Management sets internal control standards that define the basic business procedures and standards that should be observed by all employees and practices compliance with laws and regulations for a collective investor as well as sound asset management and investor protection. Control Self-Assessment System ensures regular monitor of self-evaluation of employee compliance in accordance with internal control guidelines.

Furthermore, Samsung Asset Management closely monitors and strictly manages employees’ handling of client assets to prevent any violation of standard legal guidelines. Additionally, the next-generation compliance monitoring system also allows the monitoring officer to directly implement the inspection items into the system since 2013. On top of adopting new systems, compliance monitoring has been further enhanced by system validation to prevent errors, speed and accuracy of FRPSXWHUL]DWLRQ�

◎ We respect the dignity and diversity of individuals.◎ We compete in a fair manner by obeying the law and following business ethics.◎ We ensure accounting transparency with accurate accounting records.◎ We take a neutral political stance and distance ourselves from interfering in

politics.

◦ Separation of relevant units by risk type and comprehensive management through the company-wide risk control organ

◦ Linking risk assessment results to performance results

◦ Separation of compliance, RM, and audit duties

◦ Close cooperation among internal control units

◦ Timely information collection and reporting

◦ Internal and external information provisions and communication structure

◦ Control self-assessment systems for all individuals and departments

◦ A monitoring system covering the entire investment process

◦ Management’s commitment to heightened internal controls

◦ Facilities and personnel infrastructure for the execution of internal controls

1law & ethics

◎ We draw a clear line between private and public matters in all activities.◎ We protect and respect the intellectual property (IP) rights of the company

and others.◎ :H�PDLQWDLQ�D�VRXQG�RUJDQL]DWLRQDO�FXOWXUH�

2clean culture

◎ We place customer satisfaction at the top of our priority list in all our business activities.◎ We pursue shareholder-oriented management.◎ We strive to make sure employees enjoy a high quality of life.

3samsung people

◎ We pursue environmentally friendly management practices.◎ We greatly value the health and safety of all people.

4environment, safety & Health

◎ :H�JR�ZHOO�EH\RQG�IXOILOOLQJ�RXU�EDVLF�UHVSRQVLELOLW\�DV�D�FRUSRUDWH�FLWL]HQ�◎ We respect the social and cultural characteristics of local communities

and contribute to improving the quality of life in these areas.◎ We maintain a mutually prosperous relationship with our partners.

5social responsibility

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risk management & assessment

Working-level units

information & communication

self-assessment & monitoring

environment & culture

Process for Handling Regulation Violations

strengtHening emploYee education and aWareness

In order to underscore the significance of compliance, Samsung Asset Management requires all employees to pledge their compliance with internal control guidelines and other requirements annually. Samsung $VVHW�0DQDJHPHQW�DOVR�HPSKDVL]HV�WKH�importance of compliance through in-house broadcasting and online bulletin boards. Additionally, Samsung Asset Management continues to conduct ethics management, compliance and anti-fraud education through various channels such as collective education and online education.

Since 2013, Samsung Asset Management has been holding an annual Compliance Day

in which a number of business ethics issues of each department are demonstrated to suggest practical guidelines on how to deal with such issues. Additionally, ethical awareness has been added to employee competency evaluation criteria and compliance fidelity to employee performance evaluation criteria in order to solidify foundation to ethical management. In particular, Samsung Asset Management thoroughly prevents violations in disclosure, insider transactions and collusion, three key main inspection items of the Samsung Group, through thorough monitoring and regular education programs.

reporting on unetHical practices34 35

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Business Ethics Education Employee Participation Rate (Unit: %)

2015 2016 2017

%XVLQHVV�(WKLFV�(GXFDWLRQ 100 % 100 % 100 %

Compliance Education 100 % 100 % 100 %

Graft Prevention Education 100 % 100 % 100 %Notifies measures

taken

Violation

occurs

Audit Team

Audit Committee

Request action

Reports when necessary

CEO

Relevant department

Personnel

Committee

Samsung Asset Management operates an online channel (audit.fund@samsung.com) dedicated to whistleblowing related to any unfair practices and/or corruption of employees. Contents of whistleblowing reports are processed through the confirmation process of the Audit Team, which carries out the necessary measures based on fact-checks. Whistleblowers are informed of the findings in a timely manner and appropriate measures are then implemented in accordance with an established process. All reports are real name-based to ensure their authenticity, but kept strictly confidential to protect the identity of the whistleblowers.

If the inquiry determines there has been a legal or ethical violation or reveals an area needing improvement, the Audit Committee will request a response from the CEO or relevant department and pass on the case to the Personnel Committee when necessary.

Risk Management Units

RISK MANAGEMENT

risk Management Policy6DPVXQJ�$VVHW�0DQDJHPHQW�UHFRJQL]HV�WKDW�the nature of the asset management business is closely linked to risk management, which has led to establishment of the risk management system to systematically manage risks at each level. The system enables Samsung Asset Management to check and balance asset management and risk management roles DQG�PD[LPL]H�SHUIRUPDQFH�DQG�LQYHVWPHQW�returns within the acceptable risk parameters. Samsung Asset Management conducts risk measurement and analysis through profitability and performance evaluation by headquarters, funds and managers in addition to risk monitoring through operational strategies and compliance checks, systematically managing

risks in order to successfully respond to any crisis, financial or non-financial, at the earliest stage possible.

risk Management organization The board of directors manages the Risk Management Committee, the highest working-level unit in charge of overall assessment of risks and making decisions related to risk management. The Committee examines all risk management practices and intervenes when necessary. Findings from the assessment, analysis and monitoring of risks at any risk management unit within the company (by the Risk Management Team, Compliance Team and Audit Team) are directly reported to the Committee.

risk Management ProcessSamsung Asset Management conducts a comprehensive risk management process to manage risks associated with the development, launch and operation of investment vehicles in three phases: pre-, interim, and post-management.

In full compliance with the risk management principles and operational guidelines, Samsung Asset Management strategically examines potential risks as early as the product development stage and continuously monitors and manages relevant risks and check for violations on a daily basis. In the event of abrupt risks incurred, proactive measures are taken to eliminate and prevent from reoccurrence.

Moreover, Samsung Asset Management has FDWHJRUL]HG�HDFK�W\SH�RI�ULVN�WR�comprehensively manage the risks inherent in asset operations, such as performance risk, credit concentration risk and atypical product risk.

definition and Management of risk typesEach risk type is articulated in the risk management guidelines to establish systematic approach to manage all types of risks. Core control indexes are established for each risk factor within investment guidelines and monitored on a regular basis. Samsung Asset Management effectively and proactively identifies and manages market, credit, liquidity and operational risks.

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Risk Management

Team

Monitoring of market, credit and liquidity risks in accordance with risk management guidelines

Compliance Team

Monitoring of all asset management operations Monitoring of legal and operational risks and internal control compliance

Audit Team

Audit of financials, legal compliance, business activities, management practices and IT operations

Risk Management

Risk Management Process by Stage

Risk Factor Definitions and Control Indexes

Type Definition Assessment Tool

Market Risk

Risk associated with uncertain future value of assets due to changes in stock prices, interest rates,

exchange rates and any other market-related factors

Pre/post-tracking error standard deviation,

beta scenario analysis, VHFWRU��LWHP�WUDQVIHU�OLPLW

Credit Risk

Risk associated with losses resulting from receiving collective investments or having a counterparty unable

to honor its payment obligations

Financial ratios,credit ratings

same-person exposure limits

Liquidity Risk

Risk associated with being unable to meet financial obligations arising from maturity mismatches or from

the deteriorating market liquidity of assets in possession

Liquidity to illiquidity asset ratio, transfer ratio of low- liquidity assets,ratio of liquid assets to

trade volume

Operational Risk

All financial and non-financial risks that may be incurred during the course of business operations due to an inadequate investment system or due to human

error, which may adversely affect investor capital

Frequency of operational errors

*Chief Information Officer

YES

NO

NO

NO

Financial crisis

Abrupt change in interests or stock prices

Credit crunch

Non-financial Crisis

Disaster/calamity/system breakdown

company-wide response

OccurrenceDevelopment

Preset Indicators for Crisis

Core/supplementary indicators Secure contingency plans

Prepare action plans

Prompt execution of action plan

Monitoringcrisis level

assessment bycIo*

comprehensive review of crisis

indicators by rM committee

YES

Pre-management

Interim management

Post-management

◦ Operation of investment guidelines◦Credit risk management system ◦ Key risk review prior to product

launch

◦Risk monitoring◦Daily monitoring for irregularities

◦Risk alleviation process ◦ Causal analysis and other

forms of feedback

responsible Marketing & communication

Safe Sales of Financial Products and Provision of Information

Samsung Asset Management puts into practice its investment philosophy of SULRULWL]LQJ�ULVN�PDQDJHPHQW�RYHU�SURILW��Accordingly, we employ a business strategy that shuns aggressive sales and instead promotes outstanding investment performance as a way to satisfy clients and maintain sustainable growth. We hold a strict management and control over the data on product that we provide to the clients such as investment manuals and fund management reports.

In addition, we operate a multi-dimensional risk management system to achieve stable excess returns for our client’s assets. At the same time, we do not sell or operate products that do not conform to our investment philosophy.

Total Marketing Services from Innovative Product Development to Sales Support

Samsung Asset Management offers total marketing services that start with planning innovative products and end with supporting product sales activities through a systematic structure. The industry’s most competitive product managers work hard to develop a variety of product strategies and designs that cater to individual client needs, completing an assorted product lineup that includes conventional investment vehicles, interest UDWHV�Ơ�SURGXFWV��DQG�DOWHUQDWLYH�instruments.

We also support sales activities such as product recommendations, marketing support, and promotions by providing various product and market status data for the clients’ consideration in investing. They even offer IR sessions for private bankers and major clients on their management strategies and market forecasts as fund managers.

Increased VOC Activities for the Clients

We are constantly listening to what our clients have to say through our call center and corporate website to reflect their thoughts on our management activities. The VOC (Voice of Customers) are transferred to the relevant departments to provide a real-time feedback to the clients. All of this information is FRPSLOHG�DQG�FDWHJRUL]HG�HYHU\�PRQWK�E\�issues, products, and number of VOCs. Then, it is shared with marketing department and other relevant offices, while the issues addressed by clients are continuously monitored closely to boost client communication satisfaction.

CLIENT SATISFACTION

Improving Financial accessibility

User-Friendly Management Result Reports

Usually, reports on the fund management results consist of contents that contain too many jargons for ordinary investors to easily understand. In order to overcome such, Samsung Asset Management became the first in the industry to build up the “Guidelines for suggested vocabulary in management result reports” for more accessible reports for the investors. We are trying to provide easier vocabulary and simpler sentences alongside EHWWHU�IRQW�DQG�VL]H�IRU�HDVLHU�DFFHVVLELOLW\�E\�not only financial experts but also ordinary investors to provide a wholesome information on the investment products.

(FRQRP\�%ORJ�IRU�&KLOGUHQ

Despite the increased accessibility in finance in general areas of society through developments in communication and financial technology, the importance of rational and responsible economic decision-making is also becoming more critical with the rise of adolescent delinquent borrowers. Teaching economy to children provides an opportunity to manage money wisely on their own and holds a crucial role in enabling them with an advisable consumption habit and economical mind. Samsung Asset 0DQDJHPHQW�UHFRJQL]HV�WKH�LPSRUWDQFH�RI�the early economy education for children, and ZH�RSHUDWH�DQ�(FRQRP\�%ORJ�IRU�&KLOGUHQ�WR�strengthen a healthy financial understanding

and habit for our children. The blog provides management reports that can be easily understood for children and also has continuously updated educational playground, terminology explanation, and ELWH�VL]H�FDUG�QHZV�WR�IXUWKHU�WKHLU�VWXGLHV�

Social Media Communication

Samsung Asset Management created social media channels such as Facebook, blogs, Naver posts, and Twitter to provide recommendations on funds and products, market conditions, and financial knowledge, all in real-time. The purpose of the social communication is to assist our clients to understand funds and investment information that customers may find difficult to understand. In this regard, various types of useful information are available on a mobile platform, following the recent media trend, and actively pursues a two-way communication through bulletin boards and comments.

We will continue to provide useful contents through various channels to increase accessibility on funds for all ranges of investors from novice to potential investors as well as experienced investors through various channels.

client information protection

Management and Protection of Consigned Corporate Personal Information

Samsung Asset Management manages customer information with the utmost care and takes all necessary steps to prevent institutions from abusing or misusing the information of its clients in any way. The main sales channel for our major products is through collective investment securities, with commission-based sales extended to our partners, which include securities firms, banks, and insurance companies. Only the National Pension Fund’s Investment Pool and a handful of corporations invest directly with us. Therefore, there is very little access to individual investors’ personal information and our access scope is limited to direct sales pension funds clients and corporate clients.

Samsung Asset Management engages in its sales through Korea Securities Computing’s �.26&20��¶3RZHU%DVH�V\VWHP�·�ZKLFK�DOVR�provides us the platform for managing client data. In compliance with the 2011 Personal Information Act, we have implemented plans for the internal control of customer privacy and appointed a Compliance Officer to assume responsibility for customer privacy protection.

Additionally, a virtual PC environment called VDI (Virtual Desktop Infrastructure) has been set up allowing client information access in RQO\�VXFK�FRQGLWLRQV�WR�SUHYHQW�XQDXWKRUL]HG�access, leak, or alteration. Since access and edit is possible in the virtual environment, it is impossible for a leak, and access into such system is only carried out under request by the client. On top of that, we have appointed DXWKRUL]HG�SHUVRQDO�LQIRUPDWLRQ�RIILFHUV�ZKR�conduct regular on and offline training and review the status of personal information management. Also, regular inspections are conducted on appropriateness for H[FHSWLRQDO�VHFXULW\�DXWKRUL]DWLRQV�DQG�WKHLU�actions are monitored.

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SOCIAL OUTREACH

social outreach with Participation of all staff Members

Club-Oriented Volunteer Activities

Samsung Asset Management actively engages in volunteer activities through office-run clubs under passionate participation of all our staff members. We bring out the YDULRXV�KREELHV�RI�RXU�VWDII�WR�RUJDQL]H�LQWR�clubs including culture, literature, and baseball clubs and carry out volunteer activities according to the characteristics of the clubs.

Club-based volunteer activities take place at least once a month, and starting in 2016 there is a campaign encouraging every employee to volunteer at least once a year. Furthermore, Furthermore, the company sponsors cookie baking and T-shirt making events in collaboration with external charities OLNH�6DUDQJEDW�DQG�+RSH%ULGJH�WR�SURPRWH�company-wide engagement in social outreach programs.

social contributions with the neighbors

Support for Children and Youth

We continue our support for the underprivileged children and youth in the local society through affiliation with children DQG�\RXWK�RUJDQL]DWLRQV�VXFK�DV�QXUVHU\�centers, study rooms, and community centers.

We support the emotional fostering of the children and the youth through carrying out the activities such as DIY projects, group outings, cultural performances, and sports events with the affiliation with “House of Isaac” and “Nabi Local Children’s Center” – since 2000 and 2016, respectively.

Extending a Helping Hand to Farmers

We engage in staff-participatory volunteer DFWLYLWLHV�WKDW�FRQWULEXWHV�WR�WKH�YLWDOL]DWLRQ�RI�the farm economy and support the lacking workers in the farmlands.

We also co-operate a direct-sale market and promote the products of our sister village. Every October, we support the lacking workers in the pear farms through participating farm experience activities. We FRQWULEXWH�WR�WKH�YLWDOL]DWLRQ�RI�WKH�IDUP�economy by purchasing the collected products, then donating them to the local and neighbors and uphold the value of sharing.

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42 Independent auditor’s audit report

43 Consolidated Financial Statement

44 Consolidated Statements of Comprehensive Income

45 Consolidated statement of changes in

Shareholders’ equity

46 Consolidated Statements of Cash Flows

48 Chronology

INDEPENDENT AUDITOR’S AUDIT REPORT

CONSOLIDATED FINANCIAL STATEMENT

Samsung Asset Management Inc. Messrs. Shareholders and Board of DirectorsWe have audited the accompanying consolidated financial statement of Samsung Asset Management Inc. and its subsidiaries. The consolidated financial statement consist of the consolidated statements of financial positions as of December 31st, 2017 as well as related consolidated statements of comprehensive income, consolidated statements of changes in shareholders’ equity, consolidated statements of cash flows for the period ending on the aforementioned date, and a summary of significant accounting principles and other explanations.

Management Accountabilities with the Consolidated Financial StatementsSamsung Asset Management’s executives are responsible for the preparation and fair presentation of the consolidated financial statements as stipulated in the Korea International Financial Reporting Standards (K-IFRS). They are also held accountable for the internal control that is required for the preparation of the consolidated financial statements without any material risk of misstatement.

Auditors’ AccountabilitiesOur accountability stops at expressing our opinion based on our audit of the said consolidated financial statements. We conducted our audits in accordance with the Generally Accepted Accounting Principles (GAAP) of Korea. These standards dictate that we abide by all ethical requirements and that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.

An audit includes collecting evidence to support the amounts and disclosures in consolidated financial statements for auditing purposes. The procedure choice is at the discretion of the auditors, who factored in the risk of material misstatement (RMM) in the consolidated financial statements as a result of irregularities or errors. Auditors assess this risk in consideration of the internal control status concerning the preparation and fair statement of consolidated financial statements in order to design auditing procedures most well-suited to the situation. However, this is not for the purpose of deriving auditing opinions concerned with the effectiveness of internal control practices. Additionally, an audit includes assessing the accounting principles that have been used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation.

We believe that the collected audit evidence and our audits will suffice for our audit opinion.

Auditor’s opinionIt is our belief that the consolidated financial statements referred to above fairly present, in all material respects, the consolidated financial position of Samsung Asset Management and all its subsidiaries as of December 31st, 2017 and of December 31st, 2016 as well as the results of its financial results and its cash flows for the reporting periods ending on the aforementioned dates from the perspective of importance in conformity with K-IFRS.

March 15th, 2018

Seoul Yongsan Hangangdaero 92Sam Il Accounting Firm

CEO Kim Young Sik

Samsung Asset Management and its subsidiary companies (Unit: Won)

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Account End of current year End of previous year

I. Cash and cashable equivalents 50,927,731,124 37,342,471,661

II. Fair value financial assets 214,693,713,847 184,356,923,820

III. Available-for-sale financial assets 85,357,384,836 78,366,328,538

IV. Held-to-maturity financial assets 35,028,543,280 35,944,345,367

V. Loans and receivables 165,331,157,228 319,354,780,010

VI. Properties, plants and equipment 4,073,203,386 5,241,224,437

VII. Intangible assets 13,860,345,249 12,810,263,590

VIII. Current tax assets 557,969,530 436,947,677

IX. Deferred tax assets 2,269,324,842 2,170,320,059

X. Other assets 2,582,223,043 2,485,325,060

Total assets 574,681,596,365 678,508,930,219

I. Financial assets at Fair Value through profit or loss 5,349,265,494 11,667,902,866

II. Customers’ deposit liabilities 64,681,628,058 245,609,341,245

III. Other liabilities 117,026,912,359 76,178,129,701

IV. Provisions 299,912,777 295,444,650

V. Retirement benefit obligations 73,037,332 450,973,868

VI. Income tax payable 13,175,452,724 12,931,574,086

VII. Deferred income tax liabilities - 6,509,054

Other liabilities 1,422,176,014 978,528,204

Total liabilities 202,028,384,758 348,118,403,674

Equity attributable to owners of the parent company 372,653,211,607 330,390,526,545

I. Capital stock 93,430,000,000 93,430,000,000

II. Other contributed capital (384,524,208) (384,524,208)

III. Components of other capita (10,732,766,442) (4,995,462,493)

IV. Retained earnings 290,340,502,257 242,340,513,246

Non-controlling shares - -

Total shareholders’ equity 372,653,211,607 330,390,526,545

Total liabilities and shareholders’ equity 574,681,596,365 678,508,930,219

20th (current year) 2017 December 31st

19th (previous year) 2016 December 31st

This report is effective as of March 15, 2018, the auditors’ report date. Certain subsequent events or circumstances may have occurred between the auditors’ report date and the time the report is read. Such events or circumstances could significantly affect the accompanying consolidated financial statements and may result in modification to the auditors’ report.

Samsung Asset Management and its subsidiary companies (Unit: Won) Samsung Asset Management and its subsidiary companies (Unit: Won)

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Account End of current year End of previous year

I. Operating Revenue 198,662,576,487 181,702,436,340

1. Fee revenue 177,361,575,394 172,806,956,830

2. Financial product evaluation and disposable credit 16,450,387,819 1,716,480,795

3. Interest income 3,312,580,313 4,254,168,245

4. Gain on foreign transactions 309,328,219 372,399,564

5. Dividend income 1,216,599,803 1,881,477,915

6. Other revenue 12,104,939 670,952,991

II. Operating expenses 130,224,684,984 111,943,841,112

1. Commission expenses 10,132,988,981 7,692,084,813

2. Financial product evaluation and disposable loss 14,052,702,595 1,197,109,377

3. Interest expenses 613,585,221 1,431,397,232 527,135,088,578

4. Loss on foreign transaction 472,612,507 464,798,676

5. Selling expenses 6,678,730,127 7,474,046,337

6. Maintenance expenses 98,269,597,426 93,667,611,324

7. Other operating expenses 4,468,127 16,793,353

III. Profit from operating activities 68,437,891,503 69,758,595,228

IV. Gains/Losses on disposition of investments in subsidiaries (729,235,633) 250,038,153

1. Non-operating revenue 44,323,711 887,121,915

2. Non-operating expenses 773,559,344 637,083,762

V. Income before income tax 67,708,655,870 70,008,633,381

VI. Income tax expense 19,708,666,859 20,182,606,133

VII. Net income 47,999,989,011 49,826,027,248

VIII. Other comprehensive income (5,737,303,949) (3,545,385,540)

Deferred income (not reclassified to profit or loss) (367,340,181) (511,846,059)

1. Readjustments of defined benefit obligations (482,806,876) (675,258,654)

2. Deferred tax (not reclassified to profit or loss) 115,466,695 163,412,595

Deferred income (reclassified to profit or loss) (5,369,963,768) (3,033,539,481)

1. Gains/Losses on valuation of available-for-sale securities 390,672,697 (552,124,294)

2. Gains/Losses on foreign operations translation (5,760,310,425) (2,649,316,145)

3. Deferred tax (reclassified to profit or loss) (326,040) 167,900,958

IX. Total comprehensive profit income 42,262,685,062 46,280,641,708

X. Income attributable 47,999,989,011 49,826,027,248

1. Owners of the parent company 47,999,989,011 49,826,027,248

2. Non-controlling interests - -

XI. Total comprehensive income attributable 42,262,685,062 46,280,641,708

1. Owners of the parent company 42,262,685,062 46,280,641,708

2. Non- controlling interests - -

XII. Earnings per share

����%DVLF�HDUQLQJV�SHU�VKDUH 2,569 2,666

Account Capital Stock Other contributed capital

Other capital Structure

Retained Earning

Attributable toOwners of parent

company

Non-controlling interests Total

January 1, 2016 93,430,000,000 (384,524,208) (1,450,076,953) 192,514,485,998 284,109,884,837 - 284,109,884,837

Total comprehensive profit

Net income - - - 49,826,027,248 49,826,027,248 - 49,826,027,248

Total comprehensive income - - (3,545,385,540) - (3,545,385,540) - (3,545,385,540)

Readjustments of defined benefit obligations

- - (511,846,059) - (511,846,059) - (511,846,059)

Gains/Losses on valuation of available-for-sale securities

- - (384,223,336) - (384,223,336) - (384,223,336)

Gains/Losses on foreign operation translation

- - (2,649,316,145) - (2,649,316,145) - (2,649,316,145)

December 31, 2016 93,430,000,000 (384,524,208) (4,995,462,493) 242,340,513,246 330,390,526,545 - 330,390,526,545

January 1, 2017 93,430,000,000 (384,524,208) (4,995,462,493) 242,340,513,246 330,390,526,545 - 330,390,526,545

Total comprehensive profit

Net income - - - 47,999,989,011 47,999,989,011 - 47,999,989,011

Total comprehensive income - - (5,737,303,949) - (5,737,303,949) - (5,737,303,949)

Readjustments of defined benefit obligations

- - (367,340,181) - (367,340,181) - (367,340,181)

Gains/Losses on valuation of available-for-sale securities

- - 390,346,657 - 390,346,657 - 390,346,657

Gains/Losses on foreign operation translation

- - (5,760,310,425) - (5,760,310,425) - (5,760,310,425)

December 31, 2017 93,430,000,000 (384,524,208) (10,732,766,442) 290,340,502,257 372,653,211,607 - 372,653,211,607

20th from 2017 January 1st to 2017 December 31st

19th 2016 January 1st to 2016 December 31st

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

20th from 2017 January 1st to 2017 December 31st

19th 2016 January 1st to 2016 December 31st

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

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Samsung Asset Management and its subsidiary companies (Unit: Won)

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Account End of current year End of previous year

Provision of retirement funds (2,529,310,976) (2,720,878,019)

Net increase in pension plan assets - (44,316,900)

2. Interest received 2,872,659,627 4,436,343,169

3. Interest paid (1,013,478,868) (2,091,372,129)

4. Dividend income 1,255,575,803 874,291,214

5. Income tax paid (19,561,495,901) (19,236,759,512)

II. Cash flow from investing activities (41,723,159,670) 27,427,885,529

1. Cash income from investing activities 63,515,648,035 165,882,085,215

Decrease in term deposits 30,900,000,000 111,892,221,561

Decrease in loans and receivables 856,492,595 831,421,328

Decrease in deposits 222,311,131 9,865,609,939

Disposal of available-for-sale financial assets 2,303,000,226 36,979,083,527

Decrease in held-to-maturity financial assets 8,615,316,000 6,164,037,948

Disposal of property 10,000,000 24,140,912

Disposal of intangible assets 52,060,652 125,570,000

Changes in consolidated coverage 20,556,467,431 -

2. Cash outflows from investing activities (105,238,807,705) (138,454,199,686)

Increase in term deposits (58,800,000,000) (74,178,265,636)

Increase in loans and receivables (1,657,544,343) (1,290,000,000)

Increase in deposits (371,394,686) (4,349,051,526)

Acquisition of marketable financial assets (10,414,274,929) (41,130,654,829)

Acquisition of held-to-maturity financial assets (29,650,108,368) (9,909,987,362)

Acquisition of property (525,527,125) (4,916,727,752)

Acquisition of intangible assets (3,819,958,254) (2,679,512,581)

III. Cash flows from financial activities 43,507,640,281 36,246,713,448

1. Cash inflow from financial activities 43,507,640,281 36,246,713,448

Increase in other financial liabilities 43,507,640,281 36,246,713,448

2. Cash outflows from financial activities - -

IV. Net increase (decrease) in cash and cash equivalents (I + II + III) 13,689,573,251 (1,970,761,729)

V. Cash and cash equivalents, beginning of year 37,342,471,661 39,308,734,257

VII. Effect of exchange rate changes on cash and cash equivalents in foreign currencies (104,313,788) 4,499,133

VIII. Cash and cash equivalents, end of year 50,927,731,124 37,342,471,661

Samsung Asset Management and its subsidiary companies (Unit: Won)

Account End of current year End of previous year

I. Cash flows from operating activities 11,905,092,640 (65,645,360,706)

1. Cash flows from operating activities 28,351,831,979 (49,627,863,448)

Net income 47,999,989,011 49,826,027,248

Loss on redemption of trading securities 3,132,710,112 95,006,433

Loss on redemption of trading securities 410,858,910 -

Loss on disposition of available-for-sale 316,468,264 -

Reserves for impairment losses on available-for-sale securities - 384,666,700

Interest expenses 613,585,221 1,431,397,232

Loss on foreign currency translation 134,964,596 177,244,267

Retirement benefits 1,668,567,561 1,495,299,860

Depreciation 1,671,779,690 943,340,874

Loss on disposition of tangible assets 10,426,728 12,706,958

$PRUWL]DWLRQ�RI�LQWDQJLEOH�DVVHWV 2,335,825,668 1,731,480,626

Impairment loss on intangible assets 380,803,580 320,881,510

Provisions for restoration 4,468,127 16,793,353

Income tax expenses 19,708,666,859 20,182,606,133

Gain on valuation of trading securities (2,719,379,889) (1,140,041,645)

Gain on redemption of trading securities (844,764,883) (21,971,130)

Gain on disposition of trading securities (255,722,594) (345,269,829)

Interest income (3,312,580,313) (4,254,168,245)

Gain on foreign currency translation (85,285,347) (36,818,442)

Dividend income (1,216,599,803) (1,881,477,915)

Gain on disposal of properties, plants and equipment (10,000,000) (12,627,075)

Gain on disposal of intangible assets (210,652) -

Recovery of liability purchase - (657,713,680)

Changes in operating assets and liabilities (41,592,738,867) (117,895,226,681)

,QFUHDVH�LQ�ILQDQFLDO�DVVHWV�UHFRJQL]HG�DV�SURILWV��losses for the current term (2,680,925,704) (122,101,551,735)

Increase (decrease) in loans and receivable asset 182,058,999,607 (61,941,774,254)

Decrease in other assets 16,695,791 (762,148,543)

'HFUHDVH�LQ�ILQDQFLDO�OLDELOLWLHV�UHFRJQL]HG�DV�SURILWV�losses for the current term (6,620,830,451) 11,649,928,202

Increase (decrease) in customers’ deposits for beneficiaries (180,927,713,187) 48,697,490,055

Increase (decrease) in other financial liabilities (31,660,760,359) 9,310,970,710

Increase (decrease) in other liabilities 751,106,412 17,053,803

20th from 2017 January 1st to 2017 December 31st

19th 2016 January 1st to 2016 December 31st

CONSOLIDATED STATEMENTS OFCASH FLOWS

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1998-1999

1998.09 Samsung Life Trust Management established (Paid-in capital of KRW 30 billion)

1999.12 Old Samsung Life Trust Management merger (Paid-in capital KRW 63.2 billion, KRW 18.9 trillion in trust)

2000-2002

2000.03 5HFDSLWDOL]DWLRQ�RI�.5:����ELOOLRQ� (paid-in capital KRW 93.2 billion) Changed the name from Samsung Life

Trust Management to Samsung Trust Management

2001.11 Pension fund investment pool weekly management firms designated

2002.10 KODEX 200 ETF listed on the Korean Stock Exchange

2003-2005

2004.12 Managed asset surpasses KRW 60 trillion

2005.04 $%)�IXQG�VHW�XS��GHVLJQDWHG�DV�WKH�management firm in Korea for Asia %RQG�)XQG��

2005.11 Reselected as the Pension fund investment pool weekly management firm

2006-2007

2006.01 Enacted the Samsung Trust Management brand slogan (Stay Ahead)

2007.11 Establishment of Hong Kong local corporation

KODEX 200 ETF listed in the Japan Tokyo Stock Exchange

2008-2009

2008.04 Established Singapore local corporation

2009.09 KODEX Inverse ETF listed in the Korean Stock Exchange

Designated by Nomura Asset Management as consigned Korean fund management firm

2009.11 Reselected as the Pension fund investment pool weekly management firm

2010

2010.02 KODEX leverage ETF listed in Korean Stock Exchange

2010.04 Changed the name from Samsung Trust Management to Samsung Asset Management

2010.11 Designated by Japan Niko Fund as consigned Korean fund management firm

2010.12 Designated by Korean Investment Corporation(KIC) as asset management firm

2011

2011.05 1RPLQDWHG�E\�$VLDQ�,QYHVWRU�PDJD]LQH�as Korea’s best management firm

2012

2012.04 Listed on KODEX MSCI Korea ETF for the first time in Korea

2013

2013. 08 KODEX Samsung Group stock listed in the Japan Tokyo Stock Exchange

2013. 10 Reselected as the Pension fund investment pool weekly management firm

2013. 12 Achieved KRW 127.4 trillion in managed assets at the end of December

2014

2014. 03 Designated as the foreign stock consigned management firm for National Pension

2014. 10 Research Center established in Shanghai, China

2015

2015. 02 Acquisition of a local corporation in New York

Hong Kong’s first gift ETF “KODEX HSI )XWXUHV�(7)���.2'(;�+6,�)XWXUHV�50%�FX ETF” listed in the Hong Kong Stock Exchange

2015. 04 Signed a strategic alliance with Indian Reliance Capital

2015. 07 Designated by the Ministry of Labor for industrial funds weekly management firm

2015. 10 Signed a strategic alliance with US Capital Group

2015. 11 Signed a strategic alliance with Chinese Fund for entry into the Chinese ETF market

2015. 12 Management asset reached KRW 200 trillion

Acquisition of London subsidiary in Samsung Life Insurance2016

2016

2016. 04 Launched Samsung Korean Target Date Fund with the US Capital Group

Signed a strategic alliance with the European EDR(Edmond de Rothschild) Group

First to list crude oil futures in the ETF at the Hong Kong stock market

2016. 06 First to list 4 leverage inverse ETF sets at the Hong Kong stock market

2016. 08 Moved company location (Seoul -XQJJX�7DHS\HRQJUR�ȹ�6HRFKRJX�Seochodaero Samsung Electronics 6HRFKR�%XLOGLQJ�

2016. 10 Consulting company established in %HLMLQJ��&KLQD

2017

2017. 01 Divided up subsidiary companies (Samsung Active Asset Management, Samsung Hedge Asset Management)

2017. 04 Created global infrastructure fund with IFM Investor Australia

2017. 05 Samsung Korean RIF is launched with US Capital Group

2017.07 �2SHQHG�LQGXVWU\�ILUVW�)$��3%�H[FOXVLYH�platform

Launched Samsung ASEAN Fund management strategy for local customers in Europe

2017.10 Marked 15th anniversary of KODEX ETF

2017.12 Offer consulting service on PDQDJHPHQW�RI�(7)�SURGXFWV�IRU�&&%3

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