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Document DEVICE REPORT2015 business quarter03SAMSUNG ELECTRONICS Co., Ltd. Interim Business Report For the quarter ended September 30, 2015 Note about forward-looking statements Certain statements in the document, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are "forward-looking statements." Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. A detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in our financial reports available on our website. See, also, Note on Forward-Looking Statements in preamble of II. Business Overview. Samsung Electronics Interim Business Report 1 / 173 Table of Contents Certification ..................................................................................................................................................................... 3 I. Corporate Overview ..................................................................................................................................................... 4 II. Businesses Overview ............................................................................................................................................... 20 III. Financial Affairs........................................................................................................................................................ 58 IV. Auditor's Report ..................................................................................................................................................... 113 V. Management Discussion and Analysis.................................................................................................................. 115 VI. Corporate Governance .......................................................................................................................................... 116 VII. Information on Shareholders ............................................................................................................................... 126 VIII. Executives and Employees ................................................................................................................................. 132 IX. Affiliates and Subsidiaries .................................................................................................................................... 139 X. Related Party Transactions .................................................................................................................................... 166 XI. Other Information................................................................................................................................................... 170 Samsung Electronics Interim Business Report 2 / 173 Certification Letter of Certification We, Oh-Hyun Kwon and Sang-Hoon Lee, respectively as CEO and director of the company in charge of reporting, certify that we have reviewed the interim business report of Samsung Electronics Co., Ltd. for the nine-months ended September 30, 2015. To our knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary that would be misleading with respect to the period covered by this report. To our knowledge, the financial statements, and other financial information included in the report, fairly present in all materials respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report. We confirm that Samsung Electronics operates an Internal Accounting Management System, responsible for establishing and maintaining disclosure controls and procedures and internal controls over financial reporting, as defined in Article 2.2 and 2.3 of the External Audit Act. We have disclosed our most recent evaluation of internal controls over financial reporting to the Company's auditors and to the audit committee of the Company's board of directors. Date: 2015. 11. 16 Samsung Electronics Interim Business Report 3 / 173 I. Corporate Overview 1. Overview A. Legal, Commercial Name: - Samsung Electronics Co., Ltd. B. Date of Establishment: - Samsung Electronics ("SEC" or the "Company") was established as Samsung Electronics Industry Co., Ltd. on January 13, 1969, and held an initial public offering on June 11, 1975. - The Company changed its name from Samsung Electronics Industry Co., Ltd. to Samsung Electronics Co., Ltd. following a resolution passed at the Annual General Meeting of Shareholders on February 28, 1984. C. Address, Phone Number, and English Language Website of the Corporate Headquarter - Address: 129, Samsung-ro, Yeongtong-gu, Suwon, Gyeonggi-do, Korea - Phone Number: 82-31-200-1114 - Website: http:// www.samsung.com/sec D. The Company is not subject to Article 2 of the Framework Act on Small and Medium Enterprises. E. Core Businesses - The Company separately oversees three independent self-determining divisions (each a "Division"), CE (Consumer Electronics), IM (Information Technology & Mobile Communications), and DS (Device Solutions). Products in each Division are presented below: Division CE IM DS Products TV, Monitor, Printer, Air Conditioner, Refrigerator, Washing Machine, Medical Devices, etc. HHP, Network System, Computer, Digital Camera, etc. DRAM, NAND Flash, Mobile AP, LCD panel, OLED panel, LED, etc. The Company is a global electronics company comprised of the headquarters in Korea and 157 subsidiaries across the world including nine (9) regional headquarters for the CE and IM Divisions and five (5) regional headquarters for the DS Division. [CE Division] The CE Division is leading the global digital era by continuously offering new products with innovative technology, unique design, and enhanced value propositions. TV is the core product of CE. The Company has maintained its market leadership position for the past nine (9) consecutive years by leveraging competitive advantages in hardware such as LCD/LED TVs as well as software driven product features within our Smart TV product portfolio. Samsung Electronics Interim Business Report 4 / 173 [IM Division] The IM Division is at the forefront of mobile lifestyle innovation with consumer-friendly products such as the premium `GALAXY' series, while driving the paradigm shift in the market beyond mobile convergence to focus on software. The IM Division is focused on meeting market demands by enhancing mobile product differentiation through seamless integration of key features from various product categories. In addition to handheld phone ("HHP") products including smartphones, the IM Division is also leading technological development and standardization in the global networks system market including Long Term Evolution ("LTE"). [DS Division] The DS Division is comprised of the semiconductor sub-division and the display panel business. The semiconductor sub-division ("Semiconductor Sub-Division") is further divided into the memory business and the system LSI business. The Company's memory business unit ("Memory" or "Memory Business Unit") manufactures and sells DRAM and NAND products. The Company's system LSI business unit ("System LSI") manufactures mobile application processors ("Mobile APs" or "APs") and customized logic products. The display business ("DP Business Unit"), through its Samsung Display subsidiary, manufactures and sells display panels ("DP"), including TFT-LCDs and OLEDs. The Memory Business Unit produces differentiated products and has maintained the top position in the global memory market by continuously applying the latest advanced process technology ahead of the competition with each technological iteration. System LSI is leading the industry shift from PCs to mobile. The Company's DP Business Unit is leading the market with technological innovations and investment resulting in superior quality and cost competitiveness in TFT-LCDs and by increasing the application of OLED panels in various IT products. See II. Businesses Overview, for more details about each Division. Samsung Electronics Interim Business Report 5 / 173 F. Affiliates The Company is an affiliate of the Samsung group as defined under Korea's Monopoly Regulation and Fair Trade Act ("Samsung Group"). As of September 30, 2015, Samsung Group had a total of sixty-four (64) domestic affiliates, reduction of eight (8) affiliates (RAY, Samsung SGL Carbon Composite Materials, Samsung General Chemicals, Samsung Total Petrochemicals, Songdo Land Mark City, former Samsung C&T, Hanwha Thales, Hanwha Techwin) and addition of three (3) affiliates (Samsung Life Financial Service, HDC Shilla Duty Free, Core-Bridge Consulting) when compared to December 31, 2014. Among the Samsung Group's sixty four (64) domestic affiliates, sixteen (16) affiliates including Samsung Electronics are listed, and forty-eight (48) affiliates are unlisted. [As of September 30, 2015] No. of affiliates Name of affiliates Listed Samsung C&T, Samsung Electronics, Samsung SDI, SEMCO, Samsung Heavy Industries, Hotel Shilla, 16 Samsung Card, Samsung Life Insurance, Samsung Fire & Marine Insurance, Samsung Securities, Samsung Fine Chemicals, Samsung Engineering, S1, Cheil Worldwide, Samsung SDS, CREDU Unlisted Samsung Lions, SERI, STECO, SEMES, Samsung Electronics Sales, Samsung Electronics Service, Samsung Electronics Logitech, Hantok Chemicals, CVnet Corporation, Allat., SECUI, Open Tide Korea, Samsung Futures, Samsung Venture Investment Corporation, Samsung Asset Management, Saengbo, SD Flex, Samsung Claim Adjustment Service, Samsung Fire & Marine Insurance Service, Suwon Samsung Bluewings FC, S-Core, Human TSS, 48 S-1CRM, OpenHands, S-EnPol, Samsung Medison, Samsung Biologics, STM, Nuri Solution, Colombo Korea, Miracom, Samsung Life Service, SU Materials, Natural9, Samsung Display, Samsung Bioepis, Samsung Corning Advanced Glass , Daejung Offshore Wind Power Co., Ltd., Samsung SRA Asset Management, Samsung Welstory, Jeongahm Wind Power, Samsung Card Customer Service, Seoul Lakeside CC, Shilla Stay, Samoo Architects & Engineers, HDC Shilla Duty Free LTD, Samsung Life Financial Service, CORE-BRIDGE CONSULTING Total 64 Cheil Industries merged with Samsung C&T and adopted Samsung C&T as the name of the new company. See IX. Affiliates and Subsidiaries for more details about domestic and overseas affiliates. Samsung Electronics Interim Business Report 6 / 173 G. Subsidiaries Subject to Consolidated Financial Statements As of September 30, 2015, Samsung Electronics' consolidated subsidiaries totaled 157 with the addition of eight (8) newly established or acquired subsidiaries and the subtraction of nine (9) subsidiaries when compared to December 31, 2014. Below is the list of consolidated subsidiaries. Name of Subsidiaries Samsung Electronics America Inc. NexusDX Inc. NeuroLogica Corp. Samsung Receivables Corporation Quietside LLC SmartThings, Inc. Samsung Semiconductor Inc. Samsung Electronics Canada Inc. PrinterOn Inc. PrinterOn America Corporation RT SV CO-INVEST, LP Samsung Research America, Inc Grandis, Inc. Samsung International Inc. Samsung Mexicana S.A. de C.V Samsung Austin Semiconductor LLC. Samsung Electronics Mexico S.A. De C.V. SEMES America Inc. Samsung Electronics Digital Appliance Mexico, SA de CV Samsung Electronics Latinoamerica Miami, Inc. Samsung Electronics Latinoamerica (Zona Libre) Samsung Electronics Venezuela, C.A. Samsung Electronica Colombia S.A. Samsung Electronics Panama. S.A. Samsung Electronica da Amazonia Ltda. Samsung Electronics Argentina S.A. Samsung Electronics Chile Limitada Samsung Electronics Peru S.A.C. SonoAce Deutschland GmbH Samsung Electronics (UK) Ltd. Date of Establishment 1978.07 2009.07 2004.02 1998.03 2001.07 2012.04 1983.07 1980.07 2000.04 1986.04 2014.02 1988.10 2002.06 1983.10 1988.03 1996.02 1995.07 1998.10 2012.12 1995.05 1989.04 2010.05 1997.03 2012.07 1995.01 1996.06 2002.12 2010.04 2001.10 1995.07 Major business Sale of electronic goods Medical equipment Medical equipment Receivable management Sale of Air-conditioner Sale of smart-home devices Sale of semiconductors and display panels Sale of electronic goods Sale of printing solutions Sale of printing solutions Investment in venture firms R&D R&D Production of TVs and monitors Production of electronic goods Production of semiconductors Sale of electronic goods Semiconductor equipment Production of electronic goods Sale of electronic goods Sale of electronic goods Marketing and services Sale of electronic goods Consulting Production and sale of electronic goods Marketing and services Sale of electronic goods Sale of electronic goods Medical equipment Sale of electronic goods Dec 31, 2014 Assets 10,697,787 (Unit: KRW million) % ownership Classified as major subsidiary (Y/N) Over 50% Y 15,470 Over 50% N 199,807 Over 50% Y 3,527,023 Over 50% Y 15,581 Over 50% N 196,910 Over 50% Y 7,577,935 Over 50% Y 529,348 Over 50% Y 7,271 Over 50% N 22 Over 50% N 13,046 Over 50% N 238,690 Over 50% Y 107,943 Over 50% Y 33,506 Over 50% N 871,462 Over 50% Y 6,503,003 Over 50% Y 795,138 Over 50% Y 717 Over 50% N 443,745 Over 50% Y 126,017 Over 50% Y 347,502 Over 50% Y 8,344 Over 50% N 287,792 Over 50% Y 8,973 Over 50% N 3,797,166 Over 50% Y 52,003 Over 50% N 262,414 Over 50% Y 199,308 Over 50% Y 113 Over 50% N 1,235,239 Over 50% Y Samsung Electronics Interim Business Report 7 / 173 Name of Subsidiaries Samsung Electronics(London) Ltd. Samsung Electronics Holding GmbH Samsung Semiconductor Europe GmbH Samsung Electronics GmbH Samsung Electronics Iberia, S.A. Samsung Electronics France S.A.S Samsung Electronics Hungarian Private Co. Ltd. Samsung Electronics Czech and Slovak s.r.o. Samsung Electronics Italia S.P.A. Samsung Electronics Europe Logistics B.V. Samsung Electronics Benelux B.V. Samsung Display Slovakia s.r.o. Samsung Electronics Romania LLC Samsung Electronics Polska, SP.Zo.o Samsung Electronics Portuguesa S.A. Samsung Electronics Nordic Aktiebolag Samsung Semiconductor Europe Ltd. Samsung Electronics Austria GmbH Samsung Electronics Switzerland GmbH Samsung Electronics Slovakia s.r.o Samsung Electronics Baltics SIA Samsung Electronics Europe Holding Cooperatief U.A. Samsung Electronics Poland Manufacturing SP.Zo.o Samsung Electronics Greece S.A. Samsung Nanoradio Design Center Samsung Denmark Research Center ApS Samsung France Research Center SARL Samsung Cambridge Solution Centre Limited PrinterOn Europe Limited Samsung Electronics Overseas B.V. Samsung Electronics Rus LLC Samsung Electronics Rus Company LLC Samsung Electronics Ukraine LLC Samsung Electronics Ukraine Company LLC Samsung R&D Institute Rus LLC Date of Establishment 1999.01 1982.02 1987.12 1984.12 1989.01 1988.01 1989.10 2010.01 1991.04 1991.05 1995.07 2007.03 2007.09 1996.04 1982.09 1992.03 1997.04 2002.01 2013.05 2002.06 2001.10 2008.10 2010.02 2010.04 2004.02 2012.09 2012.10 2012.09 2013.11 1997.01 1999.03 2006.10 2004.01 2008.09 2011.11 Major business Holding company Holding company Sale of semiconductors and display panels Sale of electronic goods Sale of electronic goods Sale of electronic goods Production and sale of electronic goods Sale of electronic goods Sale of electronic goods Logistics Sale of electronic goods Display panel processing Sale of electronic goods Sale of electronic goods Sale of electronic goods Sale of electronic goods Sale of semiconductors and display panels Sale of electronic goods Sale of electronic goods Production of TVs and monitors Sale of electronic goods Holding company Production of home appliances Sale of electronic goods R&D R&D R&D R&D Sale of printing solutions Sale of electronic goods Marketing Sale of electronic goods Marketing Sale of electronic goods R&D Dec 31, 2014 Assets 7,515 % ownership Over 50% Classified as major subsidiary (Y/N) N 840,716 Over 50% Y 1,186,942 Over 50% Y 1,142,897 Over 50% Y 665,617 Over 50% Y 1,031,342 Over 50% Y 1,287,972 Over 50% Y 153,708 Over 50% Y 759,637 Over 50% Y 1,621,583 Over 50% Y 1,207,723 Over 50% Y 225,826 Over 50% Y 153,259 Over 50% Y 419,043 Over 50% Y 136,282 Over 50% Y 467,393 Over 50% Y 104,308 Over 50% Y 290,346 Over 50% Y 133,921 Over 50% Y 1,869,697 Over 50% Y 52,840 Over 50% N 7,022,746 Over 50% Y 331,949 Over 50% Y 84,289 Over 50% Y 21,112 Over 50% N 21,408 Over 50% N 21,275 Over 50% N 130,113 Over 50% Y 45 Over 50% N 176,271 Over 50% Y 8,067 Over 50% N 796,220 Over 50% Y 3 Over 50% N 254,000 Over 50% Y 10,048 Over 50% N Samsung Electronics Interim Business Report 8 / 173 Name of Subsidiaries Samsung Electronics Kazakhstan LLP Samsung Electronics Central Eurasia LLP Samsung Electronics Caucasus Co., Ltd. Samsung Electronics Rus Kaluga LLC Samsung Russia Service Centre LLC Samsung Electronics West Africa Samsung Electronics East Africa Samsung Gulf Electronics Co., Ltd. Samsung Electronics Egypt S.A.E Samsung Electronics Israel Ltd. Samsung Electronics Tunisia S.A.R.L Samsung Electronics Pakistan(Private) Ltd. Samsung Electronics South Africa(Pty) Ltd. Samsung Electronics South Africa Production (pty) Ltd. Samsung Electronics Turkey Samsung Semiconductor Israel R&D Center Ltd. Samsung Electronics Levant Co.,Ltd. Samsung Electronics Morocco SARLAU Samsung Japan Corporation Samsung R&D Institute Japan Co. Ltd Samsung Electronics Japan Co., Ltd. Samsung Electronics Display (M) Sdn. Bhd. Samsung Medison India Private Ltd. Samsung Electronics (M) Sdn. Bhd. Samsung Vina Electronics Co., Ltd. Samsung Asia Private Ltd. Samsung India Electronics Private Ltd. Samsung R&D Institute India-Bangalore Private Ltd. Samsung Electronics Australia Pty. Ltd. Samsung Electronics New Zealand Limited PT Samsung Electronics Indonesia PT Samsung Telecommunications Indonesia Thai Samsung Electronics Co., Ltd. Samsung Electronics Philippines Corporation Samsung Display Vietnam Co., Ltd (formerly Samsung Display Bac Ninh) Date of Establishment 2006.07 2008.09 2014.10 2007.07 1997.11 2010.03 2011.12 1995.05 2012.07 2012.09 2012.09 2012.11 1994.06 2014.07 1984.12 2007.10 2009.07 2009.11 1975.12 1992.08 2008.09 1995.03 2009.01 1989.09 1995.01 2006.07 1995.08 2005.05 1987.11 2013.09 1991.08 2003.03 1988.10 1996.03 2014.07 Major business Marketing Sale of electronic goods Marketing Production of TVs Service Marketing Marketing Sale of electronic goods Production and sale of electronic goods Marketing Marketing Marketing Sale of electronic goods Production of TV and monitors Sale of electronic goods R&D Sale of electronic goods Sale of electronic goods Sale of electronic goods R&D Sale of electronic goods Production and sale of electronic goods Medical equipment Production of home appliances Production and sale of electronic goods Sale of electronic goods Production and sale of electronic goods R&D Sale of electronic goods Sale of electronic goods Production and sale of electronic goods Sale of telecom systems and services Production and sale of electronic goods Sale of electronic goods Display panel production Dec 31, 2014 Assets 1,046 % ownership Over 50% Classified as major subsidiary (Y/N) N 154,438 Over 50% Y 2,418 Over 50% N 785,584 Over 50% Y 29,243 Over 50% N 59,933 Over 50% N 32,929 Over 50% N 921,338 Over 50% Y 512,426 Over 50% Y 4,724 Over 50% N 2,129 Over 50% N 1,943 Over 50% N 712,489 Over 50% Y 18,735 Over 50% N 563,363 Over 50% Y 30,036 Over 50% N 508,983 Over 50% Y 92,576 Over 50% Y 831,649 Over 50% Y 160,614 Over 50% Y 612,675 Over 50% Y 278,239 Over 50% Y 32 Over 50% N 129,214 Over 50% Y 219,356 Over 50% Y 3,110,433 Over 50% Y 2,949,605 Over 50% Y 190,104 Over 50% Y 437,351 Over 50% Y 70,253 Over 50% N 806,451 Over 50% Y 17,850 Over 50% N 1,654,988 Over 50% Y 126,256 Over 50% Y 128,662 Over 50% Y Samsung Electronics Interim Business Report 9 / 173 Name of Subsidiaries Samsung Malaysia Electronics (SME) Sdn. Bhd. Samsung R&D Institute BanglaDesh Samsung Electronics Vietnam Co., Ltd. Samsung Telecommunications Malaysia Sdn. Bhd. Samsung Electronics Vietnam THAINGUYEN Co., Ltd. Samsung Display Dongguan Co., Ltd. Samsung Display TianJin Co., Ltd. Samsung Electronics Hong Kong Co., Ltd. Suzhou Samsung Electronics Co., Ltd. Samsung Suzhou Electronics Export Co., Ltd. Samsung (CHINA) Investment Co., Ltd. Samsung Mobile R&D Center, China-Guangzhou Samsung Tianjin Mobile Development Center Samsung R&D Institute China-Shenzhen (formerly Samsung Network R&D Center, China-Shenzhen) Samsung R&D Institute China-Xian Samsung Electronics Suzhou Semiconductor Co., Ltd. SEMES (XIAN) Co., Ltd. Samsung Electronics (Shandong) Digital Printing Co., Ltd. Samsung Electronics Huizhou Co., Ltd. Tianjin Samsung Electronics Co., Ltd. Samsung Electronics Taiwan Co., Ltd. Beijing Samsung Telecom R&D Center Tianjin Samsung Telecom Technology Co., Ltd. Shanghai Samsung Semiconductor Co., Ltd. Samsung Electronics Suzhou Computer Co., Ltd. Samsung Suzhou Module Co., Ltd (formerly Samsung Display Suzhou Co., Ltd.) Samsung Suzhou LCD Co., Ltd Shenzhen Samsung Electronics Telecommunication Co., Ltd. Samsung Electronics Shanghai Telecommunication Co., Ltd. Samsung Semiconductor (China) R&D Co., Ltd. Samsung Electronics China R&D Center Samsung (China) Semiconductor Co., Ltd. Samsung Electronics (Beijing) Service Company Ltd. Tianjin Samsung LED Co., Ltd. Tianjin Samsung Opto-Electronics Co., Ltd. Date of Establishment 2003.05 2010.08 2008.03 2009.08 2013.03 2001.11 2004.06 1988.09 1995.04 1995.04 1996.03 2010.01 2010.08 2013.03 2013.07 1994.12 2013.07 1993.03 1992.12 1993.04 1994.11 2000.09 2001.03 2001.10 2002.09 2002.09 2011.07 2002.02 2001.11 2003.04 2004.05 2012.09 2005.01 2009.05 1994.02 Major business Sale of electronic goods R&D Production of electronic goods Sale of telecom systems and services Production of telecom products Display panel production Display panel production Sale of electronic goods Production of home appliances Production of home appliances Sale of electronic goods R&D R&D R&D R&D Semiconductor processing Semiconductor equipment Production of printers Production of electronic goods Production of TV and monitors Sale of electronic goods R&D Production of telecom products Sale of semiconductor and display panels Production of electronic goods Display panel processing Display panel production Sale of telecom products Sale of telecom and network products R&D R&D Semiconductor production Services LED production Camera/camcorder production Dec 31, 2014 Assets 328,645 % ownership Over 50% Classified as major subsidiary (Y/N) Y 7,590 Over 50% N 6,553,628 Over 50% Y 1,170 Over 50% N 3,957,700 Over 50% Y 1,101,846 Over 50% Y 836,806 Over 50% Y 984,732 Over 50% Y 689,430 Over 50% Y 370,904 Over 50% Y 9,603,679 Over 50% Y 43,117 Over 50% N 22,927 Over 50% N 12.770 Over 50% N 9.306 Over 50% N 749,914 Over 50% Y 538 Over 50% N 777,128 Over 50% Y 4,966,486 Over 50% Y 933,487 Over 50% Y 1,583,027 Over 50% Y 55,424 Over 50% N 2,316,054 Over 50% Y 2,560,852 Over 50% Y 812,755 Over 50% Y 550,429 Over 50% Y 1,831,794 Over 50% Y 146,482 Over 50% Y 124 Over 50% N 20,548 Over 50% N 30,629 Over 50% N 6,765,278 Over 50% Y 163,455 Over 50% Y 411,558 Over 50% Y 177,394 Over 50% Y Samsung Electronics Interim Business Report 10 / 173 Name of Subsidiaries Date of Establishment Major business Samsung Display SU Materials STECO SEMES Samsung Electronics Service 2012.04 2011.08 1995.06 1993.01 1998.10 Display panel sales and production Display panel component production Semiconductor component production Semiconductor/FPD manufacturing equipment Electronics goods repair services Samsung Electronics Sales 1996.07 Sales of electronic goods Samsung Electronics Logitech 1998.04 Total logistics services Samsung Medison SVIC #14 Venture Capital Union SVIC #20 Venture Capital Union SVIC #21 Venture Capital Union SVIC #22 Venture Capital Union SVIC #23 Venture Capital Union SVIC #26 Venture Capital Union SVIC #27 Venture Capital Union Simpress Comercio, Locacao e Servicos S.A. 1985.07 2009.05 2011.03 2011.11 2011.11 2012.10 2014.11 2014.09 2005.02 Medical equipment Investment in venture firms and new technologies Investment in venture firms and new technologies Investment in venture firms and new technologies Investment in venture firms and new technologies Investment in venture firms and new technologies Investment in venture firms and new technologies Investment in venture firms and new technologies Sale of printing solutions Samsung Electronics HCMC CE Complex Co. Ltd,. 2015.02 Production of CE goods Samsung Pay, Inc. (formerly LoopPay, Inc.) 2006.03 Develop and provide mobile payment services Beijing Integrated Circuit Industry International Fund, L.P 2014.12 Investment in venture firms SVIC #28 Venture Capital Union 2015.02 Investment in venture firms and new technologies YESCO Electronics LLC 2007.10 LED display panel production and sales SVIC #29 Venture Capital Union 2015.04 Investment in venture firms and new technologies Companies with over KRW75 billion in total assets as of December 31, 2014, are classified as major subsidiaries. See II. Businesses Overview for additional information about major business segments. Dec 31, 2014 Assets 37,939,965 % ownership Over 50% Classified as major subsidiary (Y/N) Y 21,978 Over 50% N 93,819 Over 50% Y 692,721 Over 50% Y 330,185 Over 50% Y 603,933 Over 50% Y 150,390 Over 50% Y 326,260 Over 50% Y 57,146 Over 50% N 26,858 Over 50% N 130,290 Over 50% Y 145,501 Over 50% Y 34,843 Over 50% N 20,057 Over 50% N 5,898 Over 50% N 133,442 Over 50% Y 0 Over 50% N 16,821 Over 50% N 0 Over 50% N 0 Over 50% N 37,701 Over 50% N 0 Over 50% N Samsung Electronics Interim Business Report 11 / 173 (Changes in Subsidiaries) Europe/ AMER MEA/ Asia CIS China Domestic Total Increase Decrease Dec 31, 2012 30 61 23 32 20 166 Dec 31, 2013 [Domestic: 2] Secron, GES [Americas: 7] Newton Sub. Corp., mSpot, Inc., Deltapoint Cardiac Diagnostics, Inc., Samsung Medison America, Inc., Intellectual Keystone Technology [Americas: 2] LLC., Samsung Medison Brasil Ltda., Samsung NeuroLogica Corp., Electronics Corporativo, SA de CV Intellectual Keystone Technology LLC. [Europe/MEA/CIS: 7] [Europe/MEA/CIS: 1] Samsung Telecoms (UK) Ltd., Samsung LCD Samsung Electronics Switzerland GmbH Netherlands R&D Center B.V, Samsung LCD 25 55 22 33 18 153 [Asia: 2] Samsung Electronics Vietnam THAINGUYEN Co., Ltd., Netherlands R&D Center (UK) Limited, General RF Modules AB, Samsung Medison Samsung Electronics New Zealand Ltd. France S.A.S., Samsung Opto-Electronics [China: 3] GmbH, Samsung Medison Italia S.r.l. Samsung Network R&D Center China-Shenzhen, [Asia: 3] Samsung R&D Institute China-Xian, SEMES (XIAN) Co., Samsung Electronic Philippines Manufacturing Ltd. Corp., Batino Realty Corporation, TNP Small/Medium Size & Venture Enterprises Growth Promotion Investment Limited Partnership(TSUNAMI) [China: 2] Samsung LCD Netherlands R&D Center (HK)Limited, Medison (shanghai) Co., Ltd. Dec 31, 2014 [Domestic : 2] SVIC #26 Venture Capital Union [Domestic: 2] SVIC #27 Venture Capital Union Samsung Blue Wings, World Cyber Games [America: 6] [America: 1] RT SV CO-INVEST, LP, Quietside LLC, 1397011 Ontario Ltd. SmartThings, Inc., PrinterOn Inc., PrinterOn America [Europe: 2] 30 56 22 32 18 158 Corporation, 1397011 Ontario Ltd. Samsung Medison Europe B.V [Europe/MEA/CIS: 3] Nanogen Recognomics GmbH PrinterOn Europe Limited, Samsung Electronics South [Asia: 1] Africa Production(pty) Ltd., Samsung Electronics Caucasus Medison Medical Systems India Private Ltd. Co., Ltd. [China: 1] [Asia : 1] Medison Medical Equipment Shanghai Co., Ltd.. Samsung Display Bac Ninh [Domestic: 3] Sep 30, 2015 32 55 23 30 17 157 [Domestic : 2] SVIC #28 Venture Capital Union SVIC #29 Venture Capital Union [America: 5] Simpress Comercio, Locacao e Servicos S.A., Samsung Pay, Inc. (formerly LooPay, Inc.), YESCO Electronics LLC, Paymate Global, Inc., Beijing Integrated Circuit Industry International Fund, L.P. [Asia: 1] Samsung Electronics HCMC CE Complex Co. Ltd. RAY HI Pioneer Private Securities Investment Trust #1 SVIC #6 Venture Capital Union [America: 3] Samsung Telecommunications America LLC., Paymate Global, Inc., Nvelo, Inc. [China: 2] Samsung Electronics Hainan Fiberoptics Co.,Ltd Samsung Medison Shanghai Medical Instrument Co., Ltd [Europe: 1] Nanoradio Hellas AE AMER = America; MEA = Middle East and Africa, CIS = Commonwealth of Independent States Samsung Electronics Interim Business Report 12 / 173 H. Credit Rating The Company's credit rating is assessed by two external credit ratings agencies. As of September 30, 2015, the Company's credit ratings are: "A1" and investment outlook is stable, as rated by Moody's; and "A+" and investment outlook is stable, as rated by S&P. Date '13.08 '13.12 '14.08 '14.10 Securities Corporate bond Corporate bond Corporate bond Corporate bond Ratings A+ A1 A+ A1 Credit Rating Agency S&P (USA) Moody's (USA) S&P (USA) Moody's (USA) Rating Range (AAA ~ D) (Aaa ~ C) (AAA ~ D) (Aaa ~ C) Note Annual Review 2. Company History (The Information disclosed below outlines major changes to the Company such as asset transfers, M&A, and security offerings) 2011.01.01 2011.02.16 2011.04.19 2011.04.29 2011.07.01 2011.07.22 2012.01.19 2012.04.01 2012.04.01 2012.04.10 2012.07.01 2012.09.01 2012.12.01 2013.01.01 2013.01.28 2014.01.15 2014.08.18 2015.01.01 2015.02.23 Merged with Samsung Electronics Gwangju Acquired shares of Prosonic (100%) and Medison (43.5%) Signed a comprehensive partnership contract (including HDD business transfer) with Seagate Acquired additional shares of Medison (22.3%) Transferred solar cell business to Samsung SDI Acquired shares of Grandis (100%), an affiliate of subsidiary SISA (Samsung Information System America) Acquired remaining shares of S-LCD Corporation (50%) from SONY Separated LCD business (established Samsung Display) Merged with Samsung LED Corporate bond ($1 billion) issued by SEA Samsung Mobile Display merged with S-LCD (a subsidiary of Samsung Display) Merged Prosonic with Samsung Medison Acquired SEHF Korea Merged SECRON with GES (a subsidiary of SEMES) Acquired shares of NeuroLogica (100%), a subsidiary of SEA Disposed of stocks of Samsung Corning Precision Materials, a subsidiary of Samsung Display Purchased convertible preferred shares from Corning Incorporated Acquired shares of SmartThings (100%), a subsidiary of SEA Merged with STA(Samsung Telecommunications America LLC), a subsidiary of SEA Acquired shares of LoopPay (100%), a subsidiary of SEA Samsung Electronics Interim Business Report 13 / 173 (Important Changes in Management Executives) Following the annual general meeting of shareholders on March 16, 2012, of the three Executive Directors with expiring terms (Gee-Sung Choi, Yoon-Woo Lee, Ju-Hwa Yoon), Yoon-Woo Lee retired and Gee-Sung Choi and JuHwa Yoon were re-appointed. Oh-Hyun Kwon was newly appointed as Executive Director. In addition, of the three Independent Directors with expiring terms (Dong-Min Yoon, Jae-Woong Lee, Oh-Soo Park), Jae-Woong Lee and OhSoo Park retired and Dong-Min Yoon was re-appointed. Han-Joong Kim and Byeong-Gi Lee were newly appointed as Independent Directors. On June 8, 2012, Oh-Hyun Kwon succeeded Gee-Sung Choi as CEO. On February 7, 2013, Independent Director Dong-Min Yoon retired (deceased). On March 14, 2013, Executive Directors Gee-Sung Choi and Ju-Hwa Yoon resigned. Following the shareholders' meeting on March 15, 2013, Boo-Keun Yoon, Jong-Kyun Shin, and Sang-Hoon Lee were newly appointed as Executive Directors. Independent Director In-Ho Lee was reappointed, and Kwang-Soo Song and Eun-Mee Kim were newly appointed as Independent Directors. On March 15, 2013, the Company appointed Executive Directors Boo-Keun Yoon and Jong-Kyun Shin as CEOs to serve alongside incumbent CEO Oh-Hyun Kwon as co-CEOs. On March 13, 2015, Executive Director Oh-Hyun Kwon and Independent Directors Han-Joong Kim and Byeong-Gi Lee were reappointed at the annual general meeting of shareholders. As of September 30, 2015, (the "Reporting Date"), the Company's BOD is comprised of four Executive Directors (OhHyun Kwon, Boo-Keun Yoon, Jong-Kyun Shin, Sang-Hoon Lee) and five Independent Directors (In-Ho Lee, Han-Joong Kim, Byeong-Gi Lee, Kwang-Soo Song and Eun-Mee Kim). Samsung Electronics Interim Business Report 14 / 173 (Changes in Organizational Structure) In December 2012, following an organizational change, CE and IM businesses were upgraded to individual Division status, and the IT Solution business was divided into Printing Solution and Computer businesses. The Printing Solution business was incorporated into the CE Division and the Computer business was converted to a team unit and integrated into the Mobile business under the IM Division. The Medical Device business team was upgraded to a business unit within the CE Division. In December 2013, the Digital Imaging business was reorganized into a team unit, and then was integrated with the Mobile business. No further changes have been made as of September 30, 2015. [As of December 2012] Before Business organization DMC Division (CE: Visual display, Digital appliances) (IM: Mobile, IT solution, Network, Digital imaging) DS Division (Memory, SYS.LSI, LCD,LED) After CE Division (Visual display, Digital appliances, Printing solution, Medical devices) IM Division (Mobile, Network, Digital imaging) DS Division (Memory, SYS.LSI, DP, LED) Regional headquarters Korea, North America, Latin America, Europe, CIS, Southwest Korea, North America, Latin America, Europe, CIS, Southwest Asia, Asia, Southeast Asia, China, Middle East, Africa Southeast Asia, China, Middle East, Africa Americas(DS), Europe(DS), China(DS), Southeast Asia(DS), Americas(DS), Europe(DS), China(DS), Southeast Asia(DS), Japan Japan(DS) (DS) [As of December 2013] Business organization Before CE Division (Visual display, Digital appliances, Printing solution, Medical devices) IM Division (Mobile, Network, Digital imaging) DS Division (Memory, SYS.LSI, DP, LED) After CE Division (Visual display, Digital appliances, Printing solution, Medical devices) IM Division (Mobile, Network) DS Division (Memory, SYS.LSI, DP, LED) Regional headquarters Korea, North America, Latin America, Europe, CIS, Southwest Korea, North America, Latin America, Europe, CIS, Southwest Asia, Asia, Southeast Asia, China, Middle East, Africa Southeast Asia, China, Middle East, Africa Americas(DS), Europe(DS), China(DS), Southeast Asia(DS), Japan(DS) Americas(DS), Europe(DS), China(DS), Southeast Asia(DS), Japan (DS) Samsung Electronics Interim Business Report 15 / 173 3. Changes in Paid-in Capital No changes were reported during the past five (5) consecutive years. 4. Stock Information A. Total Number of Shares The total number of authorized shares according to the articles of incorporation is 500,000,000 (par value per share: KRW 5,000). As of September 30, 2015, the Company has issued 147,299,337 shares of registered common stock and 22,833,427 shares of registered preferred stock without voting rights (excluding canceled shares). As of September 30, 2015, the number of floating common stock is 129,312,651 shares and the number of floating preferred stock is 19,603,734 shares, excluding treasury shares (of 17,986,686 shares of common stock and 3,229,693 shares of preferred stock). [As of September 30, 2015] (Unit: shares) Classification Type of Stocks Note Common Preferred Total I. Number of authorized shares 400,000,000 100,000,000 500,000,000 - II. Number of shares issued 155,609,337 23,893,427 179,502,764 - III. Number of shares decreased 8,310,000 1,060,000 9,370,000 - 1. Capital Reduction 2. Number of shares canceled 3. Redemption of redeemable shares 8,310,000 - 1,060,000 - - - 9,370,000 Cancellation of treasury shares - - 4. Others - - - - IV. Number of outstanding shares (II-III) 147,299,337 22,833,427 170,132,764 - V. Treasury shares 17,986,686 3,229,693 21,216,379 - VI. Number of floating shares (IV-V) 129,312,651 19,603,734 148,916,385 - Shares of the Company's common stock carry voting rights but preferred stock do not carry voting rights. Samsung Electronics Interim Business Report 16 / 173 B. Treasury Shares During first three quarters of 2015, Samsung Electronics acquired 891,945 shares of common stock and 118,750 shares of preferred stock for its treasury to stabilize the Company's stock price in order to enhance shareholder value. As of September 30, 2015, the Company holds 17,986,686 shares of common stock and 3,229,693 shares of preferred stock as treasury shares. On Oct 29, 2015, the Company announced plans for a KRW 11.3 trillion share buyback program for purposes of enhancing shareholder return. A portion of the repurchased shares is planned to be cancelled. The buyback will be conducted in 3-4 stages. The first stage of the repurchase program, which will be approximately KRW 4.2 trillion, will begin on Oct 30, 2015 and be completed within three months. The buyback program is subject to change based on, among other things, value to shareholders, market conditions and alternative methods for greater shareholder return. [As of September 30, 2015] Acquisition method Intra-market direct acquisition (Within dividend related capital gains limit) Total (Unit: Shares) Share type Common Periodbeginning shares 17,094,741 Acquisition (+) 891,945 Change Disposal (-) - Cancellation (-) - Period-end shares 17,986,686 Preferred 3,110,943 118,750 - - 3,229,693 Common 17,094,741 891,945 - - 17,986,686 Preferred 3,110,943 118,750 - - 3,229,693 C. Types of Registered Stock The Company has two types of registered equity securities: 1) common stock; 2) non-voting and non-cumulative preferred stock. The shareholders of preferred stock are entitled to dividend payments of an additional 1% of par value compared to shareholders of common stock. As of September 30, 2015, the total number of outstanding preferred stock is 22,833,427 shares. Samsung Electronics Interim Business Report 17 / 173 5. Voting Shares Samsung Electronics has 147,299,337 shares of common stock outstanding, which represents 29.5% of the total number of authorized shares of 500 million (500,000,000). There are 22,833,427 shares of preferred stock outstanding (with no voting rights). The Company holds 17,986,686 shares of common stock (with no voting rights) in its treasury, and 12,506,577 shares of common stock are held by the Company's affiliates and have limited voting rights under applicable laws. Thus, the total number of shares with voting rights is 116,806,074. [As of September 30, 2015] Classification Number of shares (Unit: Shares) Note Number of outstanding shares (A) Common Preferred 147,299,337 22,833,427 - Shares with no voting rights (B) Shares with no voting rights according to Articles of Incorporation (C) Shares with limited voting rights under relevant laws (D) Common Preferred Common Common 17,986,686 Treasury stock according to Korean Commercial Act 22,833,427 3,229,693 shares of preferred treasury stock included Restricted by the Monopoly Regulation and Fair Trade Act: 12,479,184 10,622,814 shares held by Samsung Life Insurance & 1,856,370 shares held by Samsung Fire & Marine Insurance 27,393 Restricted by the Insurance Business Act: Shares held by Samsung Life Insurance in certain special accounts Shares with voting rights (F = A - B - C - D) Common Preferred 116,806,074 - - Pursuant to Korea's Monopoly Regulation and Fair Trade Act, shareholders with limited voting rights (D) can exercise certain rights in accordance with related laws, including the right to vote on agendas such as the appointment or dismissal of directors and revisions to the Articles of Incorporation. Samsung Electronics Interim Business Report 18 / 173 6. Shareholder Return As a part of the Company's shareholder return policy, a portion of the profits have been returned to shareholders by way of dividends and shareholder value has been increased through open market purchases of floating shares (share repurchase). The Company carefully considers strategic investments for sustainable growth, business performance, and cash flows in determining the level of total shareholder return. On Oct 29, 2015, the Company announced plans for a KRW 11.3 trillion share buyback program for purposes of enhancing shareholder return. The buyback will be conducted in 3-4 stages. A portion of the repurchased shares is planned to be cancelled. The first stage of the repurchase program, which will be approximately KRW 4.2 trillion, will begin on Oct 30, 2015 and be completed within three months. The buyback program is subject to change based on, among other things, value to shareholders, market conditions and alternative methods for greater shareholder return. Dividends paid in the most recent three (3) fiscal years are as follows: (Unit: Shares / %) Classification 2015.3Q 2014 2013 Par value per share (won) 5,000 5,000 5,000 Net profit (million won) 15,452,161 23,082,499 29,821,215 EPS (won) 103,720 153,105 197,841 Total cash dividend (million won) 148,916 2,999,972 2,156,969 Total stock dividend (million won) - - - Dividend payout ratio (%) 1.0 13.0 7.2 Cash dividend yield (%) Common Preferred 0.1 1.5 1.0 0.1 1.9 1.4 Stock dividend yield (%) Common Preferred - - - - - - Cash dividend per share (won) Common Preferred 1,000 1,000 20,000 20,050 14,300 14,350 Stock dividend per share (share) Common Preferred - - - - - - Interim dividends of 2015 and 2014 are KRW 148,916 million (KRW 1,000 per share) and KRW 75,408 million (KRW 500 per share), respectively. EPS denotes basic earnings per common share. For further information relating to the calculation of basic EPS, see Earnings Per Share in 2. Note to Consolidated Financial Statements in . Financial Affairs. Samsung Electronics Interim Business Report 19 / 173 II. Businesses Overview 1. Overview Note on Forward-Looking Statements This report includes forward-looking statements that relate to future events and can be generally identified by phrases containing words such as "believes," "expects," "anticipates," "foresees," "forecasts," "estimates" or other words or phrases of similar meaning. These forward-looking statements are not guarantees of future performance and may involve known and unknown risks, uncertainties and other factors that may affect the Company's actual results, performance, achievements or financial position, making them materially different from the actual future results, performance, achievements or financial position expressed or implied by these forward-looking statements. Uncertain events that could positively or negatively affect the Company's management condition and financial performance include: · Trends of financial markets domestically and abroad, including changes in exchange rates and interest rates · The Company's strategic decision making, including disposals and purchases of businesses · Unexpected sudden changes in core businesses such as CE, IM, Semiconductor, and DP · Other changes domestically and abroad that can affect management condition and financial performance The Company assumes no obligation to revise or update this report to reflect risks or uncertainties that arise after the reporting period. A. Business Overview by Division In addition to our headquarters in Korea, Samsung Electronics is comprised of 157 subsidiaries across the world responsible for sales and production. There are also nine (9) regional headquarters for Consumer Electronics ("CE") and Information Technology & Mobile Communications ("IM") Divisions and five (5) regional headquarters for Device Solutions ("DS") Division. The Company's business Divisions are organized in a two-pronged business framework of set (brand products) and component businesses. The set business is comprised of the CE and IM Divisions, and the component business is comprised of the DS Division. The CE Division is responsible for the production and sales of TVs, monitors, printers, air conditioners and refrigerators, and the IM Division focuses on the production and sales of handheld phones (such as feature phones and smartphones), network systems, and computers. The DS Division is comprised of the Semiconductor business which manufactures and sells DRAM, NAND, Mobile APs, and other semiconductor and semiconductor-related products, and the Display Panel ("DP Business Unit") business which manufactures and sells TFT-LCD and OLED panels for TVs, monitors, notebook PCs, and mobile devices. <Major Products by Business Division> Business Division CE Division DS Division IM Division Semiconductor (SubDivision) DP Business Unit Major Products TVs, Monitors, Printers, Air Conditioners, Refrigerators, Washing Machines, Medical Devices, etc. HHPs, Network Systems, Computers, Digital Cameras, etc. DRAMs, NAND Flashes, Mobile APs, etc. TFT-LCDs, OLEDs, etc. The Company maintains its corporate headquarter and seventeen (17) consolidated domestic subsidiaries in Korea. Samsung Electronics Interim Business Report 20 / 173 The Company's corporate headquarters in Korea is divided along Divisions and/or businesses, and are situated at the following 5 locations: Suwon (CE Division and R&D Center); Gumi (IM Division); Giheung and Hwasung (Semiconductor business); and Gwangju (Home Appliance business). The Company's consolidated domestic subsidiaries include Samsung Display for display panel production, Samsung Electronics Sales for domestic retail sales, Samsung Electronics Service for after service care, and Samsung Electronics Logitech for logistics. We have 140 overseas subsidiaries for product manufacturing, sales, and R&D. In the Americas, we have 32 subsidiaries including SEA (New Jersey, United States) which is responsible for sales of set products such as HHPs, SAMEX (Tijuana, Mexico) which is responsible for manufacturing TVs, and SAS (Austin, United States) which is responsible for manufacturing semiconductor products. In Europe, we operate 31 subsidiaries including SEUK (UK), SEF (France), SEG (Germany), and SEI (Italy). SESK (Slovakia) and SEH (Hungary) are responsible for manufacturing TVs, and SEPM (Poland) is responsible for manufacturing home appliances. In Asia, we have 23 overseas subsidiaries, including SAPL (Singapore), SEAU (Australia), SEPCO (Philippines), and SME (Malaysia), which are responsible for regional sales. In addition, we operate numerous production sites including SEV (Vietnam) for HHPs, SDMA (Malaysia) for TVs, and SIEL (India) for both TVs and HHPs. We operate 30 subsidiaries in China, including regional sales operations in Beijing (SCIC) and Hong Kong (SEHK). We also operate production and processing facilities sites in Tianjin and Suzhou (TSTC, SSEC, and SESS). In addition, we have 24 production and sales subsidiaries across Africa, the Middle East and the CIS regions. Samsung Electronics Interim Business Report 21 / 173 [CE Division] Industry Overview Since the first public demonstration of a true television system in 1926 and subsequent mass production of Color TVs, technological developments have led to products such as the Trinitron CRT (1967) and the flat CRT (1996). As the penetration rate in major countries reached over 90%, the CRT TV business became stagnant. The industry regained strong growth momentum following the launch of Flat Panel TVs (LCDs, PDPs), especially with the expansion of digital broadcasting (UK/US 1998~). Flat panel TVs ("FPTVs") replaced the CRT driven by enhanced product performance with respect to design, picture quality, etc., and a sharp decline in prices. In addition, 3D TVs were launched in 2010, and the rise of internet video services (OTT, OVER-THE-TOP) along with increased consumer interest in smart devices from 2011 to 2012 led to the birth of the Smart TV market. In 2013, further innovation led to the launch of OLED and UHD TVs with high resolution as the TV market continues to evolve. In 2015, annual global TV shipment is expected to reach 231.69 million units, an increase 0.4% from the previous year. LCD-TV shipment (including LED-TVs) is expected to be around 230.07 million units with an increase of 2.3% yearover-year, while PDP-TV shipment is expected to decline by 95.6% to 0.29 million units from the previous year (Source: July `15 Display Search). Market Condition The trend towards large-size and high-resolution screens is accelerating due to intensified competition between manufacturers. Accordingly, the market share of major manufacturers with high-quality products and brand power is increasing. In addition, as consumer demand for high-resolution and slim design increases, LED TVs, with eco-friendly LED back light units ("BLU") which increases brightness and contrast as well as energy efficiency, has become the mainstream of the market. The Company has focused on smart TV sales based on forecasts that consumers' desire to acquire internet information from TVs will increase. The Company led the smart TV market in 2011 by launching smart TVs with various Smart Hubbased applications ("Apps") and implementing a premium category sales strategy. In 2012, the Company introduced a new market trend with the introduction of the Smart InteractionTM system based on voice commands and command gestures for convenient interaction with its proprietary Samsung Smart TVs. In 2013, the Company introduced a system that recommends TV programs based on the user's viewing history. In 2014, with the goal of enhancing the viewing experience of its Smart TVs, the Company focused on increasing its usability, securing access to content, and strengthening the platform. In 2015, the Company launched SUHD TVs based on semiconductor crystal technology that expresses different colors depending on the size when electric current or light is applied. < Market Share of the CE Division's Main Product > Product 2015.3Q 2014 2013 TV 21.2% 22.6% 21.6% 2013 and 2014 market share data is from research agency Display Search (global market share in quantity). Market share as of September 30, 2015 is the Company's estimation. Samsung Electronics Interim Business Report 22 / 173 Business Condition We have maintained the top position in the overall TV market, FPTVs, and LCD TVs (in terms of market share) for nine consecutive years since 2006. (Source: Dec '14 Display Search) In 2009, we created the world's first LED TV (LED BLU, ultra-slim/ultra-light, eco-friendly). In the first quarter of 2010, we launched the world's first 3D Total Solution that provides 3D TV/BDP/glasses/BD Title all-in-one, taking the lead in the 3D TV market. We also launched the world's first App Store for our Smart TVs, "Samsung Apps", in 2010, and launched Smart Hub which enables "Your Video", "Social TV", "Search All", and "Web Browser" in 2011, firmly planting the image that "Smart TV = SAMSUNG". Furthermore, in 2012, we maintained our competitive advantage in the Smart TV market by developing exercise and education contents for families and reinforcing the "All Share" function that facilitates connection with other digital devices. In 2013, we released UHD TVs which offer superior image quality and resolution. In 2014, we continued to maintain our leadership in the industry by leading the premium market with our UHD and Curved TVs. Samsung Electronics Interim Business Report 23 / 173 [IM Division] Industry Overview A mobile phone is one of the most ubiquitous electronics devices today. As of year-end 2014, the global penetration rate was 73%. In 2015, it is expected to reach 77%. (Source: Jul '15 Strategy Analytics) The mobile phone industry started with the first generation analogue phones in the early 1980s. It evolved to second generation digital, and to third generation mobile communication standards such as WCDMA with high-speed data transmission. Today, fourth generation mobile communication technology with ultra-high-speed data transmission is becoming commonplace in the market. In particular, the LTE market is spreading to all parts of the world, and LTEAdvanced with higher speeds has been commercialized in Korea since June 2013 through cooperation between the Company and mobile communication carriers. Recently, the mobile phone market is changing rapidly around not only smartphone and tablet but also new hybrid product categories such as Galaxy Note. This puts emphasis on not only existing hardware competitiveness but also on software competitiveness including Application and UX that enables users to access useful information more conveniently. Market Condition In 2015, the HHP market is expected to reach 1.9 billion units with a growth of 5% from 1.8 billion in 2014. The smartphone market is expected to increase from 1.26 billion units in 2014 to 1.5 billion units in 2015 with a growth of 16% year over year. The tablet market is expected to decrease to 230 million units (4% negative growth YoY) shipped in 2015 from 240 million units in 2014. (Source: Strategy Analytics Mobile: Jul `15, Smartphone /Tablet: Aug `15) < Market share of the IM Division's Main Product > Product 2015.3Q 2014 2013 HHP 21.9% 22.4% 26.8% Market share data of 2013, 2014, and as of September 30, 2015 are from research agency Strategy Analytics (global market share in quantity). Business Condition The Company strengthened its market leadership by maintaining its wide range of product lineup from premium to mass market models and by being at the forefront of new markets such as the LTE market. In particular, the Company has maintained its "No.1" status in terms of global smartphone market share through the success of its flagship smartphones such as the Galaxy S series and Galaxy Note series. Going forward, the Company will continue to solidify its market leadership in premium smartphones and tablets and create consumer demand with new products (such as Galaxy S, Gear VR, and Gear Circle) and advanced features (such as flexible displays). Furthermore, we will continue to strive to strengthen the competitiveness of our strategic models to overcome unfavorable market conditions resulting from intensifying competition as more competitors enter the market with more products and lower prices. In addition, we will strive to become a company that consistently offers new value to customers by making strategic investments in mobile healthcare and B2B for future growth and by utilizing our R&D capacity that is the best in the industry. Samsung Electronics Interim Business Report 24 / 173 [DS Division] - Semiconductor Industry Overview In general, semiconductor is divided into memory semiconductor that stores information and system LSI (non-memory semiconductor) that logically processes information. Memory semiconductor is divided into RAM products that can be written on and read, and ROM products that can only read. RAM is called volatile memory as the information is deleted when the power is turned off. It is used for temporary loading and storage of application programs. There are various types of system LSI products for various applications. CPUs (Central Processing Units) for PCs and servers is the biggest market. System LSI products are used in many product categories such as household electronics, telecommunications, network, and games. The Company supplies its system LSI semiconductor products for use in media players including digital TVs, DVDs, and MP3s. The company also manufactures CMOS image sensors ("CIS") for camera phones, Mobile APs for smartphones, and other customized system LSI semiconductor products. The semiconductor industry is cyclical by nature, and imbalances between supply and demand occur frequently. Many manufacturers have not been able to maintain competitiveness during periods of global economic recession and oversupply, resulting in consolidation within the industry. Supply and demand volatility is expected to decrease as a result of increased demand for semiconductors in new smartphones, tablet PCs and servers. Market Condition Even as the overall DRAM market continues to experience oversupply, supply and demand conditions in the mobile segment is expected to improve slightly driven by demand for new products, but DRAM demand for other applications such as PCs is expected to remain weak. However, demand for the Company's high-end products are robust as other manufacturers are experiencing delays in developing high-performance and highly reliable products such as DDR4/LPDDR4 manufactured using the latest leading-edge processes. Demand for NAND is expected to increase as more NAND (in terms of gigabytes of installed memory) is included in new smartphones and the ever-increasing adoption of solid state drives("SSDs") continues, but supply is also expected to increase as competitors shift to finer processes. < Market share of the Semiconductor Business' Main Product > Product 2015.3Q 2014 2013 DRAM 44.9% 39.6% 36.7% Market share data of 2013, 2014, and as of September 30, 2015 are from research agency DRAMeXchange (global market share in amount). Business Condition The Company was the first to develop and produce 20nm DRAM products and also secured technology and cost competitiveness ahead of competitors. In addition, the Company is solidifying its leadership position in the DRAM market by developing differentiated 20nm products and 10nm-class DRAM. For NAND, the Company is simultaneously developing and mass producing both planar and vertical NANDs, addressing customer demand in a timely manner. In particular, the Company is entering the premium market by mass-producing and adding the 3rd generation 48-layer vertical NAND, with technology that is one year ahead of competitors, to high-performance SSDs. The Company is also expanding high-quality 3bit products to maximize cost competitiveness. In 2015, the server market and the mid-to-low end mobile markets are expected to grow. As such, the Company will expand differentiated products based on advanced processes and address each market segment with diverse product lineups to continue to lead the market as the No.1 memory maker. Samsung Electronics Interim Business Report 25 / 173 -DP Business Unit Industry Overview Display products include TFT-LCD (Thin Film Transistor Liquid Crystal Display) and OLED (Organic Light Emitting Diode) panels. A TFT-LCD panel is a liquid crystal based display that consumes less electricity and features a thinner profile, while maintaining high resolution. It has a wide range of potential applications in devices of all sizes and functionality. The large panel TFT-LCD market has grown rapidly from first mainly being used in laptops, then monitors, and then in TVs. However, the market growth rate has slowed recently due to the high penetration rate of LCD monitors and LCD TVs. OLED panels use organic materials which offer sharp contrast and color, high color concordance, and fast response rates. Such differentiating features provide advantages in smartphone products, and as a result the market demand for under 10" small-to-medium size OLED displays has increased. In addition, OLED has recently made a foray into the high-end TV market. The TFT-LCD and OLED businesses have high barriers to entry as they are capital intensive and require large-scale production to realize economies of scale. These types of businesses are generally sensitive to business fluctuations. Therefore, even if demand continuously increases, supply and demand balance tends to change regularly due to competitive investment in facilities by producers. Also, production capacity can sharply increase as producers invest in facilities contemporaneously as they compete with one another to address demand increase ahead of the competition. As such, when production capacity sharply increases, the average selling price ("ASP") of panels may decrease. In contrast, when supply cannot meet increasing demand, ASP may increase. Market Condition In 2015, demand for large-size panels is expected to be solid driven by the trend towards large-screen TVs and continued growth of UHD TVs. However, supply and demand conditions may change negatively due to risks associated with an increase in industry capacity and a decrease in demand from set makers. For mobile devices, the product mix is expected to expand, particularly in the mid-range category. The trend toward higher resolution and larger size panels is expected to continue, and the demand from new product categories such as wearable and flexible devices, as well as automotive applications is also expected to increase. The Company has been leading the large panel TFT-LCD market with our advanced technologies. It has also been a leader in the small to medium-size OLED market since successfully commercializing the world's first OLED products in 2007 and it continues to enjoy a sizeable market share in this segment. However, competition in the overall display industry continues to intensify. < Market Share of the DP Business' Main Product > Product 2015.3Q 2014 Display Panel 21.9% 20.9% Market share data of 2013, 2014, and as of September 30, 2015 are from research agency Display Search (global market share, large-size panel in amount). 2013 20.4% Business Condition The Company is improving cost competitiveness through increasing production yields by developing advanced process technologies, developing high transmission panels, and internally producing core manufacturing equipment. In addition, the Company continues to improve profitability through close collaboration with TV and smartphone manufacturers from R&D to production. For its large-size panel business, the Company will strive to improve cost efficiency and maintain an appropriate level of Samsung Electronics Interim Business Report 26 / 173 inventory. Meanwhile, it will continue to monitor market conditions and respond appropriately. For mobile, the Company plans to diversify products and continue to expand its customer base. In particular, the Company plans to solidify its leadership in the market by enhancing the technological sophistication of its flexible displays and increasing yield rates. The Company will strive to secure new growth engines by developing new applications such as transparent, mirror, head mount, and automotive displays. Samsung Electronics Interim Business Report 27 / 173 B. Financial Summary by Division (Unit: KRW million, %) Division Classification Total sales 2015.3Q Amount Portion 84,299,333 23.2% 2014 Amount Portion 124,916,892 25.3% 2013 Amount Portion 125,088,762 22.4% Internal sales CE Net sales 51,254,388 33,044,945 23.7% 22.4% 74,733,757 50,183,135 25.9% 24.3% 74,757,247 50,331,515 22.7% 22.0% Operating profit 438,205 2.2% 1,184,325 4.7% 1,673,343 4.5% Total asset 49,177,842 13.1% 43,116,374 12.8% 47,183,953 14.9% Total sales 169,253,449 46.6% 236,438,979 47.9% 299,161,654 53.6% Internal sales IM Net sales 90,700,242 78,553,207 42.0% 53.3% 124,674,435 111,764,544 43.3% 54.2% 160,344,435 138,817,219 48.7% 60.7% Operating profit 7,908,699 39.0% 14,562,885 58.2% 24,957,741 67.8% Total asset 103,331,740 27.6% 94,227,108 27.9% 86,132,881 27.1% Total sales 64,753,973 17.8% 75,058,071 15.2% 70,908,145 12.7% Semiconductor Internal sales Net sales Operating profit 30,375,730 34,378,243 9,990,399 14.1% 23.3% 49.3% 35,328,169 39,729,902 8,776,442 12.3% 19.3% 35.1% 33,471,566 37,436,579 6,887,978 10.2% 16.4% 18.7% Total asset 98,951,159 26.5% 87,567,196 25.9% 76,224,096 24.0% Total sales 41,162,726 11.3% 52,227,615 10.6% 61,294,886 11.0% DS DP Business Unit Internal sales Net sales Operating profit 20,201,594 20,961,132 1,996,987 9.4% 14.2% 9.9% 26,500,446 25,727,169 660,181 9.2% 12.5% 2.6% 31,457,770 29,837,116 2,980,563 9.5% 13.0% 8.1% Total asset 49,560,709 13.3% 46,826,533 13.8% 42,195,558 13.3% Total sales 109,196,883 30.1% 131,459,756 26.6% 134,394,781 24.1% Internal sales 53,911,422 25.0% 65,669,950 22.8% 66,633,875 20.2% Total Net sales 55,285,461 37.5% 65,789,806 31.9% 67,760,906 29.6% Operating profit 11,910,394 58.8% 9,430,915 37.7% 10,000,665 27.2% Total asset 174,294,625 46.6% 160,138,321 47.4% 145,872,686 45.9% Net sales reported here includes inter-divisional sales. Cumulative net sales for 3Q 2015 were KRW 147,338 billion. By Division, CE reported net sales of KRW 33,045 billion (22.4%) and IM reported net sales of KRW 78,553 billion (53.3%). The DS Division contributed approximately 37.5% of net sales: KRW 34,378 billion (23.3%) by the Semiconductor Sub-Division and KRW 20,961 billion (14.2%) by the DP Business Unit. Cumulative operating profit for 3Q 2015 was KRW 20,271 billion. The IM Division accounted for 39.0% with KRW 7,909 billion and the DS Division accounted for 58.8% with KRW 11,910 billion. Samsung Electronics Interim Business Report 28 / 173 Reasonable Allocation of Common SG&A (Selling General & Administrative) Expenses and Assets (1) For common SG&A expenses, specific expenses that are allocable to a specific product/model are allocated to such product/model. However, common expenses that cannot be attributed to a specific product/model category are reasonably allocated throughout the Company based on an allocation standard (expense-to-sales ratio, number of personnel, etc.). (2) For common assets, assets that can be directly allocated (inventory assets, fixed assets, investment assets, etc.) are allocated to the corresponding organizational unit. Assets that are commonly managed are allocated to each Division based on an allocation standard (expense-to-sales ratio, pre-tax profit, etc.). 2. Key Products and Services A. Revenue For the third quarter of 2015, the CE Division's revenue of KRW 33,045 billion accounted for 22.4% of the total net revenue; the IM Division accounted for 53.3% with KRW 78,553 billion; and the DS Division accounted for 37.5% with KRW 55,286 billion. The Company's net revenue by Division as of September 30, 2015 are as follows: Division Major Products CE TV, monitor, printer, air conditioner, refrigerator, washing machine, medical equipment, etc. IM HHP, network system, computer, digital camera, etc. Semiconductor DS DP Business Unit DRAM, NAND flash, Mobile AP, etc. TFT-LCD, OLED, etc. Sub-Total Others - Total Includes sales between Divisions (on consolidated basis). (Unit: KRW 100 million, %) Net Revenue Portion 330,449 785,532 343,782 209,611 552,855 -195,456 1,473,380 22.4% 53.3% 23.3% 14.2% 37.5% -13.2% 100.0% See 5. Sales and Distribution for sales by each product. B. Average Selling Price (ASP) Changes In the third quarter of 2015, the ASP of TVs continued to decline from 2014. The ASP of HHPs has not changed materially from 2014. The ASP of memory products and display panels have declined compared to 2014. Samsung Electronics Interim Business Report 29 / 173 3. Key Raw Materials (On consolidated basis as of September 30, 2015) Division CE IM DS Type Raw materials Raw material Raw material Raw material Raw material Raw material Raw material Raw material Raw material Item Display panel Others Division Total Mobile display panel Baseband Chip Others Division Total Glass POL Window Others Division Total Others Total Specific usage Color picture signaler Color picture signaler CPU Purchase price 40,996 114,754 155,750 29,759 22,849 236,700 289,308 Glass substrate for display 10,809 Polarizer plate 14,359 Tempered glass 13,135 119,008 157,311 214 602,584 (Unit: KRW 100 million, %) Portion Note (supplier) 26.3% CMI, AUO, etc. 73.7% 100.0% 10.3% Iljin Display, etc. 7.9% Qualcomm, etc. 81.8% 100.0% 6.9% Corning Precision Materials, etc. 9.1% Dongwoo FineChem, NITTO, etc. 8.3% BIEL, etc. 75.7% 100.0% - - For the CE Division, key raw materials include display panels for TVs and monitors and PDP modules. For the IM Division, key raw materials include display panels for mobile devices and baseband chips. For the DS Division, key raw materials include glass, polarizers ("POL") and wafers. Large display panels for TVs and monitors are supplied by Cummins (CMI) and AU Optronics (AUO) (among others), mobile display panels are supplied by Iljin Display, and baseband chips are supplied by the System LSI business unit and Qualcomm. The Company manufactures display panels with glass and POLs supplied by Samsung Corning and Dongwoo Fine-Chem. (Raw Materials Price Trends) The price of TV and monitor display panels, which are the major raw materials for the CE Division, declined 9% on average since 2014 due to oversupply from increased capacity and improved productivity. For the IM Division, since 2014, the price of mobile display panels have increased by 4%, and the price of baseband chips have decreased by 6%. For the DS Division, the price of raw materials continues to decrease. Also, since 2014, the price of semiconductor wafer has declined by 15% and the price of glass for display panels has declined by 28%. Samsung Electronics Interim Business Report 30 / 173 4. Production and Facilities A. Production Capacity, Output, Utilization Rate (Capacity) Division 2015.3Q Item ('15.1.1~ 9.30) Quantity CE TV IM HHP Memory DS Display Panel Global production capacity for major product categories 33,478 375,200 192,261,000 7,179 2014 Quantity 62,990 523,750 173,506,000 9,185 (Unit: 1,000) 2013 Quantity 53,102 556,600 116,909,000 8,260 The CE and IM Divisions' production capacity, by major product, is calculated as follows: The average number of lines (x) the average output per hour (x) the average operation hours per day (x) the days of operation Memory production capacity for the DS Division is calculated as follows: Converted output (1GB equivalent) ÷ the utilization rate. Display panel production capacity is calculated as follows: The total producible panel surface area ÷ the dimensions of eighth generation glass (2200x2500mm) (Output) Division Item CE TV IM HHP Memory DS Display Panel Global output for major product categories 2015.3Q ('15.1.1~ 9.30) Quantity 30,961 317,630 192,261,000 6,359 2014 Quantity 55,066 439,520 173,506,000 8,252 (Unit: 1,000) 2013 Quantity 47,527 499,480 116,909,000 7,340 During first three quarters of 2015, the CE Division's output of TVs was 30,961 thousand units (major production sites: Korea, China, Mexico, Brazil, and Hungary). The IM Division's output of HHPs was 317,630 thousand units (major production sites: Korea, China, Vietnam, and Brazil). The DS Division's memory output (1GB equivalent) was 192,261 million (major production sites: Korea and China). The DS Division's output of display panels was 6,359 thousand units (major production sites: Korea, China, and Slovakia). Samsung Electronics Interim Business Report 31 / 173 (Utilization Rate) Division Item CE TV IM HHP 2015.3Q Production capacity 33,478 375,200 2015.3Q Actual output 30,961 317,630 (Unit: 1,000) Utilization Rate 92.5% 84.7% In the third quarter of 2015, CE and IM utilization rates were calculated as actual output relative to production capacity. The utilization rates were 97.6% for TVs and 84.7% for HHPs. Division DS Item Memory Display Panel 2015.3Q Potential Production Time 44,448 69,816 2015.3Q Actual Production Time 44,448 68,910 (Unit: hours) Utilization Rate 100.0% 98,7% The DS Division operates memory and display panel production in three shifts (24 hours a day). Cumulative operating days in the third quarter of 2015 including holidays were 273 days. The utilization rate was calculated as actual hours [273 days (x) number of production lines (x) 24 hours] relative to production capacity. Samsung Electronics Interim Business Report 32 / 173 B. Production Facilities and Investment (1) Key facilities for production and operation The Company's operational activities include manufacturing, development, marketing, and sales in Korea including operations in Seocho, Seoul, Suwon, Gumi, Giheung, Onyang, Gwangju and 9 regional headquarters under the CE and IM Divisions and 5 under the DS Division in North America, Europe, and China. [Operations] Region Korea (10) Overseas (9 Regional Headquarters for CE and IM Divisions) Overseas (5 Regional Headquarters for DS Division) Headquarters Seocho Suwon Gumi1 Gumi2 Giheung Onyang Hwaseong Gwangju Cheonan Asan North America Europe China Southeast Asia Southwest Asia CIS Middle East Africa Latin America Americas Europe China Southeast Asia Japan Location Seoul, Korea Suwon, Korea Gumi, Korea Gumi, Korea Yongin, Korea Asan, Korea Hwaseong, Korea Gwangju, Korea Cheonan, Korea Asan, Korea New Jersey, US London, UK Beijing, China Singapore, Singapore New Delhi, India Moscow, Russia Dubai, UAE Johannesburg, Republic of South Africa Sao Paolo, Brazil San Jose, US Eschborn, Germany Shanghai, China Singapore Tokyo, Japan Samsung Electronics Interim Business Report 33 / 173 The Company's property, plant and equipment include land, buildings and structures, machinery and equipment, and construction in progress. As of September 30, 2015, their total book value is KRW 86,560 billion, which is an increase of KRW 5.687 trillion from year-end 2014. In the third quarter of 2015, new acquisitions of KRW 19,178 billion and depreciation of KRW 14,614 billion were recorded. Classification Book value At 1 January 2014 Acquisition cost Accumulated depreciation (Including accumulated impairment loss) Land Buildings and Machinery and Construction Structures Equipment in progress 7,710,352 17,598,547 37,751,890 15,832,307 7,710,352 26,474,937 127,603,897 15,832,307 (Unit: KRW million) Others 1,979,854 5,664,513 Total 80,872,950 183,286,006 - (8,876,390) (89,852,007) - (3,684,659) (102,413,056) Increase (Decrease) General acquisition and capital expenditure Acquisition as a result of business combination Depreciation Disposal/Discard 254,523 246 - (20,972) 6,105,307 1,757 (1,149,941) (43,046) 18,482,779 3,498 (12,775,514) (141,442) (6,460,794) 47 - (39) 795,908 29,228 (688,574) (43,425) Impairment - - 1,446 - (449) Others (95,527) (121,177) 1,510,765 (164,991) 207,865 Book value 7,848,622 22,391,447 44,833,422 9,206,530 2,280,407 Balance at 31 Dec 2014 Acquisition cost Accumulated depreciation (Including accumulated impairment loss) 7,848,622 32,477,795 146,219,191 - (10,086,348) (101,385,769) 9,206,530 - 6,516,450 (4,236,043) Others: Includes effects of changes in FX rates and changes in the scope of consolidated financial statements. Market value of major tangible assets is omitted as objective assessment is difficult. Property, plant, and equipment above is presented on a consolidated basis. 19,177,723 34,776 (14,614,029) (248,924) 997 1,336,935 86,560,428 202,268,588 (115,708,160) (2) CAPEX During first three quarters of 2015, the Company invested KRW 19.2 trillion in CAPEX, including upgrading production lines of the Semiconductor Sub-Division and the DP Business Unit. The Company expects to increase its investments to reinforce its leadership in cutting-edge semiconductor technology and efficiently manage DP production lines. [CAPEX by Division] Business Semiconductor DP Business Unit Other Purpose Establishment, addition, upgrade Establishment, addition, upgrade Other Period Jan '15 ~ Sep '15 Jan '15 ~ Sep '15 Jan '15 ~ Sep '15 Assets Buildings, facilities Buildings, facilities Buildings, facilities (Unit: KRW 100 million) Investment in 2015.1Q~3Q 112,194 29,413 50,170 Total 191,777 Samsung Electronics Interim Business Report 34 / 173 5. Sales and Distribution A. Sales In the third quarter of 2015, the Company recorded KRW 147,338 billion of total revenue, a decline of 4.0% compared to the third quarter of the prior year. By Division, when compared to the third quarter of 2014, the CE Division's revenue decreased by 8.0%, the IM Division's revenue decreased by 8.1%, and the DS Division's revenue increased by 15.0%. (Unit: KRW 100 million) Division Sales types Product categories 2015.1Q~3Q 2014 2013 Goods TV, monitor, printer, air CE Products Service conditioner, refrigerator, washing machine, medical Others equipment IM Goods Products Service Others HHP, Network System, Computer, Digital camera Semiconductor DS DP Business Unit Goods Products Service Others Goods Products Service Others DRAM, NAND Flash, Mobile AP TFT-LCD, OLED Division total Others Other revenue - Total Includes internal sales between Divisions. 330,449 501,831 503,315 785,532 1,117,645 1,388,172 343,782 397,299 374,366 209,611 552,855 -195,456 1,473,380 257,272 657,898 -215,314 2,062,060 298,371 677,609 -282,169 2,286,927 Sales by Major Product Classification 2015.1Q~3Q TV Mobile Devices Memory Display Panel Including internal sales between Divisions. 198,456 764,293 259,510 209,611 2014 324,486 1,074,149 293,244 257,272 (Unit: KRW 100 million) 2013 331,207 1,353,537 237,146 298,371 Samsung Electronics Interim Business Report 35 / 173 Sales by Type Classification 2015.1Q~3Q Products Service and other Sales Total Other sales consists of royalty income and etc. 1,464,662 8,718 1,473,380 2014 2,036,716 25,344 2,062,060 (Unit: KRW 100 million) 2013 2,252,839 34,088 2,286,927 Sales by Region (on a separate basis) (Unit: KRW 100 million) Classification Korea Americas Europe Asia and Africa China Total 2015.1Q~3Q 111,877 314,094 122,689 225,202 226,758 1,000,620 2014 153,247 433,940 208,982 298,140 283,946 1,378,255 2013 172,004 442,526 335,645 341,059 292,487 1,583,721 B. Sales Channels Korea Seller Manufacturer (Facility) Overseas Sales Channel Retailer Distributor (General Merchandise Store, Discount Store, Department Store, Home-Shopping, Internet) Retailer Cooperative Joint Market, Sales Shop, Open Stores Telecommunication Service Provider (SKT, KT, LG U+) Direct Sales Consumer Consumer Seller Production Subsidiaries Regional Sales Office Regional Distribution Office Sales Ratio by Channel Sales Channel Retailer Dealer Retailer Distributor Dealer Retailer Telecommunication Service Provider Regional Sales Office Dealer Distributor Retailer Retailer Dealer Retailer Direct Sales Consumer Consumer Channel Ratio On a global basis Wholesale 33% Retail 24% Special/direct sale 38% Others 5% Samsung Electronics Interim Business Report 36 / 173 C. Sales Methods and Conditions Domestic Classification Channel Exclusive Agency Distributor General Merchandise Store, Discount Store, Department Store, Home Shopping, Internet Special/direct sale Corporate Clients, etc. Collection Incidental expense sharing - Credit agreement (Cash, 30 day credit) - Case specific cost sharing as determined by mutual (Credit applied within 100% of collateral) agreement Case specific and contract specific - Case specific cost sharing as determined by mutual agreement Case specific and contract specific N/A Overseas Classification Channel Retailer Dealer Distributor Retail store General merchandise store, Discount store, Department store Direct sales to local distributors B2B Corporate Clients, etc. Collection Case specific and contract specific Case specific and contract specific Case specific and contract specific Case specific and contract specific Incidental expense sharing - Case specific cost sharing as determined by mutual agreement - Case specific cost sharing as determined by mutual agreement - Case specific cost sharing as determined by mutual agreement N/A D. Sales Strategy Expand market leadership based on smart devices Provide differentiated value to customers through brand, products, and service Strengthen operational capabilities for customer/market Enhance sales capabilities E. Major Customers During the first three quarters of 2015, major customers included Apple, Deutsche Telekom, Ingram Micro, Sprint and Verizon. Sales to our five major customers accounted for about 13% of total sales. 6. Long-term Contracts N/A Samsung Electronics Interim Business Report 37 / 173 7. Financial Risk Management The Company's financial risk management focuses on minimizing market risk, credit risk, and liquidity risk arising from operating activities. To mitigate these risks, the Company implements and operates a financial risk policy and program that closely monitors and manages such risks. The finance team mainly carries out the Company's financial risk management. With the cooperation of the Company's Divisions, domestic and foreign subsidiaries, the finance team periodically measures, evaluates and hedges financial risks and also establishes and implements global financial risk management policies. Financial risk management officers are dispatched to the regional headquarters of located in the US, UK, Singapore, China, Japan, Brazil and Russia to oversee application of global financial risk management policies at the local finance centers. Financial assets subject to the Company's financial risk management are as follows: cash and cash equivalents, short-term financial instruments, available-for-sale financial assets, trade, and other receivables, and other financial assets. The Company's financial liabilities subject to financial risk management are as follows: trade and other payables, borrowings, debentures, and other financial liabilities. A. Market Risk (1) Foreign Exchange Risk The Company is exposed to foreign exchange risk arising from various currency exposures due to global operations. The Company is exposed to foreign currency volatility due to exchange positions of currencies, especially the US Dollar, Euro, Japanese Yen, and Chinese Yuan. To minimize foreign exchange risk arising from operating activities, the Company's foreign exchange management policy requires normal business transactions (including imports and exports) to be conducted in the local currency or for the cash-in currency to be matched with the cash-out currency. The Company's foreign exchange risk management policy also defines foreign exchange risk, measuring period, ownership responsibilities, management procedures, hedging period and hedge ratio. The Company prohibits all speculative foreign exchange transactions. The Company has established a global foreign exchange system to manage exposures related to receivables and payables denominated in foreign currencies. (2) Risk of Volatility in Equity Securities Held as Investment The Company's investment portfolio consists of direct and indirect investments in equity securities and is classified as available-for-sale, which is in line with the Company's strategy. As of September 30, 2015 and December 31, 2014, a price fluctuation in relation to marketable equity securities by 1% would result in changes in other comprehensive income (before income tax) of KRW 48,896 million and KRW 57,768 million, respectively. (3) Interest Rate Risk Risk of changes in interest rate for a floating interest rate financial instrument is defined as the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates and the risk that cash flows from investing/financing activities will fluctuate with changes in interest gain/loss. The Company is exposed to Samsung Electronics Interim Business Report 38 / 173 interest rate risk mainly through interest bearing liabilities and assets. The Company has policies to minimize uncertainty and expenses from changes in interest rates. In order to minimize interest rate related risks, the Company minimizes external borrowings by facilitating cash pooling systems on a regional and global basis. The Company manages its exposure to interest rate risks by regularly monitoring risk factors and timely resolution, and prevention, of issues. B. Credit Risk Credit risk arises during the normal course of transactions and investing activities where clients or other parties fail to discharge an obligation. The Company actively monitors its credit risk on a regular basis and determines a counterparty's credit limit periodically based on the counterparty's financial conditions, default history, and other important factors. Credit risk can arise from transactions with financial institutions which include financial instrument transactions such as cash and cash equivalents, savings, and derivative instruments. To minimize such risk, the Company transacts only with banks that have strong international credit ratings (S&P "A" and above), and all new transactions with financial institutions with no prior transaction history are approved, managed and monitored by the Company's finance team and the local finance center. The Company normally enters into financial agreements that do not: require guarantees for payment, have restrictions on debt ratios or have acceleration provisions. The Company requires separate approval for contracts with such restrictive provisions. The Company estimates that its maximum exposure to credit risk is the carrying value of its financial assets, net of impairment losses. C. Liquidity Risk Due to large investments made by the Company, maintaining adequate levels of liquidity is critical. The Company strives to achieve this goal by periodically forecasting its cash flow, estimating required cash levels, and managing income and expenses. The Company manages its liquidity risk by periodically forecasting projected cash flows. If abnormal signs are identified, the Company works with the local finance center and provides liquidity support by utilizing its globally integrated finance structures such as cash pooling. In addition, the Company maintains a liquidity management process which provides additional financial support through the local finance center and the Company when necessary. The cash pooling program allows sharing of surplus funds among entities and contributes to minimizing liquidity risk and strengthening the Company's competitive position by reducing capital operating expenses and finance expenses. In addition, the Company mitigates liquidity risk by contracting with financial institutions with respect to bank overdrafts and foreign trade finance and by providing payment guarantees to subsidiaries. For large scale facility investments, liquidity risk is minimized by utilizing internal reserves and long term borrowings according to the capital injection schedule. Samsung Electronics Interim Business Report 39 / 173 D. Capital Risk Management The purpose of capital management is to maintain a healthy capital structure. The Company uses debt ratio as an indicator and measure of an appropriate capital structure. The debt ratio is calculated by dividing total liabilities by total equity in the consolidated financial statements. The Company's capital risk management policy has not changed since the fiscal year ended December 31, 2014. The Company has maintained "A+ " and "A1" credit ratings from S&P and Moody's, respectively. The total liabilities to equity ratio as of September 30, 2015 and year-end 2014 are as follows: Total liabilities Total equity Total liabilities to equity ratio September 30, 2015 65,838,937 180,728,636 36.4% (Unit: KRW million) December 31, 2014 62,334,770 168,088,188 37.1% Samsung Electronics Interim Business Report 40 / 173 E. Fair Value Measurement - Carrying amounts and fair values of financial instruments by category as of September 30, 2015 and December 31, 2014 are as follows: Classification Financial assets Cash and cash equivalents September 30, 2015 Carrying amount Fair value 23,608,377 (1) (Unit: KRW million) December 31, 2014 Carrying amount Fair value 16,840,766 (1) Short-term financial instruments Short-term available-for-sale financial assets Trade and other receivables Long-term available-for-sale financial assets(2) Other 40,895,407 5,220,977 27,631,463 8,628,872 3,551,301 (1) 5,220,977 (1) 8,211,414 3,530,398 41,689,776 3,286,798 24,694,610 12,667,509 4,762,971 (1) 3,286,798 (1) 12,272,756 4,725,263 Total Financial assets 109,536,397 103,942,430 Financial liabilities Trade payables 9,842,913 (1) 7,914,704 (1) Short-term borrowings 11,303,099 (1) 8,029,299 (1) Other payables Current portion of long-term borrowings Debentures 7,672,000 46,910 1,458,885 (1) (1) 1,488,220 9,258,344 1,778,667 1,355,882 (1) (1) 1,377,113 Long-term borrowings 78,001 61,846 101,671 82,271 Long-term other payables 2,214,367 2,256,516 2,520,277 2,606,179 Other 8,861,788 (1) 11,474,129 (1) Total Financial liabilities 41,477,963 42,432,973 1 Assets and liabilities whose carrying amounts are reasonable approximations of their fair value are excluded from the fair value disclosures. 2 Amount measured at cost (2015.3Q: KRW 417,458 million and 2014: KRW 394,753 million) is excluded, as the range of reasonable fair value estimates are significant and the probabilities of the various estimates cannot be reasonably assessed. Samsung Electronics Interim Business Report 41 / 173 The following table presents the fair value of assets and liabilities, by Level (as defined below), measured as of the dates indicated: Assets (In millions of Korean won) Short-term available-for-sale financial assets Long-term available-for-sale financial assets1 Other Liabilities Other Level 1 4,889,610 - - As of September 30, 2015 Level 2 Level 3 Total balance 5,220,977 33,379 66,160 3,288,425 840 5,220,977 8,211,414 67,000 44,643 - 44,643 December 31, 2014 Assets (In millions of Korean won) Level 1 Level 2 Level 3 Total balance Short-term available-for-sale financial assets Long-term available-for-sale financial assets1 1,016,878 5,776,836 2,269,920 3,050,338 3,445,582 3,286,798 12,272,756 Other - 45,898 102,513 148,411 Liabilities Other - 78,348 - 78,348 1 Amount measured at cost (September 30, 2015: KRW 417,458 million, December 31, 2014: KRW 394,753 million) is excluded, as the range of reasonable fair value estimates are significant and the probabilities of the various estimates cannot be reasonably assessed. The levels of the fair value hierarchy (based on characteristics of the input variables) and its application to financial assets and liabilities are described below. Level 1: Quoted market prices (unadjusted) for identical assets or liabilities Level 2: Fair valuation based on inputs that are observable in the market (Other than quoted prices included within Level 1) Level 3: Fair valuation based on inputs that are unobservable in the market The fair value of financial instruments traded in active markets is based on quoted market prices at the statement of financial position date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm's length basis. The quoted market price used for financial assets held by the Company is the current bid price. These instruments are included in Level 1. Instruments in Level 1 include listed equity investments classified as trading securities or available-for-sale financial assets. The fair value of financial instruments that are not traded on an active market (for example, over-the-counter derivatives) is determined using valuation models. These valuation models maximize the use of observable market data where it is available and rely as little as possible on entity specific information. If all significant inputs required to measure the fair value of an instrument are observable, the instrument is included in Level 2. If one or more of the significant inputs are not based on observable market data, the instrument is included in Level 3. Samsung Electronics Interim Business Report 42 / 173 The Company performs fair value measurements required for financial reporting purposes, including Level 3 fair values, and discusses valuation processes and results at least once every quarter in line with the Company's quarterly reporting dates. The Company recognizes changes in Levels at the end of the reporting period, if corresponding events or changes in circumstances necessitating such reclassification have occurred. Specific valuation methods used to value financial instruments include: Quoted market prices or dealer quotes for similar instruments. The fair value of foreign exchange forward contracts is determined using, among other things, forward exchange rates at the statement of financial position date, with the resulting value discounted back to present value. Other methods, such as discounted cash flow analysis, are used to determine fair value for the remaining financial instruments. For trade and other receivables, the book value approximates a reasonable estimate of fair value. - Valuation Methods and Inputs The Company utilizes a present value method to discount future cash flows at a proper interest rate for corporate bonds, government and public bonds, and bank debentures that are classified as Level 2 in the fair value hierarchy. The following table presents the valuation methods and inputs used for major financial instruments classified as Level 3. Fair Classification Value Long-term available-for-sale financial assets Taewon Electric 17,094 Samsung Venture Investment 6,586 Coming Incorporated convertible preferred shares Derivatives Embedded derivatives (convertible bonds) 2,871,758 840 Valuation Technique Discounted cash flow Discounted cash flow Trinomial model Binomial model Level 3 Inputs Permanent growth rate Weighted average cost of capital Permanent growth rate Weighted average cost of capital Risk adjusted discount rate Price volatility Discount rate Stock price volatility (In millions of Korean won) Input Range (Weighted Average) -1.00% ~ 1.00% (0%) 7.76% ~ 9.76% (8.76%) -1.00% ~ 1.00% (0%) 7.74% ~ 9.74% (8.74%) 5.46% ~ 7.46% (6.46%) 29.8% ~ 35.8% (32.8%) 3.31% ~ 7.44% (5.22%) 15.84% ~ 22.28% (18.93%) Samsung Electronics Interim Business Report 43 / 173 - Changes in Level 3 Instruments: (In millions of Korean won) Balance as of January 1 Purchases Disposals Amount recognized in profit or loss Amount recognized in other comprehensive income Other Balance as of September 30 2015.3Q 3,548,095 77,227 (123,798) (11,230) (195,051) (5,978) 3,289,265 2014.3Q 493,378 2,498,800 (10,871) (14,518) 192,453 (41,731) 3,117,511 - Sensitivity Analysis for Recurring Fair Value Measurements Categorized within Level 3 Sensitivity analysis of financial instruments is performed to measure favorable and unfavorable changes in the fair value of financial instruments which are affected by inputs that are unobservable in the market, using a statistical technique. When the fair value is affected by two or more input variables, such fair value is calculated using the most favorable or most unfavorable input values. The results of the sensitivity analysis for the effect on profit or loss from changes in inputs for each type of financial instrument, which is categorized within Level 3 and subject to sensitivity analysis, are as follows: (In millions of Korean won) Classification Long-term available for sale financial assets1 Embedded derivatives (convertible bonds)2 Total Favorable Changes Profit or Loss - 262 262 Equity 247,116 262 247,378 Unfavorable Changes Profit or Loss - (261) (261) Equity (216,189) (261) (216,450) 1 Changes in the fair value of convertible preferred shares have been calculated by increasing or decreasing the correlation between volatility (29.8% ~ 35.8%) and the discount rate. Similarly, for other equity securities, changes in fair value have been calculated by increasing or decreasing the correlation between growth ratio (-1% ~ 1%) and the discount rate, which are significant unobservable inputs. 2 For equity derivatives, changes in fair value have been calculated by increasing or decreasing the correlation between stock prices and volatility by 10%, which are relevant major variables that cannot be observed. Samsung Electronics Interim Business Report 44 / 173 8. Derivative Instruments and Put Options The Company holds convertible bonds in several companies, including FTS. (A) The value of derivative instruments as of September 30, 2015 is presented below: (Unit: KRW million) Asset Liabilities Valuation Gain Valuation Loss Put options 9,908 - 161 1,783 Total 9,908 - 161 The option values were calculated using appropriate valuation methodologies, including the Black-Scholes model 1,783 The Company holds convertible preferred shares of Corning Incorporated and its value as of September 30, 2015 is as follows. (Unit: KRW million) Purchasing Price Fair Value Valuation Gain Valuation Loss Convertible Preferred Shares 2,434,320 Fair value determined using Trinomial Tree model 2,871,758 437,438 - (B) To manage foreign exchange risk, the Company's subsidiaries hedge their foreign currency positions by trading currency forward contracts of such currencies. Overseas subsidiaries buy or sell currency forwards with less than one year maturity through a bank to minimize such risks. (C) Currency forwards as of September 30, 2015 are as follows. Currency forwards Total Asset 65,997 65,997 Liabilities 44,605 44,605 Valuation Gain 57,039 57,039 (Unit: KRW million) Valuation Loss 20,446 20,446 Samsung Electronics Interim Business Report 45 / 173 9. Major Contracts Account Item Contents Contract type Patent cross-license agreement Ericsson Contract date 2014.01.25 Purpose and contents Secure operational advantage through mutual patent licensing Contract type Patent cross-license agreement Google Contract date and period Purpose and contents 2014.01.25 / indefinite term Secure business freedom through mutual patent licensing Others Permanent license contract (including patent applications in the next 10 years) Contract type Patent cross-license agreement Cisco Contract date 2014.01.23 Purpose and contents Secure business freedom through mutual patent licensing Global Foundries Inc. Contract type Contract date Purpose and contents Process technology license contract 2014.02.28 Expand customer base of 14nm process Contract type Patent license agreement InterDigital Contract date 2014.06.03 Purpose and contents Secure business freedom through patent licensing Contract type Patent cross-license agreement Sharp Contract date 2015.01.01 Purpose and contents Secure operational advantage through mutual patent licensing Contract type Settlement Agreement Microsoft Contract date - Purpose and contents End dispute over royalty payment Information that may be referenced or used in other IP disputes, including contract amount, is not included. Samsung Electronics Interim Business Report 46 / 173 10. Research and Development Activities A. Summary of Activities and R&D Expenditures The Company is leading the global market by continuously developing creative and innovative products and the future technology through shifting its way of thinking and understanding customer demand. The Company is currently developing creative and innovative products and doing its utmost to cement its position in the global IT industry and become a worldwide leader in industrial technology by creating and securing next-generation technology. [R&D expenses] (Unit: KRW million) 2015.3Q Total R&D expenditure Accounting Capitalization of development expenses (intangible asset) R&D costs (expenses) R&D expenses/sales Ratio 11,101,697 858,982 10,242,715 7.5% On a consolidated basis (in conformity with K-IFRS) 2014.3Q 11,412,295 679,094 10,733,201 7.4% 2014 15,325,507 940,001 14,385,506 7.4% 2013 14,780,432 461,030 14,319,402 6.5% As of September 30, 2015, the Company's R&D expenses were KRW 11,102 billion. The Company capitalized KRW 859 billion and recognized KRW 10,243 billion as current expenditure. B. R&D Organization and Operations Korea The Company operates three levels of R&D organizations; a business unit development team under each Division that develops market ready technologies with a 1-2 year outlook, a research institute under each business unit that develops mid-to-long term technology with a 3-5 year outlook, and the Samsung Advanced Institute of Technology that develops core technology as seeds for future growth engines. Samsung Advanced Institute of Technology is the central research institute of Samsung Electronics that has been established to lead the Company into the future and serve as an incubator of cutting-edge technology. It has a creative R&D system and provides R&D direction for promising growth sectors at the Company level, exploring future growth engines and strengthening technological competitiveness of core businesses. Overseas The Company operates R&D organizations in the US (SRA), the UK (SRUK), Russia (SRR), Israel (SRIL and SIRC), India (SRI-Bangalore and SRI-Delhi), Japan (SRJ), China (SSCR, SRC-Beijing, SRC-Nanjing, SRC-Tianjin, and SRCGuangzhou) to carry out research activities for product development and basic technological research. Samsung Electronics Interim Business Report 47 / 173 As of September 30, 2015 Refer to G. Subsidiaries subject to consolidation in I. Corporate Overview for more details about overseas R&D organizations. Samsung Electronics Interim Business Report 48 / 173 C. R&D Results Research Project Research Results and Expected Effect In case applied to a product, name of the product and application Smart TV Service Smart Hub service launch in `13 - Provides Smart Hub that enables easy and fast access to contents by category via five panel UIs On TV: Recommends program based on viewing history by the hour Movies & TV Shows: Recommends popular/new VOD based on user's viewing history Photos, Videos & Music: Provides list of recently played/recorded photos/music/videos Social: list of contents recommended by SNS friends/ video call Apps: Shows recommended/ downloaded apps SDK 4.1 Public Release - Reinforces platform and ecosystem by adding major S/W module platform of `13 - Supports Linux and Mac emulator and provides local Cloud Emulator functions - Adds Smart Controller functions of `13 - Native IME (response to '13 input device) Region: Global Launch: Feb '13 160lm/W middle power LED package Smart Input Device Mass produced 160lm/W middle power, LED package - Middle power LED package achieved luminance efficiency of 160 lumen per watt Region : Global - First to mass produce industry-best middle power LED package Launch: Feb `13 Promote the Company's image as a leader in middle power LED package technology and Name: LM561B continue to secure LED market presence Introduction of 2013 smart wireless keyboard Easy to control device with QWERTY text input and Touch Pad Supports multi pairing between BT standard devices including TV/mobile (shortcut) Introduction of 2013 external camera Improves Skype resolution with 5M pixel camera EPTZ(Electronic Pan Tilt Zoom), Face Tracking One Hand Gesture Recognition Region: Global Launch: Mar '13 HDD Broadcasting Multi-device (BD-F8500) Key features Dual Tuner , CI , LAN, USB 2.0, HDMI, S-PDIF, Internal HDD, WiFi, Record 3D broadcasts Development Applied `13 UX & Apps, Applied Fox-B, New Micom (Nuvoton, 32bit), Movie & TV Show, Screen Mirroring, Remote Access Region: Europe Launch: Mar `13 BD Player (BD-F7500) Key features 4K 3D Wifi BDP premium model Internal 4K Scaler / 2HDMI (4K/Audio) TV 7080 design matching VFD Front Display Smart Hub / Screen mirroring 2 x 2 Dual band Wifi module (minimized interference) Development Scaler Chip for 4K HDMI exclusively for Audio (increase usability) Strengthen Smart Hub functions (Movie & TV Show, Screen Mirroring, Remote Access) Reinforce security with TrustZone Region: Global Launch: Mar `13 Mobile AP development Developed and mass produced big.LITTLE based octa-core Mobile AP as the first in the industry - Maximized benefits of low power consumption with big.LITTLE based octa-core - GPU capacity twice the 'Exynos 4 Quad' products - Support WQXGA can be applied to smartphone and tablet - Applied eMMC 5.0 and USB 3.0 interface as the first in the industry - Continue to secure the Company's AP technology leadership Mass produce 10nm 128Gb NAND Flash for mobile Mass produced high capacity 10nm 128Gb NAND Flash - Launched twice the capacity of 10nm 64Gb in Nov `12 - Equipped best capacity 20nm 64Gb NAND from May `12 Strengthen product competitive edge and lead memory market growth with 128Gb NAND-based memory card and expansion of SSD market Region : Global Launch : Mar `13 Name : Exynos 5 Octa Region : Global Launch : Mar `13 Name : 128Gb NAND Flash Samsung Electronics Interim Business Report 49 / 173 Research Project Research Results and Expected Effect Mass produce 20nm 1TB Server SSD for Server Mass produced world best performance 1TB class Server storage - High-efficiency solution for cloud service market - Enhanced Server system capacity by six fold, reduced power consumption by 30% Lead premium SSD market growth by developing next generation SSD - Solidified competitive advantage with high value-added Server SSD Smart card IC Acquired 'CC EAL7' with Smart card IC as the first in the industry - Applied world-class design/manufacture/security technology - Established standard modeling that can resist various types of hacking attacks Issue certification via ANSSI, a French security agency Promote the Company's image as a leader of smart card IC technology and continue to increase FSID market presence Develop high-resolution OLED panel Secure advantages in terms of resolution compare to competitors and strengthen market competitiveness by developing high-resolution technology Mass produce smartphone OLED panel eFlash process Developed 45nm eFlash process as the first in the industry - Secured commercialization technology by developing smart card IC test chip - Reduced power consumption 25%, data reading time 50% - Plan to mass produce the first commercialized product in 2H14 - Applied to MCU product foundry/ASIC business Promote the Company's image as a leader of smart card IC technology and induce foundry/ASIC customers In case applied to a product, name of the product and application Region : Global Launch : Mar `13 Name : 960GB Server SSD Region : Global Launch : Mar `13 Name : S3FT9KF Region : Global Launch : Apr `13 Region : Global Launch: May `13 Name: 45nm eFlash Develop Mass produced 55",65" UHD TV panel ultra-large-size/ high Strengthen market leadership and contribute to commercialization of UHD TV resolution LCD TV panel by expanding UHD TV lineups Region : Global Launch : Jun `13 Develop OLED TV panel (55") Smart Interaction Monitor (SC770) Take the lead in the next generation TV market by launching curved OLED TV Secure competitiveness by enabling Zero Pixel Defect definition Region : Global Launch : Jun `13 Improved motion recognition - Improve motion sensitivity, Thumbs Up recognition Increased interactive voice response supported countries - Countries added: Canada/Switzerland/Spain Countries supported: 9 (as of end-June) US, UK, Korea, France, Germany, Australia, Canada, Switzerland, Spain Introduced built-in camera for OLED/UHD TV Reflected new developments on circuit/apparatus for OLED Design 5M pixels, support motion/face recognition (same spec as LED F8000) Region: Global Launch: Jun `13 Applied products - Motion recognition: TV with built-in camera - Interactive voice response: Models of LED 6400 or higher - Built-in camera: OLED TV KN55S9CAF, UHD TV 55/65 F9000 Added Touch Monitor Line up in `13 - Introduced Touch Monitor to create a new market Reinforced user convenience - Secured absolute advantage over competitors by providing differentiated usability&design Optimum solution for using Touch - Fast Touch and 10 Points multi Touch possible by applying capacitive sensing Touch, Windows8 certification - Ergonomic sliding stand structure - Wide viewing range Panel and contrast range three times wider than plain monitor Premium design - Premium design with metallic materials - Narrow Bezel design that maximizes immersive experience when using Touch Region: America/Europe/etc. Launch: Jun `13 Inch : 24" Mass produce 3D vertical 128Gb V-NAND Flash Mass produce new concept 128Gb 3D V-NAND Flash as the first in the world - Overcome the limits of miniaturization by 3D CTF(Charge Trap Flash) cell structure innovation and vertical layer process innovation - Increased degree of integration by twofold/ cell life by tenfold/ writing speed by twofold Secured Tera bit NAND mass production technology with 300 core patents - Strengthen technological competitive advantage to take the lead in large capacity market Region : Global Launch: Aug `13 Name: 128Gb V-NAND Flash Samsung Electronics Interim Business Report 50 / 173 Research Project Open Cell Monitor (SC590) Research Results and Expected Effect Seek to introduce Open Cell to Display product line - Introduced Open Cell model Reinforced lineups - Open Cell new lineups - Cheaper model than existing SC570 model as responding to 27" Slim Design Reinforced user convenience - Narrow Bezel Design provides immersive experience aesthetic value - Applied wide viewing range PLS Panel, reproduce vivid color in any angle - Increased connection devices such as PC and imaging device by supporting HDMI In case applied to a product, name of the product and application Region: Global Launch: Aug `13 Inch : 27" Wearable Display Watch Create new OLED Application market based on design differentiation Develop 1.63" high-resolution Compact Design Region : Global Launch : Sep `13 Mass produce Server 3D V-NAND based 960GB high reliability SSD Develop Flexible technology Mass produced 3D V-NAND based high-reliability 960GB SSD as the first in the world Equal performance with SLC NAND SSD by using 3D V-NAND Increased customer value with high-reliability/high performance/high capacity/ low power consumption Maximized efficiency of investment in datacenter with ultra power saving solution Secure competitiveness for expansion of next generation green IT market Secure advanced technology to take the lead in the next generation products Mass produce curved display for smartphone as the first in the world Region : Global Launch : Sep `13 Name: 960GB 3D V-NAND SSD Region : Global Launch : Oct `13 Develop ISOCELL Pixel technology Develop next generation image sensor pixel technology as the first in the industry - Applied new method that isolates adjacent pixel - Enhanced sensitivity by minimizing loss of electric signal - Provide a sample of the first product with new technology Strengthened the Company's leadership in image sensor market Region : Global Launch : Nov `13 Name : S5K4H5YB Mass produce mobile 20nm 8Gb LPDDR4 DRAM Mass produced the world's first ultrafine 20nm 8Gb LPDDR4 DRAM - Applied "highly integrated/ultrahigh speed/high-density" solution developed by the Company Region : Global - Created the world's first 4GB market and took the lead Launch : Dec `14 Led growth of the DRAM market by expanding 20nm DRAM lineup Inch: 8Gb LPDDR4 DRAM - Plan to take the lead in the market by expanding next-generation lineups(8/6/4Gb) in the future LFD ME95C Product Concept - Ultra-large-size 95" LED LFD(world's largest Edge LED LFD) - Slim Bezel & Depth Metallic Black Premium Design - Symmetric Design for both vertical/horizontal use - Valuable functions for Smart Meeting Room Product specification - Support PIM Half Embedded structure - Support automatic Pivot, using sensor - Terminal: D -sub,DVI,Component(AV),DP,HDMIx3,RS232C Region: America/Europe/Domestic, etc. Launch: Dec `13 Inch : 95" Develop new smart card product Launched NFC with internal flash memory (e-flash) - Used 45nm e-flash logic process as the only one in the industry, which improves density and power efficiency compare to 90nm products - Miniaturized products by supporting smallest antenna solution - Enabled mobile POS through NFC chip as the first in the industry POS (Point of Sales): point of sale information management system Region : Global Launch: Jan `14 Name : S3FWRN5 High-resolution low power Mass produce high-resolution Tablet panel consumption Achieved low power consumption of tablet products and higher rate of production by Tablet product technology enhancing transmissivity Region : Global Launch : Feb `14 Mass produce 20nm 4GB DDR3 DRAM for server Mass produce ultra-fine 20nm 4GB DDR3 DRAM as the first in the world - Applied independently developed high-density/high-speed/low-power consumption technology - Enhanced productivity by 30% compare to 25nm PC and server full line-up to be launched with 20nm 4GB DRAM - Enhance competitiveness by launching the whole line-up including mobile in the future Region : Global Launch : Feb `14 Name : 4GB DDR3 DRAM Samsung Electronics Interim Business Report 51 / 173 Research Project Research Results and Expected Effect Develop new ISOCELL image sensor Launched new 1600 megapixel ISOCELL image sensor - Clear image even in dark places - 16 megapixel / 30pfs per second (first in the industry) - 16:9 aspect ratio FullHD resolution Develop new Mobile AP product with HMP solution UHD TV HU9000 Launched new Exynos 5 Octa (5422) product - Enhance power efficiency by combining and utilizing 8 high-capacity/low-power consumption cores through applying HMP solution - Support WQHD and WQXGA ultra-high resolution - Strengthen low-power consumption capacity by using automatic conversion to power save mode and mobile video compression technology Launched new Exynos 5 Hexa (5250) product - Enhance power efficiency by combining and utilizing 6 high-capacity/low power consumption cores through applying HMP solution - Support WQXGA ultra-high resolution Ultimate Curved UHD TV that provides perfect immersive experience - Adopted ergonomic Curved LED Panel Clear differentiation values compare to competitors - Smart Hub function with Multi-Link Screen added - The only Evolutionary UHD TV Premium design - Ergonomic Curved Design - The best premium image through Immersive Viewing Experience Mass produce 2nd generation V-NAND based 1TB SSD for PC Mass produced 2nd generation 3D V-NAND based 1TB SSD as the first in the world - Opened up `the era of popularized 3D memory' with 2nd generation V-NAND - Target PC market after creating server market last year Launched high-reliability, high-capacity, low-power consumption V-NAND SSD line-up - Increased life by twofold and reduced power consumption by 20% compare to existing SSD - Launch `V-NAND SSD' in 53 nations around the world starting in July In case applied to a product, name of the product and application Region : Global Launch : Mar `14 Name : S5K2P2 Region : Global Launch: Jan/Mar `14 Name : Exynos5250/ Exynos5422 Region : Global Launch: Mar `14 Inch : 55"/65" Region : Global Launch : May `14 Name : 1TB, V-NAND SSD Develop new ISOCELL Image sensor Develop 13 megapixel stacked ISOCELL image sensor - Smaller chip size and wider circuit range by applying stacked structure - Diversification of exposure with smart WDR function improves color in backlight Region : Global Launch : Jun `14 Name : S5K3M2 Develop new Mobile AP product Launched new Exynos 5 Octa (5430) product - Increased power efficiency by applying 20nm low-power consumption HKMG process - Enhanced performance by applying HMP solution and can work individually depending on low power core needs - Enhanced low power consumption property by using automatic conversion to power save mode and mobile video compression technology - Support WQHD and WQXGA ultra high-resolution Region : Global Launch : Jun `14 Name : Exynos 5430 UHD TV (UN105S9WAF) Product Concept - Wide Curved(21:9) 105" UHD TV - Need to solidify market leadership by introducing ultra-large size 105" UHD TV as the first in the world Spec and effects - Adopted SDC 4200R 105" Wide Curved Panel - Applied Golf-AP/MP Platform - Provide the ultimate immersive and realistic viewing experience Region : Global Launch : Jul `14 Inch: 105" Introduced Premium UHD Line Up - Introduced high resolution UHD LFD lineup - Applied SE13U Platform LFD - Applied spec to respond to LFD Usage - Reduced additional investment costs by sharing TV HU7K design QMD Main functions - Support full HD screen split in 4 (2/3/4 splits) - DP 1.2 and SBB applicable Region : Global Launch : Aug `14 Inch: 85" Samsung Electronics Interim Business Report 52 / 173 Research Project Bendable TV Nov (UN78S9BAF) Mass produce PC/server 32 layer 3bit 3D V-NAND Mass produce mobile 20nm 8Gb LPDDR4 DRAM Research Results and Expected Effect World's first Bendable UHD TV - Secured technology leadership Design - Adopted Timeless Gallery Design - Becomes an aesthetic object when power is off In case applied to a product, name of the product and application Region : Domestic Launch : Nov `14 Inch: 78" Mass produced the world's first 3bit 3D V-NAND based 1TB SSD - Opened up the era of "popularized V-NAND SSD" with 3bit V-NAND - Target the standard SSD market with V-NAND that has 50% higher productivity Reinforced highly reliable, high-performance, low energy consuming V-NAND SSD lineup - Launched mSATA and M.2 SSD lineups in addition to the existing 2.5" - Launched '850 EVO SSD' in 53 nations around the world in Dec Region : Global Launch : Oct `14 Inch: 128Gb 3bit 3D V-NAND (850 EVO SSD) Mass produced the world's first ultrafine 20nm 8Gb LPDDR4 DRAM - Applied "highly integrated/ultrahigh speed/high-density" solution developed by the Company - Created the world's first 4GB market and took the lead Led growth of the DRAM market by expanding 20nm DRAM lineup - Plan to take the lead in the market by expanding next-generation lineups(8/6/4Gb) in the Region : Global Launch : Dec `14 Inch: 8Gb LPDDR4 DRAM future Launch new Mobile AP product Industry's first 14nm FinFET process-based Mobile AP - Compared to 20nm process, 14nm process has enhanced performance by 20%, reduced power consumption by 30%, and improved productivity by 35% Region : Global Launch : Jan `15 Name: Exynos 7 Octa Launch new NFC product Mass produce 10nm-class 128GB UFS for mobile Launch SUHD TV Mass produce NAND-based 10nm-class 512GB M.2 NVMe SSD for PC HAV(WAA) WAM5500/ZA Launch new CMOS image sensor 4th generation NFC solution with enhanced RF performance - Compared to 3rd generation products, doubled card mode and enhanced reader mode by 20% Region : Global Support mobile POS in smartphone environment Launch : Jan `15 Applied 45nm embedded flash process Name: S3FWRN5P - Reduced customers' product development and certification period Mass produced the world's first 128GB UFS memory for mobile - Performance was enhanced by 12 times compared to memory card and 2.7 times compared to eMMC Lead the growth of the premium market by expanding the high-density memory market - Launched high-density line up with twice the density (128/64/32GB) Region : Global Launch : Feb `15 Name: 128GB UFS (Internal memory card)Lau Curved SUHD TV : Provide the ultimate immersive experience S: Spectacular, Smart, Stylish, Superb Design : Chamfer Design (Real Metal) Region : Global Launch : Mar `15 Inch: 65"/78"/88" Mass produced world's first 512GB M.2 NVMe SSD for the next generation PC - Read speed of 2,260MB/s, 4 times faster than SATA SSD - Took the lead in the mobile workstation and slim PC markets Led the premium market by expanding the ultra-high speed, high-density SSD market - Plan to target PC market in earnest by launching V- NAND based line ups in the future Region : Global Launch : Apr `15 Name: 512GB M.2 NVMe SSD (SM951 SSD) Ambient Audio Defined a new audio category with differentiated sound quality and sensible design (Blending, conventional design) - Provide the same sound quality through Wireless Audio 360 and Ring Radiator Tech - Expand multi-room audio usability through compatibility with TV/AV products - Provide sensible user experience by applying Analog Wheel - Easy to understand setting information through Voice AUI - Provide visual experience by applying OLED Industry's first 1.0um 16 mega-pixel mobile image sensor - Provide the same image quality with 1.12um pixels by applying ISOCELL - With camera module of under 5mm in height, mobile device design became slimmer - Compared to 1.12um pixel sensor, module height decreased by 20% Region : Americas Launch : Aug `15 Region : Global Launch : Jul `15 Name: S5K3P3 Samsung Electronics Interim Business Report 53 / 173 Research Project Research Results and Expected Effect Mass produce 3rd generation(48-layer) 256Gb 3D V-NAND for SSD Mass produce 20nm DRAM-based 12Gb LPDDR4 mobile DRAM for mobile Mass produced world's first 3rd generation(48-layer) 3D V-NAND - Began mass producing 256Gb in earnest, which has twice the degree of integration than 128Gb - Took the lead in the PC, enterprise server, and datacenter SSD markets Led `popularization of Tera SSD' by expanding ultra-high-speed SSD line ups - Target the market by expanding 3rd generation V-NAND based line ups Mass produced world's first next generation 12Gb LPDDR4 DRAM for mobile - First to achieve 4,266Mbps, which is twice the speed of PC DRAM - Took the lead in not only mobile but also PC, consumer electronics, and automobile markets Led the premium DRAM market by taking the lead in the ultra-high-speed DRAM market - Plan to target the next generation DRAM market in the future by launching 6GB line ups In case applied to a product, name of the product and application Region : Global Launch : Aug `15 Name: 256Gb 3D V-NAND (3G 48-layer) Region : Global Launch : Sep `15 Name: 12Gb LPDDR4 Mobile DRAM (20nm DRAM) Samsung Electronics Interim Business Report 54 / 173 11. Other Information A. Intellectual Property Rights In 2014, the Company invested KRW 15.3 trillion and registered 7,574 domestic and 14,342 overseas patents, including approval for 4,952 US patents. As a result, the Company maintained second place in terms of numbers of patents registered in US amongst global technology companies for nine (9) consecutive years since 2006. <Number of Patents Registered in Each Country (as of December 31, 2014, cumulative)> Number Korea 32,507 US 35,718 Europe 14,834 China 9,099 Japan 6,814 (Unit: # of Patents) Others 7,735 The Company registered its first US patent in 1984, and now holds 106,707 patents around the world. <Number of Patent Registrations Per Year> Korea US `14 3,970 4,952 `13 2,762 4,676 `12 2,013 5,081 `11 1,610 4,894 `10 1,612 4,551 `09 1,485 3,611 (Unit: # of Patents) `08 `07 4,740 10,974 3,515 2,725 These patents are mostly related to smartphone, smart TV, flash memory, and system LSI products for the Company's strategic business products or for future use. These patents not only protect the Company's business but also play a role in keeping similar technology and patents, as well as competitors, in check. In addition, as some of the patents are for new materials and next-generation mobile communication, the Company expects them to protect its business in the future when it enters into new businesses. The Company has also been focusing on securing design patents to protect its original design applied to smartphones and LED TVs. In 2014, the Company acquired 832 US patents, in part for the aforementioned purpose. B. Environmental regulations The Company strictly abides by environmental regulations on products and in the workplace, as prescribed by law. In addition, to following "the low carbon green growth policy" of the Korean government, the Company has been increasing the number of "Green Technology Certifications" and reports "the amount of CO2 emission and energy use" to the government and provides related information to stakeholders. (See 9. Green Management of XI. Other Information for more details about Green Technology Certification.) Samsung Electronics Interim Business Report 55 / 173 (Environmental Regulation of Products) Environmental regulation of products are becoming stricter reflecting the concerns of governments and regulators about potential direct and indirect impact of products to consumers' health and safety as consumers. Accordingly, the Company is working to minimize the environmental impact throughout the entire life cycle of products from the development stage of components and products to manufacturing, distribution, use, and disposal. The Company offers "Eco-Partner Certification" to suppliers for components free of harmful substances, and runs an "eco-design evaluation" system to reflect eco-friendly elements on products (reduced use of resources, energy and harmful substances, and the use of ecofriendly materials) at the development stage, and operates a "waste electronics collection recycle system" in Europe, North America, Korea, and India for collecting and recycling waste electronics. These activities are in line with domestic and foreign environmental laws on electronics and are a differentiation factor for the Company and its products. Relevant laws are as follows: 1. law on collection and· recycle of waste electronics (e.g., EU WEEE Directive) 2. limit on the use of harmful substances (e.g., EU RoHS Directive, REACH Regulation) 3. regulation on energy efficiency (e.g., EU ErP Directive) (Environmental Regulations in the Workplace) The Company operates environmental pollution prevention facilities to reduce air pollution, water pollution, and waste disposal, and to minimize the discharge of pollutants, thereby minimizing impact on the surrounding environment. Environmental management of workplace is supervised by the relevant government authorities. All production facilities, domestic and overseas, have acquired the International Occupational Health and Safety Management System Certification (ISO 14001, OHSAS18001) to strengthen compliance. Major Relevant Domestic and International Laws are as follows: 1. Regulations related to emission of pollutants: Water Quality and Ecosystem Conservation Act, Clean Air Conservation Act, Wastes Control Act, Noise and Vibration Control Act, Environmental Impact Assessment Act 2. Management of greenhouse gas emission: Greenhouse gas emission report, Goal management system 3. Others: Toxic Chemicals Control Act, Odor Control Law, Soil Environment Conservation Act Samsung Electronics Interim Business Report 56 / 173 (Greenhouse gas emission and energy consumption management) The Company is a "controlled entity" according to Article 42 of Korea's "Framework Act on Low Carbon, Green Growth." Thus, the Company has been reporting the amount of greenhouse gas emission and energy consumption, verified by a third-party, to the authorities and disclosing it to stakeholders according to Article 44 of the same Act since May 2011. The reported amount of greenhouse gas emission and energy use are provided below: Greenhouse gas (Unit: tCO2e) 2014 6,775,019 2013 6,303,033 2012 6,004,674 Energy (Unit: TJ) 101,386 96,298 62 workplaces, including domestic manufacturing facilities, company buildings, and company owned buildings. Reported Greenhouse gas emission excludes ozone depletion substances (ODS). 91,330 The Company achieved its own greenhouse emission and energy consumption limit goal for 2014 through energ y-saving activities and by installing energy efficient equipment to meet greenhouse gas reduction. From 2015, in accordance with the Article 8 of the Act on the Allocation and Trading of Greenhouse-Gas Emission Permits, the Company is an eligible business entity under the Act. See 9. Green Management in XI. Other Informationfor Green Technology Certifications. Samsung Electronics Interim Business Report 57 / 173 III. Financial Affairs 1. Consolidated Financial Statements INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (In millions of Korean won, in thousands of U.S dollars (Note 2.3)) Assets Current assets Cash and cash equivalents Short-term financial instruments Short-term available-for-sale financial assets Trade receivables Non-trade receivables Advances paid Prepaid expenses Inventories Other current assets Assets held-for-sale Total current assets Non-current assets Long-term available-for-sale financial assets Investment in associates and joint ventures Property, plant and equipment Intangible assets Long-term prepaid expenses Deferred income tax assets Other non-current assets Total assets Notes September 30, 2015 KRW 3 23,608,377 3 40,895,407 3 5,220,977 3 27,631,463 3 3,062,872 1,781,263 3,623,823 5 22,841,069 1,113,148 28 - 129,778,399 3, 4 8,628,872 6 5,406,135 7 86,560,428 8 5,560,298 4,249,552 4,522,873 1,861,016 246,567,573 December 31, 2014 KRW September 30, 2015 USD 16,840,766 41,689,776 3,286,798 24,694,610 3,539,875 1,989,470 3,346,593 17,317,504 1,795,143 645,491 115,146,026 21,035,898 36,439,251 4,652,075 24,620,609 2,729,127 1,587,168 3,228,954 20,352,199 991,854 - 115,637,135 12,667,509 5,232,461 80,872,950 4,785,473 4,857,126 4,526,595 2,334,818 230,422,958 7,688,629 4,817,057 77,128,396 4,954,422 3,786,501 4,030,039 1,658,230 219,700,409 December 31, 2014 USD 15,005,717 37,147,062 2,928,653 22,003,769 3,154,154 1,772,688 2,981,932 15,430,507 1,599,536 575,155 102,599,173 11,287,198 4,662,307 72,060,653 4,264,025 4,327,871 4,033,356 2,080,406 205,314,989 Samsung Electronics Interim Business Report 58 / 173 INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (In millions of Korean won, in thousands of U.S dollars (Note 2.3)) Liabilities and Equity Current liabilities Trade payables Short-term borrowings Other payables Advances received Withholdings Accrued expenses Income tax payable Current portion of long-term liabilities Provisions Other current liabilities Liabilities held-for-sale Total current liabilities Notes September 30, 2015 KRW 3 3, 9 3 3 3, 9, 10 12 28 9,842,913 11,303,099 8,943,659 1,314,436 902,629 9,801,498 1,712,186 46,910 8,885,694 275,371 - 53,028,395 Non-current liabilities Debentures Long-term borrowings Long-term other payables Net defined benefit liabilities Deferred income tax liabilities Provisions Other non-current liabilities Total liabilities 3, 10 3, 9 3 11 12 1,458,885 78,001 2,433,972 1,012,175 5,242,795 692,508 1,892,206 65,838,937 December 31, 2014 KRW September 30, 2015 USD 7,914,704 8,029,299 10,318,407 1,427,230 1,161,635 12,876,777 2,161,109 1,778,667 5,991,510 326,259 28,316 52,013,913 8,770,383 10,071,460 7,969,116 1,171,209 804,274 8,733,481 1,525,618 41,798 7,917,467 245,365 - 47,250,171 1,355,882 101,671 2,562,271 201,342 4,097,811 499,290 1,502,590 62,334,770 1,299,918 69,502 2,168,755 901,884 4,671,515 617,049 1,686,022 58,664,816 December 31, 2014 USD 7,052,281 7,154,389 9,194,065 1,271,712 1,035,058 11,473,663 1,925,624 1,584,855 5,338,647 290,708 25,231 46,346,233 1,208,139 90,592 2,283,074 179,403 3,651,294 444,885 1,338,861 55,542,481 Samsung Electronics Interim Business Report 59 / 173 INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (In millions of Korean won, in thousands of U.S dollars (Note 2.3)) Equity attributable to owners of the parent Preferred stock Common stock Share premium Retained earnings Other components of equity Accumulated other comprehensive income attributable to assets heldfor-sale Non-controlling interests Total equity Notes September 30, 2015 KRW 14 119,467 14 778,047 4,403,893 15 181,889,556 16 (12,796,100) 28 - 174,394,863 6,333,773 180,728,636 Total liabilities and equity 246,567,573 December 31, 2014 KRW 119,467 778,047 4,403,893 169,529,604 (12,729,387) 80,101 162,181,725 5,906,463 168,088,188 230,422,958 September 30, 2015 USD 106,449 693,267 3,924,024 162,070,014 (11,401,776) - 155,391,978 5,643,615 161,035,593 219,700,409 December 31, 2014 USD 106,449 693,267 3,924,024 151,056,861 (11,342,333) 71,373 144,509,641 5,262,867 149,772,508 205,314,989 Samsung Electronics Interim Business Report 60 / 173 INTERIM CONSOLIDATED STATEMENTS OF INCOME (In millions of Korean won, in thousands of U.S dollars (Note 2.3)) Notes For the three-months ended September 30, 2015 KRW 2014 KRW 2015 USD 2014 USD For the nine-months ended September 30, 2015 KRW 2014 KRW 2015 USD 2014 USD Revenue Cost of sales Gross profit Selling, general and administrative expenses Operating profit Other non-operating income Other non-operating expense Share of profit of associates and joint ventures Finance income Finance expense Profit before income tax Income tax expense Profit for the period Profit attributable to owners of the parent Profit attributable to non-controlling interests Earnings per share for profit attributable to the owners of the parent (in Korean Won, in US dollars) - Basic - Diluted 17 17, 18 19 19 6 20 20 21 22 51,682,572 31,609,452 20,073,120 12,679,747 7,393,373 320,297 404,293 23,694 3,385,634 3,328,586 7,390,119 1,931,560 5,458,559 5,306,104 152,455 35,630 35,629 47,447,310 46,050,996 30,711,398 28,165,137 16,735,912 17,885,859 12,675,390 11,298,102 4,060,522 828,296 286,460 6,587,757 285,396 360,239 2,076 21,112 1,682,596 1,440,159 4,846,871 624,526 4,222,345 4,135,422 3,016,719 2,965,888 6,584,857 1,721,088 4,863,769 4,727,926 86,923 135,843 27,419 27,418 31.75 31.75 42,277,228 27,364,940 14,912,288 11,294,220 3,618,068 738,041 255,246 1,850 1,499,252 1,283,232 4,318,733 556,475 3,762,258 3,684,807 77,451 147,338,029 89,520,438 57,817,591 37,546,914 20,270,677 1,335,872 869,351 113,872 7,961,000 7,575,284 21,236,786 5,400,115 15,836,671 15,452,161 384,510 153,475,865 94,432,732 59,043,133 39,306,489 19,736,644 3,327,828 1,572,572 96,217 5,369,692 4,676,862 22,280,947 4,233,380 18,047,567 17,796,608 250,959 131,283,384 79,765,870 51,517,514 33,455,626 18,061,888 1,190,309 774,622 101,464 7,093,532 6,749,845 18,922,726 4,811,693 14,111,033 13,768,421 342,612 136,752,412 84,142,897 52,609,515 35,023,469 17,586,046 2,965,212 1,401,217 85,733 4,784,585 4,167,249 19,853,110 3,772,091 16,081,019 15,857,406 223,613 24.43 24.43 103,720 103,718 118,009 118,000 92.42 92.42 105.15 105.14 Samsung Electronics Interim Business Report 61 / 173 INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In millions of Korean won, in thousands of U.S dollars (Note 2.3)) Notes Profit for the period Other comprehensive income Items not to be reclassified subsequently to profit or loss : Remeasurements of the net defined 16 benefit liability, net of tax Items to be reclassified subsequently to profit or loss : Changes in value of available-for-sale 16 financial assets, net of tax Share of other comprehensive 16 income(loss) of associates and joint ventures, net of tax Foreign currency translation, net of tax 16 Other comprehensive income(loss) for the period, net of tax Total consolidated comprehensive income for the period Consolidated comprehensive income attributable to : Owners of the parent Non-controlling interests For the three-months ended September 30, 2015 2014 2015 2014 KRW KRW USD USD For the nine-months ended September 30, 2015 2014 2015 2014 KRW KRW USD USD 5,458,559 4,222,345 4,863,769 3,762,258 15,836,671 18,047,567 14,111,033 16,081,019 (17,309) (15,366) (15,423) (13,692) (67,240) (35,973) (59,913) (32,054) (339,259) (292,853) (1,729) 1,841,124 1,482,827 6,941,386 22,408 112,396 (173,415) 4,048,930 (302,292) (1,541) 1,640,506 1,321,250 6,185,019 (260,942) (818,154) (562,797) (729,004) (501,472) 19,966 2,037 100,149 (154,519) 2,110,157 1,226,800 3,607,739 17,063,471 (61,509) (1,792,533) (2,452,812) 15,594,755 1,815 (54,807) 1,880,224 (1,597,211) 1,093,122 (2,185,544) 15,204,155 13,895,475 6,735,178 206,208 3,977,392 71,538 6,001,281 183,738 3,543,997 16,632,865 15,400,519 14,820,470 13,722,406 63,742 430,606 194,236 383,685 173,069 Samsung Electronics Interim Business Report 62 / 173 INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In millions of Korean won) 2014 KRW Preferred Common Share Notes stock stock premium Retained earnings Other components of equity Equity attributable to owners of the parent Non-controlling interests Total Balance as at January 1, 2014 Profit for the period Changes in value of available-for-sale 16 financial assets, net of tax Share of other comprehensive loss of 16 associates and joint ventures, net of tax Foreign currency translation, net of tax 16 Remeasurements of net defined benefit 16 liability, net of tax Total comprehensive income Dividends Capital transaction under common control Changes in consolidated entities Disposal of treasury stock 16 Stock option 16 Others Total transactions with owners Balance as of September 30, 2014 119,467 - - - 119,467 778,047 - 4,403,893 148,600,282 17,796,608 - - (9,459,073) (586,312) - - - (61,138) - - - - - (1,710,595) - (38,044) - - 17,796,608 (2,396,089) - - (2,157,011) - - 778,047 - - (158) - 4,403,893 4,977 (2,152,034) 164,244,856 32,763 (9,436) 2,882 26,051 (11,829,111) 144,442,616 17,796,608 (586,312) (61,138) (1,710,595) (38,044) 15,400,519 (2,157,011) (158) - 32,763 (9,436) 7,859 (2,125,983) 157,717,152 5,573,394 150,016,010 250,959 18,047,567 23,515 (562,797) (371) (61,509) (81,938) 2,071 194,236 (16,312) (1,792,533) (35,973) 15,594,755 (2,173,323) (549) 378 - (604) (17,087) 5,750,543 (707) 378 32,763 (9,436) 7,255 (2,143,070) 163,467,695 Samsung Electronics Interim Business Report 63 / 173 INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In thousands of US dollars (Note 2.3)) 2014 USD Preferred Common Share Notes stock stock premium Retained earnings Other components of equity Equity attributable to owners of the parent Non-controlling interests Total Balance as at January 1, 2014 Profit for the period Changes in value of available-for-sale 16 financial assets, net of tax Share of other comprehensive loss of 16 associates and joint ventures, net of tax Foreign currency translation, net of tax 16 Remeasurements of net defined benefit 16 liability, net of tax Total comprehensive income Dividends Capital transaction under common control Changes in consolidated entities Disposal of treasury stock 16 Stock option 16 Others Total transactions with owners Balance as of September 30, 2014 106,449 - - 693,267 - - 3,924,024 - - 132,408,096 15,857,406 - (8,428,368) - (522,425) - - - - 106,449 - - - (54,476) - - - - - (1,524,201) - (33,899) - - 15,857,406 (2,135,001) - - (1,921,973) - - 693,267 - 3,924,024 - 4,435 (1,917,538) 146,347,964 (141) 29,193 (8,408) 2,568 23,212 (10,540,157) 128,703,468 15,857,406 (522,425) (54,476) (1,524,201) (33,899) 13,722,405 (1,921,973) (141) - 29,193 (8,408) 7,003 (1,894,326) 140,531,547 4,966,091 223,613 20,953 133,669,559 16,081,019 (501,472) (331) (54,807) (73,010) 1,845 (1,597,211) (32,054) 173,070 (14,535) 13,895,475 (1,936,508) (489) 337 - (538) (15,225) 5,123,936 (630) 337 29,193 (8,408) 6,465 (1,909,551) 145,655,483 Samsung Electronics Interim Business Report 64 / 173 INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In millions of Korean won) 2015 KRW Preferred Common Share Notes stock stock premium Retained earnings Other components of equity Accumulated other comprehensive income attributable to assets held-for- sale Equity attributable to owners of the parent Noncontrolling interests Total Balance as at January 1, 2015 Profit for the period Changes in value of available-for-sale 16 financial assets, net of tax Share of other comprehensive income 16 (loss) of associates and joint ventures, net of tax Foreign currency translation, net of tax 16 Remeasurements of net defined benefit 16 liability, net of tax Reclassification to assets held-for-sale Total comprehensive income (loss) Dividends Capital transaction under common control Changes in consolidated entities Acquisition of treasury stock 16 Others Total transactions with owners Balance as of September 30, 2015 119,467 - - 778,047 - - 4,403,893 169,529,604 - 15,452,161 - - (12,729,387) (760,372) - - - - - 119,467 - - - 55,943 - - - 2,036,691 - - - (67,235) - - - (4,222) - - 15,452,161 1,260,805 - - (3,073,480) - - 778,047 - - - 4,403,893 (18,729) (3,092,209) 181,889,556 (5,314) (1,323,059) 855 (1,327,518) (12,796,100) 80,101 (28,972) 162,181,725 15,452,161 (789,344) 5,906,463 168,088,188 384,510 15,836,671 (28,810) (818,154) (54,118) 1,825 (1,233) - 4,222 (80,101) - 2,035,458 (67,235) - 16,632,865 (3,073,480) - (5,314) - - - (1,323,059) - (17,874) - (4,419,727) - 174,394,863 212 2,037 74,699 (5) - 430,606 (1,564) 2,110,157 (67,240) - 17,063,471 (3,075,044) (463) (152) - (1,117) (3,296) 6,333,773 (5,777) (152) (1,323,059) (18,991) (4,423,023) 180,728,636 Samsung Electronics Interim Business Report 65 / 173 INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In thousands of US dollars (Note 2.3)) 2015 USD Preferred Common Share Notes stock stock premium Retained earnings Other components of equity Accumulated other comprehensive income attributable to assets held-for- sale Equity attributable to owners of the parent Noncontrolling interests Total Balance as at January 1, 2015 Profit for the period Changes in value of available-for-sale 16 financial assets, net of tax Share of other comprehensive income 16 (loss) of associates and joint ventures, net of tax Foreign currency translation, net of tax 16 Remeasurements of net defined benefit 16 liability, net of tax Reclassification to assets held-for-sale Total comprehensive income (loss) Dividends Capital transaction under common control Changes in consolidated entities Acquisition of treasury stock 16 Others Total transactions with owners Balance as of September 30, 2015 106,449 - - - - - 106,449 693,267 - - 3,924,024 151,056,861 (11,342,333) - 13,768,421 - - - (677,518) - - 49,847 - - - - 693,267 - - 1,814,764 - - (59,909) - - - 13,768,421 - (2,738,579) - - (3,762) 1,123,422 - (4,735) - 3,924,024 (16,689) (2,755,268) 162,070,014 (1,178,892) 762 (1,182,865) (11,401,776) 71,373 - (25,815) 144,509,641 13,768,421 (703,333) 5,262,867 342,612 (25,671) 149,772,508 14,111,033 (729,004) (48,221) 1,626 (1,099) - 3,762 (71,373) - - - 1,813,665 (59,909) 14,820,470 (2,738,579) (4,735) - (1,178,892) (15,927) (3,938,133) 155,391,978 189 1,815 66,559 (4) - 383,685 (1,394) 1,880,224 (59,913) - 15,204,155 (2,739,973) (413) (135) - (995) (2,937) 5,643,615 (5,148) (135) (1,178,892) (16,922) (3,941,070) 161,035,593 Samsung Electronics Interim Business Report 66 / 173 INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions of Korean won, in thousands of U.S dollars (Note 2.3)) Cash flows from operating activities Profit for the period Adjustments Changes in assets and liabilities arising from operating activities Cash flows from operating activities Interest received Interest paid Dividend received Income tax paid Net cash generated from operating activities Notes 23 23 2015 KRW 15,836,671 21,499,982 (6,478,308) 30,858,345 1,740,947 (577,860) 227,915 (4,543,937) 27,705,410 2014 KRW 18,047,567 16,303,949 638,514 34,990,030 1,118,831 (341,456) 1,459,641 (5,657,246) 31,569,800 For the nine months ended September 30, 2015 2014 USD 14,111,033 USD 16,081,019 19,157,243 14,527,394 (5,772,401) 568,939 27,495,875 1,551,245 (514,894) 203,080 (4,048,808) 31,177,352 996,918 (304,249) 1,300,592 (5,040,806) 24,686,498 28,129,807 Cash flows from investing activities Net increase in short-term financial instruments Proceeds from disposal of short-term available-for-sale financial assets Acquisition of short-term available-for-sale financial assets Proceeds from disposal of long-term financial instruments Acquisition of long-term financial instruments Proceeds from disposal of long-term available-for-sale financial assets Acquisition of long-term available-for-sale financial assets Proceeds from disposal of associates and joint ventures Acquisition of associates and joint ventures Disposal of property, plant and equipment Purchases of property, plant and equipment Disposal of intangible assets Purchases of intangible assets Cash outflows from business combinations Others Net cash used in investing activities (1,141,287) 2,043,234 (861,548) 2,799,709 (132,323) 117,272 (102,712) 278,009 (137,917) 193,271 (20,116,206) 803 (1,113,338) (411,445) 438,126 (18,146,352) (6,524,466) 1,468,788 (2,253,454) 94,089 (3,248,187) 151,548 (5,940,674) 2,014,430 (653,567) 267,969 (14,478,346) 7,865 (951,358) (176,625) 202,918 (30,019,070) (1,016,927) 1,820,594 (767,670) 2,494,640 (117,904) 104,493 (91,520) 247,716 (122,889) 172,211 (17,924,250) 716 (992,023) (366,612) 390,386 (16,169,039) (5,813,529) 1,308,742 (2,007,907) 83,837 (2,894,249) 135,035 (5,293,350) 1,794,928 (582,351) 238,770 (12,900,717) 7,008 (847,694) (157,379) 180,807 (26,748,049) Samsung Electronics Interim Business Report 67 / 173 INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions of Korean won, in thousands of U.S dollars (Note 2.3)) For the nine months ended September 30, Notes 2015 2014 2015 2014 Cash flows from financing activities Net increase in short-term borrowings Acquisition of treasury stock Disposal of treasury stock Proceeds from long-term borrowings and debentures Repayment of long-term borrowings and debentures Payment of dividends Net increase in non-controlling interests Net cash generated(used) in financing activities KRW 3,234,626 (1,323,059) 190 (1,795,923) (3,074,851) (26,185) (2,985,202) KRW 3,474,181 - 27,582 1,739,653 (2,177,556) (2,162,416) (760) 900,684 USD 2,882,166 (1,178,892) 169 (1,600,231) (2,739,801) (23,332) (2,659,921) USD 3,095,618 - 24,577 1,550,092 (1,940,279) (1,926,789) (677) 802,542 Effect of exchange rate changes on cash and cash equivalents Net increase(decrease) in cash and cash equivalents 193,755 6,767,611 (732,131) 1,719,283 172,643 6,030,181 (652,355) 1,531,945 Cash and cash equivalents Beginning of the period End of the period 16,840,766 23,608,377 16,284,780 18,004,063 15,005,717 21,035,898 14,510,314 16,042,259 Samsung Electronics Interim Business Report 68 / 173 2. Notes to Consolidated Financial Statements 1. General Information 1.1 Company Overview Samsung Electronics Co., Ltd. ("SEC") was incorporated under the laws of the Republic of Korea in 1969 and listed its shares on the Korea Stock Exchange in 1975. SEC and its subsidiaries (collectively referred to as the "Group") operate three business divisions: Consumer Electronics ("CE"), Information technology & Mobile communications ("IM"), and Device Solution ("DS"). The CE division includes digital TVs, monitors, printers, air conditioners and refrigerators and the IM division includes mobile phones, communications system, and computers. The DS division includes products such as memory and system LSI in the semiconductor business ("Semiconductor"), and LCD and OLED panels in the display business ("DP"). SEC is domiciled in the Republic of Korea and the address of its registered office is Suwon, the Republic of Korea. These interim consolidated financial statements have been prepared in accordance with Korean International Financial Reporting Standards ("K-IFRS") 1110, Consolidated Financial Statements. SEC, as the controlling Company, consolidates its 157 subsidiaries including Samsung Display and Samsung Electronics America. 1.2 Consolidated Subsidiaries (A) The consolidated subsidiaries as of September 30, 2015 are as follows: Area Domestic Subsidiaries Samsung Display (SDC) SU Materials STECO SEMES Samsung Electronics Service Samsung Electronics Sales Samsung Electronics Logitech Samsung Medison Samsung Venture Capital Union #14 Samsung Venture Capital Union #20 Samsung Venture Capital Union #21 Samsung Venture Capital Union #22 Samsung Venture Capital Union #23 Samsung Venture Capital Union #26 Samsung Venture Capital Union #27 Samsung Venture Capital Union #28 Samsung Venture Capital Union #29 Industry Manufacture and sale of display panels Manufacture of LCD components Manufacture of semiconductor components Manufacture of semiconductor/FPD Repair services for electronic devices Sale of electronic devices General logistics agency Medical equipment Technology business, Venture capital investments Technology business, Venture capital investments Technology business, Venture capital investments Technology business, Venture capital investments Technology business, Venture capital investments Technology business, Venture capital investments Technology business, Venture capital investments Technology business, Venture capital investments Technology business, Venture capital investments Ownership Percentage 1 84.8 50.0 70.0 91.5 99.3 100.0 100.0 68.5 99.0 99.0 99.0 99.0 99.0 99.0 99.0 99.0 99.0 Samsung Electronics Interim Business Report 69 / 173 Area America Europe/CIS Subsidiaries Samsung Electronics America (SEA) NexusDX (Nexus) Samsung Receivables (SRC) NeuroLogica Samsung Semiconductor (SSI) Samsung Electronics Canada (SECA) Samsung Research America (SRA) Grandis Samsung Mexicana (SAMEX) Samsung International (SII) Samsung Austin Semiconductor (SAS) Samsung Electronics Mexico (SEM) SEMES America (SEMESA) Samsung Electronics Digital Appliance Mexico (SEDAM) Samsung Electronics Latinoamerica Miami (SEMI) Samsung Electronics Latinoamerica (SELA) Samsung Electronics Venezuela (SEVEN) Samsung Electronica Colombia (SAMCOL) Samsung Electronics Panama (SEPA) Samsung Electronica da Amazonia (SEDA) Samsung Electronics Argentina (SEASA) Samsung Electronics Chile (SECH) Samsung Electronics Peru (SEPR) RT SV CO-INVEST (RT-SV) Quietside SmartThings PrinterOn PrinterOn America Simpress Samsung Pay(formerly LoopPay) YESCO Electronics Beijing Integrated Circuit Industry International Fund (Beijing Fund) Samsung Electronics (UK) (SEUK) Samsung Electronics Holding (SEHG) Samsung Semiconductor Europe GmbH (SSEG) Samsung Electronics GmbH (SEG) Samsung Electronics Iberia (SESA) Samsung Electronics France (SEF) Samsung Electronics Hungarian (SEH) Samsung Electronics Czech and Slovak (SECZ) Samsung Electronics Italia (SEI) Samsung Electronics Europe Logistics (SELS) Samsung Electronics Benelux (SEBN) Samsung Display Slovakia (SDSK) Samsung Electronics Romania (SEROM) Samsung Electronics Overseas (SEO) Samsung Electronics Polska (SEPOL) Samsung Electronics Portuguesa (SEP) Samsung Electronics Nordic (SENA) Industry Sale of electronic devices Medical equipment Credit management Medical equipment Sale of semiconductor/LCD Sale of electronic devices R&D R&D Manufacture of electronic devices Manufacture of TV/monitors Manufacture of semiconductor Sale of electronic devices Semiconductor equipment Manufacture of electronic devices Sale of electronic devices Sale of electronic devices Marketing and services Sale of electronic devices Consulting Manufacture and sale of electronic devices Marketing and services Sale of electronic devices Sale of electronic devices Technology business, Venture capital investments Sale of heating and cooling products Sale of smart home electronics Sale of printing solutions Sale of printing solutions Sale of printing solutions Develop and provide mobile payment service Manufacture and sale of LED displays Venture capital investments Sale of electronic devices Holding Company Sale of semiconductor/LCD Sale of electronic devices Sale of electronic devices Sale of electronic devices Manufacture and sale of electronic devices Sale of electronic devices Sale of electronic devices Logistics Sale of electronic devices Toll processing of LCD Sale of electronic devices Sale of electronic devices Sale of electronic devices Sale of electronic devices Sale of electronic devices Ownership Percentage 1 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 99.9 100.0 99.9 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 99.9 100.0 100.0 100.0 100.0 100.0 100.0 100.0 99.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Samsung Electronics Interim Business Report 70 / 173 Area Europe/CIS Middle East and Africa Subsidiaries Samsung Semiconductor Europe (SSEL) Samsung Electronics Austria (SEAG) Samsung Electronics Slovakia (SESK) Samsung Electronics Europe Holding (SEEH) Samsung Electronics Poland Manufacturing (SEPM) Samsung Electronics Greece (SEGR) Samsung Nanoradio Design Center (SNDC) SonoAce Deutschland (SMDE) Samsung Electronics Rus (SER) Samsung Electronics Rus Company (SERC) Samsung Electronics Ukraine (SEU) Samsung Electronics Baltics (SEB) Samsung Electronics Ukraine Company (SEUC) Samsung R&D Institute Rus (SRR) Samsung Electronics Kazakhstan (SEK) Samsung Electronics Central Eurasia (SECE) Samsung Electronics Rus Kaluga (SERK) Samsung Russia Service Centre (SRSC) Samsung Electronics (London) Limited (SEL) Samsung Denmark Research Center (SDRC) Samsung France Research Center (SFRC) Samsung Cambridge Solution Centre (SCSC) Samsung Electronics Switzerland GmbH (SESG) PrinterOn Europe Samsung Electronics Caucasus (SECC) Samsung Electronics West Africa (SEWA) Samsung Electronics East Africa (SEEA) Samsung Gulf Electronics (SGE) Samsung Electronics Egypt (SEEG) Samsung Electronics Israel (SEIL) Samsung Electronics Tunisia (SETN) Samsung Electronics Pakistan (SEPAK) Samsung Electronics South Africa (SSA) Samsung Electronics Turkey (SETK) Samsung Semiconductor Israel R&D Center (SIRC) Samsung Electronics Levant (SELV) Samsung Electronics Morocco (SEMRC) Samsung Electronics South Africa Production (SSAP) Industry Sale of semiconductor/LCD Sale of electronic devices Manufacture of TV/monitors Holding Company Manufacture of home appliances Sale of electronic devices R&D Medical equipment Marketing Sale of electronic devices Marketing Sale of electronic devices Sale of electronic devices R&D Marketing Sale of electronic devices Manufacture of TV Services Holding Company R&D R&D R&D Sale of electronic devices Sale of printing solutions Marketing Marketing Marketing Sale of electronic devices Manufacture and sale of electronic devices Marketing Marketing Marketing Sale of electronic devices Sale of electronic devices R&D Sale of electronic devices Sale of electronic devices Manufacture of TV/monitors Ownership Percentage 1 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Samsung Electronics Interim Business Report 71 / 173 Area Asia (Except China) Subsidiaries Samsung Japan (SJC) Samsung R&D Institute Japan (SRJ) Samsung Electronics Japan (SEJ) Samsung Electronics Display (M) (SDMA) Samsung Electronics (M) (SEMA) Samsung Vina Electronics (SAVINA) Samsung Asia Private (SAPL) Samsung India Electronics (SIEL) Samsung R&D Institute India-Bangalore (SRI-B) Samsung Electronics Australia (SEAU) Samsung Electronics Indonesia (SEIN) Samsung Telecommunications Indonesia (STIN) Industry Sale of electronic devices R&D Sale of electronic devices Manufacture and sale of electronic devices Manufacture of home appliances Manufacture and sale of electronic devices Sale of electronic devices Manufacture and sale of electronic devices R&D Sale of electronic devices Manufacture and sale of electronic devices Sale and services of communication systems China Thai Samsung Electronics (TSE) Samsung Electronics Philippines (SEPCO) Samsung Malaysia Electronics (SME) Samsung R&D Institute Bangladesh (SRBD) Samsung Electronics Vietnam (SEV) Manufacture and sale of electronic devices Sale of electronic devices Sale of electronic devices R&D Manufacture of electronic devices Samsung Telecommunications Malaysia (STM) Samsung Electronics Vietnam THAINGUYEN (SEVT) Samsung Medison India (SMIN) Samsung Electronics New Zealand (SENZ) Samsung Display Vietnam (SDV) Samsung Electronics HCMC CE Complex (SEHC) Samsung Display Dongguan (SDD) Samsung Display Tianjin (SDT) Samsung Electronics Hong Kong (SEHK) Suzhou Samsung Electronics (SSEC) Samsung Suzhou Electronics Export (SSEC-E) Samsung (China) Investment (SCIC) Samsung Mobile R&D Center China-Guangzhou (SRC-Guangzhou) Samsung Tianjin Mobile Development Center (STMC) Samsung R&D Institute China-Shenzhen(SRC- Shenzhen) Samsung Electronics Suzhou Semiconductor (SESS) Samsung Electronics (Shandong) Digital Printing (SSDP) Samsung Electronics Huizhou (SEHZ) Tianjin Samsung Electronics (TSEC) Samsung Electronics Taiwan (SET) Beijing Samsung Telecom R&D Center (BST) Tianjin Samsung Telecom Technology (TSTC) Shanghai Samsung Semiconductor (SSS) Communication system services Manufacture of communication equipment Medical equipment Sale of electronic devices Manufacture of LCD Manufacture of CE Manufacture of LCD Manufacture of LCD Sale of electronic devices Manufacture of home appliances Manufacture of home appliances Sale of electronic devices R&D R&D R&D Toll processing of semiconductor Manufacture of printers Manufacture of electronic devices Manufacture of TV/monitors Sale of electronic devices R&D Manufacture of communication equipment Sale of semiconductor/LCD Percentage of ownership1 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 91.8 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 95.0 100.0 88.3 100.0 100.0 100.0 100.0 100.0 100.0 100.0 99.9 91.2 100.0 100.0 90.0 100.0 Samsung Electronics Interim Business Report 72 / 173 Area China (Cont.) Subsidiaries Samsung Electronics Suzhou Computer (SESC) Samsung Suzhou Module (SSM) Samsung Suzhou LCD (SSL) Shenzhen Samsung Electronics Telecommunication (SSET) Samsung Electronics Shanghai Telecommunication (SSTC) Samsung Semiconductor (China) R&D (SSCR) Samsung Electronics China R&D Center (SCRC) Samsung (China) Semiconductor (SCS) Samsung Electronics (Beijing) Service (SBSC) Tianjin Samsung LED (TSLED) Tianjin Samsung Opto-Electronics (TSOE) Samsung R&D Institute China-Xian (SRC-Xian) SEMES (Xian) Industry Manufacture of electronic devices Toll processing of LCD Manufacture of LCD Manufacture of communication equipment Sale of mobile communication and network equipment R&D R&D Manufacture of semiconductor Services Manufacture of LED Manufacture of cameras/camcorders R&D Semiconductor equipment Percentage of ownership1 100.0 100.0 60.0 95.0 100.0 100.0 100.0 100.0 100.0 100.0 90.0 100.0 100.0 1 Ownership Percentage represents the Group's ownership of voting rights in each entity. (B) A summary of financial data of major consolidated subsidiaries is as follows: (1) 2015 (In millions of Korean won) Samsung Display (SDC) Samsung Electronics America (SEA) Samsung (China) Investment (SCIC) Samsung (China) Semiconductor (SCS) Samsung Electronics Vietnam (SEV) Samsung Semiconductor (SSI) Samsung Electronics Europe Holding (SEEH) Samsung Electronics Vietnam THAINGUYEN (SEVT) Samsung Electronics Huizhou (SEHZ) Samsung Austin Semiconductor (SAS) Samsung India Electronics (SIEL) Shanghai Samsung Semiconductor (SSS) Samsung Asia Private (SAPL) Samsung Electronica da Amazonia (SEDA) Tianjin Samsung Telecom Technology (TSTC) Samsung Electronics Slovakia (SESK) Samsung Suzhou LCD (SSL) Samsung Electronics Europe Logistics (SELS) Thai Samsung Electronics (TSE) Samsung Electronics GmbH (SEG) Samsung Electronics Hungarian (SEH) Samsung Electronics Taiwan (SET) Samsung Display Dongguan (SDD) Samsung Electronics Benelux (SEBN) Samsung Electronics (UK) (SEUK) As of September 30, 2015 Assets 39,387,793 16,668,150 12,984,718 9,938,158 9,174,677 8,807,260 7,556,858 Liabilities 6,661,459 9,401,585 11,008,507 6,812,170 1,794,180 4,759,144 5,710,968 7,208,895 4,926,024 6,653,751 6,563,152 3,831,053 3,567,332 3,410,963 3,150,270 2,603,905 2,017,743 3,099,668 2,378,295 2,994,996 652,167 1,145,890 690,336 2,299,479 2,223,677 2,203,302 712,117 997,044 1,699,855 1,908,402 1,903,777 1,599,160 1,597,998 1,313,721 1,307,028 1,306,598 409,313 1,754,422 547,240 1,300,474 435,884 298,486 911,304 For the three months ended September 30, 2015 Net Income Sales (Loss) 7,117,283 773,364 8,911,077 (68,576) 3,318,502 141,357 825,268 77,346 5,118,744 585,546 5,849,751 11,195 - 1,227 5,456,766 373,456 4,969,806 832,923 2,100,563 3,947,122 340,453 1,171,639 1,750,439 199,595 23,246 97,730 36,688 (17,441) (7,403) 96,281 696,050 276,285 3,079,680 35,020 15,204 11,600 986,636 1,473,490 824,353 1,024,722 1,319,652 521,721 1,178,020 68,860 134,679 35,623 2,330 55,307 9,573 (11,759) For the nine months ended September 30, 2015 Net Income Sales (Loss) 20,054,143 1,713,347 25,546,201 89,782 9,208,543 88,981 1,728,586 85,570 14,110,473 1,524,364 14,809,510 31,900 - 12,079 14,646,759 1,207,986 13,963,990 2,117,895 5,830,237 10,073,341 1,091,804 4,324,964 5,298,631 662,844 60,770 221,651 98,939 (9,068) 244,289 285,486 2,290,874 776,696 9,013,251 105,984 89,504 373,861 3,036,786 4,287,618 2,153,078 3,398,670 3,406,445 1,626,405 3,285,295 192,790 81,462 77,291 1,775 71,068 37,141 100,579 Samsung Electronics Interim Business Report 73 / 173 (2) 2014 (In millions of Korean won) Samsung Display (SDC) Samsung Electronics America(SEA) Samsung (China) Investment (SCIC) Samsung Semiconductor (SSI) Samsung Electronics Europe Holding (SEEH) Samsung (China) Semiconductor (SCS) Samsung Electronics Vietnam (SEV) Samsung Austin Semiconductor (SAS) Samsung Telecommunications America (STA) Samsung Electronics Huizhou (SEHZ) Samsung Electronics Vietnam THAINGUYEN (SEVT) Samsung Electronica da Amazonia (SEDA) Samsung Asia Private (SAPL) Samsung India Electronics (SIEL) Shanghai Samsung Semiconductor (SSS) Tianjin Samsung Telecom Technology (TSTC) Samsung Electronics Slovakia (SESK) Samsung Suzhou LCD (SSL) Thai Samsung Electronics (TSE) Samsung Electronics Europe Logistics (SELS) Samsung Electronics Taiwan (SET) Samsung Electronics Hungarian (SEH) Samsung Electronics (UK) (SEUK) Samsung Electronics Benelux (SEBN) Samsung Electronics GmbH (SEG) As of December 31, 2014 Assets 37,939,965 10,697,787 9,603,679 7,577,935 7,022,746 Liabilities 6,728,991 5,409,749 7,830,941 3,883,673 5,062,988 6,765,278 6,553,628 6,503,003 5,321,014 3,911,166 1,251,667 3,375,099 4,573,413 4,966,486 3,957,700 1,258,635 3,042,402 3,797,166 3,110,433 2,949,605 2,560,852 2,316,054 1,330,302 671,729 1,776,936 2,120,738 789,395 1,869,697 1,831,794 1,654,988 1,621,583 405,089 768,230 307,109 1,524,468 1,583,027 1,287,972 1,235,239 1,207,723 1,142,897 1,299,330 323,972 964,058 245,237 1,082,420 For the three months ended September 30, 2014 Net Income Sales (Loss) 6,043,529 66,017 3,145,802 (75,814) 3,395,069 (322,423) 4,681,030 47,138 - 1,971 189,080 3,886,424 668,145 4,550,285 (12,305) 166,292 22,956 (104,815) 3,827,484 2,480,192 265,450 206,799 1,825,010 312,590 1,632,698 3,616,584 2,809,188 155,794 (1,937) 107,337 39,079 322,878 844,881 258,731 1,018,159 2,994,163 43,607 38,822 58,042 104,646 1,179,554 687,212 893,598 511,153 1,600,627 18,664 6,686 31,684 17,769 141,822 For the nine months ended September 30, 2014 Net Income Sales (Loss) 18,191,377 1,509,567 9,149,586 (220,435) 13,411,425 (576,120) 13,451,383 85,071 - 68,329 268,214 15,508,180 1,756,028 16,464,805 (7,785) 1,652,910 51,218 83,974 13,369,539 4,413,669 738,019 404,121 5,887,469 1,096,470 5,167,986 10,221,111 9,203,231 565,521 1,054,976 454,429 103,466 550,952 2,836,360 522,466 3,494,346 9,829,423 108,725 (47,802) 170,537 511,148 3,318,667 2,076,974 3,191,298 1,854,147 4,728,311 20,679 83,797 (187,648) 5,914 (77,947) (C) Changes in scope of consolidation A. Subsidiaries newly included in the consolidation for the nine months ended September 30, 2015: Area Domestic America Asia (Except China) Subsidiary Samsung Venture Capital Union #28 Samsung Venture Capital Union #29 Simpress Samsung Pay(formerly LoopPay) YESCO Electronics Beijing Integrated Circuit Industry International Fund(Beijing Fund) Paymate Global Samsung Electronics HCMC CE Complex (SEHC) Description Incorporation Incorporation Acquisition of shares Acquisition of shares Acquisition of shares Acquisition of shares Acquisition of shares Incorporation Samsung Electronics Interim Business Report 74 / 173 B. Subsidiaries excluded from the consolidation for the nine months ended September 30, 2015: Area Domestic America Europe/CIS China Subsidiary Ray High Pioneer Private Investment Trust #1 Samsung Venture Capital Union #6 Samsung Telecommunications America (STA) Paymate Global Nvelo Nanoradio Hellas Samsung Electronics Hainan Fiberoptics (SEHF) Samsung Medison Shanghai Medical Instrument (SMS1) Description Disposal Liquidation Liquidation Merger1 Liquidation Liquidation Disposal Disposal Liquidation 1 Samsung Electronics America (SEA), a subsidiary of the Group, merged with Samsung Telecommunications America (STA) on January 1, 2015. 2. Summary of Significant Accounting Policies 2.1 Basis of Presentation The interim consolidated financial statements for the nine months ended September 30, 2015, have been prepared in accordance with K-IFRS 1034, Interim Financial Reporting. These interim consolidated financial statements have been prepared in accordance with the K-IFRS standards and interpretations effective or early adopted at the reporting date. The Group applied the following amended and enacted standards for the annual period beginning on January 1, 2015: Amendment to Korean IFRS 1019, Employee Benefits According to the amendment of K-IFRS 1019, Employee Benefits, a practical expedient is allowed for a participant in a defined benefit plan when it receives contributions from employees or third parties. The adoption of this standard did not have a material impact on the interim consolidated financial statements. 2.2 Accounting Policies Significant accounting policies and estimates adopted in the preparation of the interim consolidated financial statements are consistent with those adopted in the preparation of the annual consolidated financial statements for the year ended December 31, 2014, except changes in accounting policies applied in the financial year beginning on January 1, 2015 and as described below. Income tax expense for the interim period is recognized based on management's best estimate of the weighted average annual effective income tax rate expected for the full financial year. The estimated average annual tax rate is applied to the pre-tax income. An emission trading scheme came into effect in January 2015 and is accounted for in accordance with Section 33 of the Korean Generally Accepted Accounting Standard, Emission Rights and Liabilities. The emission permits granted by the government for no consideration are recognized at zero value, and emission permits purchased are stated at cost, less accumulated impairment losses. Reserves have been made in the Company's books for emission permits to be purchased that relate to emissions produced during the nine months ended September 30, 2015 that were in excess of government granted emission permits held by the Group, which was calculated using market rates in effect during the period. Samsung Electronics Interim Business Report 75 / 173 2.3 Convenience Translation into United States Dollar Amounts The Company operates primarily in Korean won and its official accounting records are maintained in Korean won. The US dollar amounts provided in the financial statements represent supplementary information solely for the convenience of the reader. All Korean won amounts are expressed in US dollars at the rate of 1,122.29 to US $1, the average exchange rate for the nine month period ended in September 30, 2015. Such presentation is not in accordance with generally accepted accounting principles, and should not be construed as a representation that the Korean won amounts shown could be readily converted, realized or settled in U.S. dollars at this or at any other rate. 2.4 Critical Accounting Estimates and Assumptions In preparing the interim consolidated financial statements, the management of SEC makes estimates and assumptions on matters which affect the application of policies and reported amounts of assets, liabilities, income and expenses. Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The resulting accounting estimates, by definition, seldom equal the related actual results. Critical accounting estimates and assumptions made in the preparation of the interim consolidated financial statements are consistent with those made in the preparation of the annual consolidated financial statements for the year ended December 31, 2014, except for the estimation methodologies applied in deriving corporate income tax, emission rights and liabilities. 3. Financial Instruments by Category Categorizations of financial assets and liabilities as of September 30, 2015 and December 31, 2014, are as follows: (1) As of September 30, 2015 (In millions of Korean won) Assets at fair value through profit and loss Loans and receivables Available-for-sale financial assets Total Assets Cash and cash equivalents Short-term financial instruments Short-term available-for-sale financial assets Trade receivables Long-term available-for-sale financial assets Other Total - 67,000 67,000 23,608,377 40,895,407 27,631,463 3,484,301 95,619,548 - 5,220,977 8,628,872 13,849,849 23,608,377 40,895,407 5,220,977 27,631,463 8,628,872 3,551,301 109,536,397 (In millions of Korean won) Liabilities Trade payables Short-term borrowings Other payables Current portion of long-term liabilities Debentures Long-term borrowings Long-term other payables Other Total Liabilities at fair Financial liabilities value through profit measured at amortized and loss cost Other financial liabilities Total - 9,842,913 - 9,842,913 - 2,423,299 8,879,800 11,303,099 - 7,672,000 - 7,672,000 - 46,910 - 46,910 - 1,458,885 - 1,458,885 - 78,001 - 78,001 - 2,214,367 - 2,214,367 44,643 8,817,145 - 8,861,788 44,643 32,553,520 8,879,800 41,477,963 Samsung Electronics Interim Business Report 76 / 173 (2) As of December 31, 2014 (In millions of Korean won) Assets Cash and cash equivalents Short-term financial instruments Short-term available-for-sale financial assets Trade receivables Long-term available-for-sale financial assets Other Total (In millions of Korean won) Liabilities Trade payables Short-term borrowings Other payables Current portion of long-term liabilities Debentures Long-term borrowings Long-term other payables Other Total Assets at fair value through profit or loss Loans and receivables Available-for-sale financial assets Total - 16,840,766 - 16,840,766 - 41,689,776 - 41,689,776 - - 3,286,798 3,286,798 - 24,694,610 - 24,694,610 - - 12,667,509 12,667,509 48,360 4,614,560 100,051 4,762,971 48,360 87,839,712 16,054,358 103,942,430 Liabilities at fair Financial liabilities value through profit measured at Other and loss amortized cost financial liabilities Total - 7,914,704 - 7,914,704 - 3,367,915 4,661,384 8,029,299 - 9,258,344 - 9,258,344 - 1,778,667 - 1,778,667 - 1,355,882 - 1,355,882 - 101,671 - 101,671 - 2,520,277 - 2,520,277 78,348 11,395,781 - 11,474,129 78,348 37,693,241 4,661,384 42,432,973 4. Long-Term Available-for-Sale Financial Assets (A) Details of long-term available-for-sale financial assets as of September 30, 2015 and December 31, 2014, are as follows: (In millions of Korean won) Equity securities - Listed Equity securities - Non-listed Debt securities1 Total September 30, 2015 4,889,610 3,593,869 145,393 8,628,872 December 31, 2014 5,776,836 3,746,393 3,144,280 12,667,509 1 The maximum exposure to credit risk of available-for-sale debt securities is the carrying value at the reporting date. Samsung Electronics Interim Business Report 77 / 173 (B) Details of listed equity securities as of September 30, 2015 and December 31, 2014, are as follows: (In millions of Korean won, number of shares and percentage) Samsung SDI Samsung Heavy Industries Samsung Fine Chemicals Hotel Shilla Cheil Worldwide iMarket Korea SFA Wonik IPS ASML Rambus Seagate Technology Sharp SunEdison Semiconductor Wacom Other Total September 30, 2015 December 31, 2014 Number of Shares Owned 13,462,673 40,675,641 2,164,970 2,004,717 14,498,725 647,320 1,822,000 7,220,216 12,595,575 4,788,125 12,539,490 35,804,000 8,398,400 Percentage of Ownership (%) 19.6 17.6 8.4 5.1 12.6 1.8 10.2 9.0 2.8 4.1 4.2 2.1 5.0 Acquisition Cost 2,180,953 258,299 45,678 13,957 223,941 324 38,262 63,250 726,024 92,682 218,543 122,535 - 62,013 48,022 4,094,483 Book Value (Market Value) 1,460,700 500,310 87,140 230,542 263,877 19,031 81,990 65,992 1,317,038 67,489 671,034 48,894 36,857 38,716 4,889,610 Book Value (Market Value) 1,561,670 811,479 70,795 183,231 249,378 18,384 90,462 100,722 1,506,664 58,368 916,597 88,292 49,510 36,084 35,200 5,776,836 Acquisition cost includes impairment loss on available-for-sale financial assets recognized due to the decline in realizable value below acquisition cost. The difference between the acquisition cost and the current fair value, after income tax effects, is recorded within other components of equity (unrealized gains or losses on available-for-sale financial assets). 5. Inventories Inventories as of September 30, 2015 and December 31, 2014, are as follows: (In millions of Korean won) Finished goods Work in process Raw materials and supplies Materials in transit Total Gross Amount 7,285,098 6,542,848 8,254,137 September 30, 2015 Valuation Allowance (174,987) (385,295) (317,438) Book Value 7,110,111 6,157,553 7,936,699 December 31, 2014 Gross Amount Valuation Allowance 6,011,078 (237,630) 5,018,416 6,244,161 (553,345) (287,155) Book Value 5,773,448 4,465,071 5,957,006 1,636,706 23,718,789 - 1,636,706 (877,720) 22,841,069 1,121,979 18,395,634 (1,078,130) 1,121,979 17,317,504 Samsung Electronics Interim Business Report 78 / 173 6. Investments in Associates and Joint Ventures (A) Changes in investments in associates and joint ventures for the nine months ended September 30, 2015 and 2014, are as follows: (In millions of Korean won) Balance as of January 1 Acquisition Disposal Share of profit Other1 Balance as of September 30 September 30, 2015 5,232,461 137,917 (19,323) 113,872 (58,792) 5,406,135 September 30, 2014 6,422,292 655,067 (28,268) 96,217 (1,753,384) 5,391,924 1 Other consists of dividends, business combinations, and effects of changes in foreign currency exchange rates. And, due to decrease in shareholding ratio during the nine months ended September 30, 2014, the Group reclassified investment in Samsung SDI as available-for-sale financial assets. (B) Major investments in associates and joint ventures as of September 30, 2015, are as follows: (1) Investments in Associates Investee Samsung Card Samsung Electro-Mechanics Samsung SDS Nature of Relationship with Associate Business alliance Manufacture and supply electronic components including passive components, circuit boards, and modules Provide IT services including computer programming, system integration and management Ownership Percentage1 (%) 37.5 23.7 22.6 Principal Business Location Korea Korea Korea 1 Ownership Percentage represents the Group's ownership of common stock in each entity. (2) Investments in joint ventures Investee Samsung Corning Advanced Glass Nature of Relationship with Joint Venture Manufacture and supply industrial glass devices Ownership Percentage1 (%) 50.0 Principal Business Location Korea 1 Ownership Percentage represents the Group's ownership of common stock in each entity. (C) Details of investments in associates and joint ventures as of September 30, 2015 and December 31, 2014, are as follows: (1) Investments in Associates (In millions of Korean won) Investee Acquisition cost September 30, 2015 Net asset value1 Book value Samsung Card Samsung Electro-Mechanics Samsung SDS Other Total 1,538,540 359,237 147,963 1,127,679 3,173,419 2,464,095 1,020,258 991,733 552,798 5,028,884 1 Company's portion of net asset value of associates is based on the Group's ownership percentage. 2,421,664 1,011,778 1,014,893 695,556 5,143,891 Samsung Electronics Interim Business Report 79 / 173 (In millions of Korean won) Investee Acquisition cost December 31, 2014 Net asset value1 Samsung Card Samsung Electro-Mechanics Samsung SDS Other Total 1,538,540 359,237 147,963 1,012,517 3,058,257 2,393,185 1,038,184 928,548 483,413 4,843,330 1 Company's portion of net asset value of associates is based on the Group's ownership percentage. (2) Investments in joint ventures (In millions of Korean won) Investee Acquisition cost September 30, 2015 Net asset value1 Samsung Corning Advanced Glass Other Total 215,000 259,977 474,977 1 Company's portion of net asset value of associates is based on the Group's ownership percentage. 189,965 107,618 297,583 (In millions of Korean won) Investee Acquisition cost December 31, 2014 Net asset value1 Samsung Corning Advanced Glass Other Total 215,000 196,015 260,255 102,865 475,255 298,880 1 Company's portion of net asset value of joint ventures is based on the Group's ownership percentage. Book value 2,354,026 1,040,404 951,776 623,480 4,969,686 Book value 189,899 72,345 262,244 Book value 195,930 66,845 262,775 (D) Details of changes in equity-method investments, including associates and joint ventures, are as follows: (1) For the nine months ended September 30, 2015 (In millions of Korean won) Balance as of January 1 Gain/loss on valuation Other comprehensive income/loss Other1 Balance as of September 30 Samsung Card Samsung Electro-Mechanics Samsung SDS Samsung Corning Advanced Glass Other Total 2,354,026 1,040,404 951,776 195,930 690,325 5,232,461 96,536 1,616 70,380 (6,120) (48,540) 113,872 14,321 (16,154) 1,470 89 2,311 2,037 (43,219) (14,088) (8,733) 123,805 57,765 1 Other consists of acquisitions, disposals, dividends, and effects of changes in foreign currency exchange rates. 2,421,664 1,011,778 1,014,893 189,899 767,901 5,406,135 Samsung Electronics Interim Business Report 80 / 173 (2) For the nine months ended September 30, 2014 (In millions of Korean won) Balance as of January 1 Gain/loss on valuation Other comprehensive income/loss Other1 Balance as of September 30 Samsung Card Samsung Electro-Mechanics Samsung SDI Samsung SDS Samsung Techwin Samsung Corning Advanced Glass Other Total 2,340,009 954,496 1,175,204 879,956 402,745 111,961 557,921 6,422,292 85,496 (13,253) 11,636 65,455 (4,377) (10,579) (38,161) 96,217 (68,269) (25,519) 32,795 (10,618) 18,063 (33) (7,928) (61,509) (30,375) (13,270) (1,219,635) (4,367) (6,762) 99,893 109,440 (1,065,076) 1 Other consists of acquisitions, disposals, dividends, and effects of changes in foreign currency exchange rates. 2,326,861 902,454 930,426 409,669 201,242 621,272 5,391,924 (E) Summary of condensed financial information of major associates and joint ventures (1) A summary of condensed financial information of major associates and dividends received from associates as of September 30, 2015 and December 31, 2014, and for the nine months ended September 30, 2015 and 2014, is as follows: (In millions of Korean won) Investee Samsung Card1 2015 Samsung Electro- Mechanics Samsung SDS 1. Condensed financial information Condensed statement of financial position Current assets Non-current assets Current liabilities Non-current liabilities Non-controlling interests Condensed statement of comprehensive income Revenue Profit from continuing operations2 Post-tax profit or loss from discontinued operations2 Other comprehensive income (loss)2 Total comprehensive income2 19,284,457 12,713,538 - 2,456,493 257,733 38,240 295,973 3,277,624 4,534,515 1,815,353 1,591,645 100,252 4,814,227 294,687 (266,830) (72,341) (44,484) 3,613,473 2,482,667 1,230,883 306,509 170,549 5,748,700 308,105 6,523 314,628 2. Dividends from Associates Dividends 43,393 13,270 8,736 1 Samsung Card does not present current and non-current classifications of assets and liabilities in its statement of financial position. 2 Income (loss) attributable to owners of the parent. Samsung Electronics Interim Business Report 81 / 173 (In millions of Korean won) Investee Samsung Card1 2014 Samsung Electro- Mechanics Samsung SDS 1. Condensed financial information Condensed statement of financial position Current assets Non-current assets Current liabilities Non-current liabilities Non-controlling interests Condensed statement of comprehensive income Revenue Profit from continuing operations2 Other comprehensive loss2 Total comprehensive income (loss)2 17,736,627 11,346,281 - 2,421,895 378,239 (182,294) 195,945 3,553,987 4,164,625 2,151,002 924,814 89,390 5,311,155 (55,161) (112,371) (167,532) 3,228,074 2,317,971 1,117,969 214,051 101,766 5,728,672 282,987 (46,942) 236,045 2. Dividends from Associates Dividends 30,375 13,270 4,368 1 Samsung Card does not present current and non-current classifications of assets and liabilities in its statement of financial position. 2 Income (loss) attributable to owners of the parent (2) A summary of the condensed financial information of major joint ventures and dividends received from joint ventures as of September 30, 2015 and December 31, 2014, and for the nine months ended September 30, 2015 and 2014, is as follows: (In millions of Korean won) Samsung Corning Advanced Glass 2015 2014 1. Condensed financial information Condensed statements of financial position Current assets - Cash and cash equivalent Non-current assets Current liabilities - Current financial liabilities1 Non-current liabilities Condensed statements of comprehensive income2 Revenue Depreciation and amortization Interest income Income tax expense Net loss from continuing operations Other comprehensive income (loss) Total comprehensive loss 227,929 15,931 188,861 33,479 15,672 3,381 200,676 1,412 865 (927) (12,279) 179 (12,100) 228,312 14,696 200,105 34,719 18,718 1,669 190,632 436 574 (2,863) (21,195) (65) (21,260) 2. Dividends from joint ventures Dividends - - 1 Accounts payable, other payables, and provisions are excluded. 2 Amounts relate to the nine months ended September 30, 2015 and 2014. Samsung Electronics Interim Business Report 82 / 173 (3) Profit (loss) amounts attributable to owners of the parent from associates and joint ventures which are not individually material for the nine months ended September 30, 2015 and 2014, are as follows: (In millions of Korean won) Investee 2015 Associates Joint ventures Associates 2014 Joint ventures Income (loss) from continuing operations1 Other comprehensive income (loss) 1 Total comprehensive loss1 (47,869) (618) (48,487) 926 3,865 4,791 (38,805) (3,547) (42,352) (12,700) 3,764 (8,936) 1 Income (loss) attributable to owners of the parent. (F) Fair value of marketable investments in associates as of September 30, 2015 and December 31, 2014, is as follows: (In millions of Korean won and number of shares) September 30, 2015 Number of shares held Market value December 31, 2014 Market value Samsung Card Samsung Electro-Mechanics Samsung SDS 43,393,170 17,693,084 17,472,110 1,573,002 1,137,665 5,031,968 1,917,978 967,812 5,128,064 7. Property, Plant and Equipment (A) Changes in property, plant and equipment for the nine months ended September 30, 2015 and 2014, are as follows: (In millions of Korean won) Balance as of January 1 Acquisition and capital expenditures Business combinations Depreciation Disposals/scrap/impairment Other1 Balance as of September 30 1 Other includes effects of changes in foreign currency exchange rates. 2015 80,872,950 19,177,723 34,776 (14,614,029) (247,927) 1,336,935 86,560,428 2014 75,496,388 14,460,046 940 (12,531,487) (711,738) (702,084) 76,012,065 (B) Allocation of depreciation of property, plant and equipment for the nine months ended September 30, 2015 and 2014, are as follows: (In millions of Korean won) 2015 2014 Cost of sales Selling and administrative expenses Total 13,284,416 11,351,213 1,329,613 1,180,274 14,614,029 12,531,487 Samsung Electronics Interim Business Report 83 / 173 8. Intangible Assets (A) Changes in intangible assets for the nine months ended September 30, 2015 and 2014, are as follows: (In millions of Korean won) Balance as of January 1 Internally generated (development costs) External acquisitions Business combinations Amortization Disposals/scrap/impairment Other1 Balance as of September 30 2015 4,785,473 858,982 254,356 374,224 (933,624) (75,986) 296,873 5,560,298 2014 1 Other includes effects of changes in foreign currency exchange rates. 3,980,600 679,094 272,263 239,890 (845,103) (30,287) 388,295 4,684,752 (B) Allocation of amortization of intangible assets for the nine months ended September 30, 2015 and 2014, are as follows: (In millions of Korean won) 2015 2014 Cost of sales Selling and administrative expenses Total 9. Borrowings 579,190 405,886 354,434 439,217 933,624 845,103 Details of the carrying amounts of borrowings as of September30, 2015 and December 31, 2014 are as follows: (In millions of Korean won) Financial Institutions Annual Interest Rates (%) as of September 30, 2015 Short-term borrowings Collateralized borrowings1 Non-collateralized borrowings Total Woori Bank and others Citibank and others 0.3 ~ 13.8 0.1 ~ 14.6 September 30, 2015 8,879,800 2,423,299 11,303,099 December 31, 2014 4,661,384 3,367,915 8,029,299 Current portion of long-term borrowings Bank borrowings Financial lease liabilities2 Total SMBC and others CSSD and others 1.1 ~ 18.8 1.1 ~ 15.7 24,945 16,182 41,127 1,758,556 14,807 1,773,363 Long-term borrowings Bank borrowings Financial lease liabilities2 Total SMBC and others CSSD and others 1.1 ~ 19.8 1.1 ~ 15.7 1 Collateralized borrowings are secured by trade receivables. 2 Leased property, plant and equipment were pledged as collateral. 203 77,798 78,001 23,989 77,682 101,671 Samsung Electronics Interim Business Report 84 / 173 10. Debentures Details of the carrying amount of debentures as of September 30, 2015 and December 31, 2014 are as follows: (In millions of Korean won) September 30, 2015 December 31, 2014 Korean won denominated debentures (A) Foreign currency denominated debentures (B) Total 199,727 1,259,158 1,458,885 199,515 1,156,367 1,355,882 (A) Details of Korean won denominated debentures as of September 30, 2015 and December 31, 2014 are as follows: (In millions of Korean won) Unsecured debentures Less: Discounts Total Issue Date Due Date 2011.11.17 2016.11.17 Annual Interest Rates (%) as of September 30, 2015 4.2 September 30, 2015 December 31, 2014 200,000 200,000 (273) (485) 199,727 199,515 All the above debentures have been issued by Samsung Display and will be repaid upon maturity. (B) Details of foreign currency denominated debentures as of September 30, 2015 and December 31, 2014 are as follows: (In millions of Korean Won) US dollar denominated straight bonds1 US dollar denominated unsecured bonds2 Less: Current Portion Less: Discounts Total Annual Interest Rates (%) Issue Date Due Date as of September 30, 2015 September 30, 2015 1997.10.02 2027.10.01 2012.4.10 2017.4.10 7.7 77,643 (US$65 million) 1,194,500 1.8 (US$1,000 million) (5,973) (7,012) 1,259,158 December 31, 2014 71,448 (US$65 million) 1,099,200 (US$1,000 million) (5,496) (8,785) 1,156,367 1 US dollar denominated straight bonds are repaid annually for twenty years after a ten-year grace period from the date of issuance. Interest is paid semi-annually. 2 US dollar denominated unsecured bonds are issued by Samsung Electronics America, a subsidiary of the Group, and are repaid in full upon maturity. Interest is paid semi-annually. 11. Net Defined Benefit Liabilities (A) Details of net defined benefit liabilities recognized on the consolidated statements of financial position as of September 30, 2015 and December 31, 2014 are as follows: (In millions of Korean won) Present value of funded defined benefit obligations Present value of unfunded defined benefit obligations Subtotal Fair value of plan assets Total September 30, 2015 8,173,051 138,025 8,311,076 (7,298,901) 1,012,175 December 31, 2014 7,404,205 138,042 7,542,247 (7,340,905) 201,342 Samsung Electronics Interim Business Report 85 / 173 (B) The amounts recognized in the consolidated statements of income for the nine months ended September 30, 2015 and 2014 are as follows: (In millions of Korean won) 2015 2014 Current service cost Interest cost Past service cost Other Total 859,768 741,684 4,720 77,393 - 110,397 2,075 (34) 866,563 929,440 (C) The pension expenses related to defined benefit plans recognized on the consolidated statements of income for the nine months ended September 30, 2015 and 2014 are as follows: (In millions of Korean won) 2015 2014 Cost of sales Selling and administrative expenses Total 375,371 388,346 491,192 541,094 866,563 929,440 12. Provisions Changes in the provisions during the nine months ended September 30, 2015 are as follows: (In millions of Korean won) Warranty (A) Royalty expenses (B) Long-term incentives (C) Bonus (D) Other (E) Total Balance as of January 1, 2015 Charged to the statement of income Payment Other1 Balance as of September 30, 2015 1,829,068 3,917,792 730,464 1,358,330 1,036,211 170,288 (1,403,974) (3,222) 1,780,202 (352,394) 265,306 4,866,915 (210,509) - 690,243 1 Other includes effects of changes in foreign currency exchange rates. - 2,465,072 (270,133) - 2,194,939 13,476 6,490,800 37,974 5,067,875 (6,083) 536 45,903 (2,243,093) 262,620 9,578,202 (A) The Group accrues warranty reserves for estimated costs of future service, repairs and recalls, based on historical experience and terms of warranty programs. (B) The Group makes provisions for the estimated royalty expenses under negotiation with counterparties. The timing of payment depends on the settlement of the negotiation. (C) The Group has a long-term incentive plan for its executives based on a three-year management performance criteria and has made a provision for the estimated incentive cost for the accrued period. (D) The Group provides bonuses for its executives and employees, which are determined based on current-period performance. The estimated bonus cost for the accrued period has been recognized as a provision. (E) The Group makes provisions for the estimated emission expense for the emission in excess of the permits held by the Group for the applicable years. Details of emission rights and liabilities as of September 30, 2015 are as follows: Samsung Electronics Interim Business Report 86 / 173 (1)Allocated amount of emission permits and estimated amount of emission for the next three years as of September 30, 2015 are as follows: (In metric tons) Allocated emission permits Estimated volume of emission 2015 5,774,375 6,569,385 2016 5,662,429 7,328,034 2017 5,548,627 8,248,797 (2)Changes in the certified emission reductions as of September 30, 2015 are as follows: (In millions of Korean won) Balance as of January 1 Acquisition Balance as of September 30 2015 5,100 5,100 (3)Changes in the provisions for emissions as of September 30, 2015 are as follows: (In millions of Korean won) Balance as of January 1 Charged to the statement of income Balance as of September 30 2015 5,960 5,960 13. Commitments and Contingencies (A) Guarantees Details of guarantees of debt provided by the Group as of September 30, 2015 and December 31, 2014 are as follows: (In millions of Korean won) September 30, 2015 December 31, 2014 Guarantees of debt for housing rental1 66,401 76,558 1 Represents the maximum amount of debt guarantee, which was provided for employees who took debt from financial institutions in order to finance employee housing rental. As of September 30, 2015, the Group's investments in Pusan Newport are pledged as collateral against the investee's debt. (B) Litigation (1) The litigation with Apple Inc. ("Apple") is ongoing in the United States as of the reporting date. Regarding the ongoing lawsuit in the United States, on August 24, 2012, the jury determined that the Group partially infringed Apple's design and utility patent and should pay damages to Apple. On March 1, 2013, however, the Judge ordered a new trial for a certain portion of the damages, ruling that it was originally miscalculated. On March 6, 2014, the Judge denied Apple's bid for a permanent injunction against the Group and made a final judgment restating the total damages amount determined by a jury verdict. The Group appealed the decision on the amount of damages on March 7, 2014, and a hearing on the appeal was held on December 4, 2014. On May 18, 2015, the United States Court of Appeals for the Federal Circuit upheld the prior design infringement verdict, but reversed and remanded a previous decision related to a trademark finding. On June 17, 2015, the Group petitioned for an en banc rehearing regarding the design infringement, and on August 13, 2015, the Court of Appeals for the Federal Circuit dismissed the Group's request. The appellate court remanded the case to the district court, and the district court announced partial final judgment on the appeals on September 18, 2015. On October 19, 2015, the Group petitioned for an en banc rehearing since the immediate appeal had been dismissed on October 13, 2015. The final conclusion and the effect of the patent lawsuits with Apple are uncertain as at the reporting date. In August 2014, the Group and Apple reached an agreement to withdraw from ongoing litigation in all regions other than the United States, and the Group has withdrawn all non-United States based lawsuits. Samsung Electronics Interim Business Report 87 / 173 Additionally, on May 5, 2014, the jury in another ongoing lawsuit determined that the Group partially infringed Apple's utility patent and should pay damages to Apple. On November 25, 2014, the first trial judgment was pronounced to confirm the jury's verdict. The Group appealed the decision on the damages and the appeal is currently on-going. On October 19, 2015, the Group requested an en banc hearing following the remand and reversal by the appellate court on September 17, 2015 of a first trial decision to deny a sales ban on the Company's products on August 27, 2014. (2) The Group is involved in claims, disputes, and investigations conducted by regulatory bodies as of the reporting date, including civil claims from some overseas buyers for price-fixing related to the sale of TFT-LCD. Although the outflow of resources and timing of these matters are uncertain, the Group believes the outcome will not have a material impact on the financial condition of the Group. (3) In addition, during the normal course of business with numerous companies, the Group has been involved in various claims, disputes, and investigations conducted by regulatory bodies. Although the outflow of resources and timing of these matters are uncertain, the Group believes the outcome will not have a material impact on the financial condition of the Group. (C) Other commitments The Group entered into a comprehensive business cooperation agreement with Corning Incorporated on October 23, 2013. The respective agreement includes ex-post settlement conditions based on the business performance of Samsung Corning Precision Materials which may result in future outflows of, or inflows to, the Group's resources. As of the reporting date, future inflows or outflows are uncertain and thus, its impact to the Group's financial statements cannot be estimated. The Group's management, however, believes future inflows or outflows will not have a material impact on the financial conditions of the Group. 14. Share Capital The Group's total number of authorized shares is 500,000,000 shares (5,000 per share). The Group has issued 147,299,337 shares of common stock and 22,833,427 shares of preferred stock as of September 30, 2015, excluding retired shares. Due to the retirement of shares, the total par value of the shares issued is 850,664 million (common stock 736,497 million and preferred stock 114,167 million), which differs from paid-in capital of 897,514 million. 15. Retained Earnings (A) Retained earnings as of September 30, 2015 and December 31, 2014 consist of: (In millions of Korean won) September 30, 2015 Appropriated Unappropriated Total 131,539,595 50,349,961 181,889,556 December 31, 2014 119,947,785 49,581,819 169,529,604 Samsung Electronics Interim Business Report 88 / 173 (B) On July 30, 2015, the Company declared cash dividends to shareholders of common stock and preferred stock as interim dividends for the six-months ended June 30, 2015. Details of the interim dividends for the nine-months ended September 30, 2015 and 2014 are as follows: (In millions of Korean won) Number of shares eligible for dividends Dividend rate (based on par value) Dividend amount Common stock Preferred stock Common stock Preferred stock Total September 30, 2015 129,312,651 19,603,734 20% 129,313 19,603 148,916 September 30, 2014 130,962,651 19,853,734 10% 65,481 9,927 75,408 16. Other Components of Equity (A) Other components of equity as of September 30, 2015 and December 31, 2014 consist of: (In millions of Korean won) Treasury stock Stock options Unrealized gains on available-for-sale financial assets Share of other comprehensive income of associates and joint ventures Foreign currency translation Remeasurements of net defined benefit liability Other Total September 30, 2015 (9,752,372) 806 1,085,601 615,223 (2,530,196) (2,064,027) (151,135) (12,796,100) December 31, 2014 (8,429,313) 806 1,850,195 559,280 (4,566,887) (1,996,792) (146,676) (12,729,387) (B) The Group repurchases registered common stock and non-voting preferred stock and recognizes the repurchase amount in other components of equity. Such stock will be distributed upon exercise of stock options. Treasury stock as of September 30, 2015 and December 31, 2014 consists of the following: (In millions of Korean won and number of shares) Number of shares Acquisition cost September 30, 2015 December 31, 2014 Common Stock Preferred Stock Common Stock Preferred Stock 17,986,686 8,873,555 3,229,693 878,817 17,094,741 7,673,549 3,110,943 755,764 Samsung Electronics Interim Business Report 89 / 173 17. Expenses by Nature Expenses by nature for the three and nine months ended September 30, 2015 and 2014 consist of the following: (In millions of Korean won) Changes in finished goods and work in process Raw materials and goods Wages and salaries Pension Depreciation Amortization Welfare Commission and service charges Other Total1 September 30, 2015 3 Months 9 Months (1,406,662) (3,029,145) September 30, 2014 3 Months 196,927 9 Months 770,729 20,841,438 4,587,111 57,616,337 13,793,828 19,768,884 4,409,601 62,216,017 13,326,624 311,100 921,394 287,956 975,262 5,103,838 14,614,029 4,326,214 12,531,487 318,966 933,624 312,151 845,103 987,832 2,878,007 838,033 2,598,983 2,209,595 6,289,172 1,941,816 6,417,942 11,335,981 33,050,106 11,305,206 34,057,074 44,289,199 127,067,352 43,386,788 133,739,221 1 Expenses above are equal to the sum of cost of sales and selling and administrative expenses on the interim consolidated statements of income. 18. Selling and Administrative Expenses Selling and administrative expenses for the three and nine months ended September 30, 2015 and 2014 are as follows: (In millions of Korean won) September 30, 2015 3 Months 9 Months September 30, 2014 3 Months 9 Months 1) Selling and administrative expenses Wages and salaries Pension Commission and service charges Depreciation Amortization Advertising Sales promotion Transportation Warranty Other 2) Research and development expenses Total expenses Capitalized expenses Total 1,372,254 4,070,527 1,309,046 74,435 207,898 69,470 2,209,595 6,289,172 1,941,816 181,608 527,978 170,368 56,682 197,964 100,314 1,033,184 2,733,017 849,261 1,795,875 5,176,128 2,020,609 920,651 2,539,462 927,563 758,418 2,178,845 724,495 861,118 3,383,208 1,222,763 3,943,049 226,538 6,417,942 498,853 298,508 2,665,563 5,751,672 2,742,874 2,397,659 3,630,630 3,690,644 (274,717) 11,101,697 (858,982) 3,677,237 (337,552) 12,679,747 37,546,914 12,675,390 11,412,295 (679,094) 39,306,489 Samsung Electronics Interim Business Report 90 / 173 19. Other Non-Operating Income and Expense Details of other non-operating income and expense for the three and nine months ended September 30, 2015 and 2014 are as follows: (In millions of Korean won) September 30, 2015 3 Months 9 Months September 30, 2014 3 Months 9 Months Non-operating income Dividend income Rental income Gain on disposal of investments Gain on disposal of property, plant and equipment Gain on disposal of assets classified as held-for-sale Other Total (In millions of Korean won) Non-operating expense Loss on disposal of property, plant and equipment Donations Loss on disposal of assets classified as held for sale Other Total 35,735 23,120 27,043 38,748 3,772 191,879 320,297 146,235 70,256 220,652 103,151 211,568 584,010 1,335,872 30,599 21,390 16,890 34,838 - 724,579 828,296 1,381,208 67,246 142,103 162,585 1,574,686 3,327,828 September 30, 2015 3 Months 9 Months September 30, 2014 3 Months 9 Months 45,462 165,392 193,439 404,293 91,968 326,890 450,493 869,351 28,861 149,260 108,339 286,460 120,503 369,317 723,869 358,883 1,572,572 20. Finance Income and Expense (A) Details of finance income and expense for the three and nine months ended September 30, 2015 and 2014 are as follows: (In millions of Korean won) September 30, 2015 3 Months 9 Months September 30, 2014 3 Months 9 Months Finance income Interest income: Interest income from loans and receivables Interest income from available-for-sale financial assets Foreign exchange differences Gain on derivatives Total 445,531 422,926 22,605 2,628,557 311,546 3,385,634 1,314,685 1,241,037 73,648 5,887,792 758,523 7,961,000 480,149 449,731 30,418 1,058,158 144,289 1,682,596 1,343,255 1,283,582 59,673 3,603,871 422,566 5,369,692 Samsung Electronics Interim Business Report 91 / 173 (In millions of Korean won) September 30, 2015 3 Months 9 Months September 30, 2014 3 Months 9 Months Finance expense Interest expense: Interest expense from financial liabilities measured at amortized cost Other financial liabilities Foreign exchange differences Loss on derivatives Total 205,234 561,371 154,360 442,545 123,444 340,561 96,161 288,964 81,790 220,810 58,199 153,581 2,875,464 6,250,109 1,131,322 3,768,362 247,888 763,804 154,477 465,955 3,328,586 7,575,284 1,440,159 4,676,862 (B) The Group recognizes foreign exchange gains and losses arising from foreign currency transactions and translation as finance income and expense. 21. Income Tax Expense Income tax expense is recognized based on management's best estimate of the average annual income tax rate expected for the full financial year. The average annual tax rate expected as of September 30, 2015 to be effective for the year ended December 31, 2015 is 25.4%. 22. Earnings per Share (A) Basic earnings per share Basic earnings per share for the three and nine months ended September 30, 2015 and 2014 are calculated as follows: (1) Common stock (In millions of Korean won and thousands of shares, except per share data) September 30, 2015 3 Months 9 Months September 30, 2014 3 Months 9 Months Net income as reported on the statements of income Net income available for common stock Weighted-average number of common shares outstanding Basic earnings per share (in Korean won) 5,306,104 15,452,161 4,135,422 17,796,608 4,607,382 13,417,361 3,590,812 15,453,185 129,313 129,362 130,963 130,949 35,630 103,720 27,419 118,009 (2) Preferred stock (In millions of Korean won and thousands of shares, except per share data) Net income as reported on the statements of income Net income available for preferred stock Weighted-average number of preferred shares outstanding Basic earnings per preferred share (in Korean won) September 30, 2015 3 Months 9 Months 5,306,104 698,722 19,604 35,642 15,452,161 2,034,800 19,611 103,760 September 30, 2014 3 Months 9 Months 4,135,422 544,610 19,854 27,431 17,796,608 2,343,423 19,854 118,034 Samsung Electronics Interim Business Report 92 / 173 (B) Diluted earnings per share The Group has one category of potentially dilutive ordinary shares: stock options. Dilutive earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. Diluted earnings per share for the three and nine months ended September 30, 2015 and 2014 are calculated as follows: (1) Common stock (In millions of Korean won and thousands of shares, except per share data) September 30, 2015 3 Months 9 Months September 30, 2014 3 Months 9 Months Net income available for common stock and common stock equivalents Weighted-average number of shares of common stock and common stock equivalents Diluted earnings per share (in Korean won) 4,607,405 13,417,429 3,590,822 15,453,227 129,315 35,629 129,365 103,718 130,965 27,418 130,959 118,000 (2) Preferred stock (In millions of Korean won and thousands of shares, except per share data) Net income available for preferred stock and preferred stock equivalents Weighted-average number of shares of preferred stock and preferred stock equivalents Diluted earnings per preferred share (in Korean won) September 30, 2015 3 Months 9 Months 698,699 2,034,732 September 30, 2014 3 Months 9 Months 544,600 2,343,381 19,604 35,641 19,611 103,756 19,854 27,431 19,854 118,032 Samsung Electronics Interim Business Report 93 / 173 23. Cash Flows Generated from Operating Activities Adjustments and changes in assets and liabilities arising from operating activities for the nine months ended September 30, 2015 and 2014 are as follows: - Adjustments (In millions of Korean won) 2015 2014 Adjustments for: Income tax expense Finance income Finance expense Pension Depreciation Amortization Bad debt expense Dividend income Gain on valuation of equity method Gain on disposal of property, plant and equipment Loss on disposal of property, plant and equipment Obsolescence and scrapping of inventories Gain on disposal of investments Gain on disposal of assets classified as held-for-sale Loss on disposal of assets classified as held-for-sale Other income/expense Adjustments, total 5,400,115 (2,704,801) 2,426,990 921,394 14,614,029 933,624 295,441 (146,235) (113,872) (103,151) 91,968 470,125 (220,652) (211,568) (153,425) 21,499,982 4,233,380 (2,722,916) 1,420,957 975,262 12,531,487 845,103 290,893 (1,381,208) (96,217) (162,585) 120,503 645,220 (142,103) 723,869 (977,696) 16,303,949 - Changes in assets and liabilities arising from operating activities (In millions of Korean won) Changes in assets and liabilities : Increase in trade receivables Decrease in other receivables Decrease (Increase) in advances Decrease (Increase) in prepaid expenses Increase in inventories Increase in trade payables Increase (Decrease) in other payables Increase (Decrease) in advances received Decrease in withholdings Decrease in accrued expenses Increase in provisions Payment of severance benefits Other Changes in net working capital, total 2015 (1,475,321) 696,564 (14,879) 378,853 (5,620,212) 532,619 (571,847) (96,459) (266,293) (3,218,994) 3,055,284 (355,656) 478,033 (6,478,308) 2014 (538,733) 477,583 113,763 (2,704,279) (860,536) 2,549,339 1,323,115 558,201 (101,171) (1,929,725) 1,323,833 (251,242) 678,366 638,514 Samsung Electronics Interim Business Report 94 / 173 24. Financial Risk Management The Group's financial risk management focuses on minimizing market risk, credit risk, and liquidity risk arising from operating activities. To mitigate these risks, the Group implements and operates a financial risk policy and program that closely monitors and manages such risks. The Group's financial risk management is mainly performed by the finance team. With the cooperation of the Group's divisions, domestic and foreign subsidiaries, the finance team periodically measures, evaluates and hedges financial risk and also establishes and implements the global financial risk management policy. Also, financial risk management officers are dispatched to the regional headquarters of each area including the United States, England, Singapore, China, Japan, Brazil and Russia to operate the local finance center in accordance with global financial risk management. The Group's financial assets that are under financial risk management are comprised of cash and cash equivalents, short-term financial instruments, available-for-sale financial assets, trade and other receivables and other financial assets. The Group's financial liabilities under financial risk management are comprised of trade and other payables, borrowings, debentures, and other financial liabilities. (A) Market Risk (1) Foreign Exchange Risk The Group is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the United States, European Union, South America, Japan and other Asian countries. Revenues and expenses arise from foreign currency transactions and exchange positions, and the most widely used currencies are the US Dollar, Eurozone Euro, Japanese Yen and Chinese Yuan. Foreign exchange risk management of the Group is carried out by both SEC and its subsidiaries. To minimize foreign exchange risk arising from operating activities, the Group's foreign exchange management policy requires normal business transactions to be in local currency or for the cash-in currency to be matched up with the cash-out currency. The Group's foreign exchange risk management policy also defines foreign exchange risk, measuring period, controlling responsibilities, management procedures, hedging period and hedge ratio. The Group limits all speculative foreign exchange transactions and operates a system to manage receivables and payables denominated in foreign currency. It evaluates, manages and reports foreign currency exposures. (2) Price Risk The Group's investment portfolio consists of direct and indirect investments in equity securities classified as available-for-sale, which is in line with the Group's strategy. As of September 30, 2015 and December 31, 2014, a price fluctuation in relation to marketable equity securities by 1% would result in changes in other comprehensive income (before income tax) of 48,896 million and 57,768 million, respectively. (3) Interest Rate Risk Risk of changes in interest rates for floating interest rate financial instruments is defined as the risk that the fair value of components of the statement of financial position, and future cash flows of interest income (expenses) of a financial instrument, will fluctuate because of changes in market interest rates. The Group is exposed to interest rate risk mainly through interest bearing liabilities and assets. The Group's position with regard to interest rate risk exposure is mainly driven by its floating interest rate debt obligations and interest-bearing deposits. The Group implemented policies and operates to minimize uncertainty arising from changes in interest rates and finance costs. Samsung Electronics Interim Business Report 95 / 173 In order to mitigate the risks associated with changes in interest rates, the Group maintains minimum external borrowings by facilitating cash pooling systems on a regional and global basis. The Group manages exposure to interest rate risks via periodic monitoring and effectively managing risk factors on a timely basis. (B) Credit Risk Credit risk arises during the normal course of transactions and investing activities where clients or other parties fail to discharge an obligation. The Group monitors and sets the client's and counterparty's credit limit on a periodic basis based on the client's and counterparty's financial conditions, default history and other important factors. Appropriate insurance coverage is maintained for accounts receivables generated by trading partners situated in higher risk countries. Credit risk can arise from transactions with financial institutions which include financial instrument transactions such as cash and cash equivalents, savings, and derivative instruments. To minimize such risk, the Group transacts only with banks which have strong international credit rating (S&P long-term rating "A" and above), and all new transactions with financial institutions with no prior transaction history are approved, managed and monitored by the Group's finance team and the local finance center. The Group requires separate approval for contracts with restrictions. The Group estimates that its maximum exposure to credit risk is the carrying value of its financial assets, net of impairment losses. (C) Liquidity Risk Due to large investments made by the Group, maintaining adequate levels of liquidity risk is critical. The Group strives to achieve this goal by periodically forecasting its capital balance, estimating required cash levels, and managing income and expenses. The Group manages its liquidity risk by periodically forecasting projected cash flows. If material implications are identified, the Group works with the local finance center and provides liquidity support by utilizing a globally integrated finance structure, such as Cash Pooling. In addition, the Group maintains a liquidity management process which provides additional financial support by the local finance center and the Group. The Cash Pooling program allows sharing of surplus funds among entities and contributes to minimizing liquidity risk and strengthening the Group's competitive position by reducing capital operation expenses and financial expenses. In addition, the Group mitigates liquidity risk by contracting with financial institutions with respect to bank overdrafts and foreign trade finance, and by providing payment guarantees to subsidiaries. For large scale facility investments, liquidity risk is minimized by utilizing internal reserves and long term borrowings according to the capital injection schedule. (D) Capital Risk Management The purpose of capital management is to maintain a sound capital structure. The Group monitors capital on the basis of the ratio of total liabilities to total equity. This ratio is calculated by dividing total liabilities by total equity in the consolidated financial statements. The Group's capital risk management policy has not changed since the fiscal year ended December 31, 2014. As of September 30, 2015, the Group has maintained an "A+" and "A1" credit rating from S&P and Moody's, respectively, on its long term debt. Samsung Electronics Interim Business Report 96 / 173 The total liabilities to equity ratios as of September 30, 2015 and December 31, 2014 are as follows: (In millions of Korean won) Total liabilities Total equity Total liabilities to equity ratio September 30, 2015 65,838,937 180,728,636 36.4% December 31, 2014 62,334,770 168,088,188 37.1% (E) Fair value estimation (1) Carrying amounts and fair values of financial instruments by category as of September 30, 2015 and December 31, 2014 are as follows: (In millions of Korean won) Financial assets Cash and cash equivalents1 Short-term financial instruments1 Short-term available-for-sale financial assets Trade receivables1 Long-term available-for-sale financial assets2 Other Total financial assets Financial liabilities Trade payables1 Short-term borrowings1 Other payables1 Current portion of long-term liabilities1 Debentures Long-term borrowings Long-term other payables Other1 Total financial liabilities September 30, 2015 Carrying amount Fair value December 31, 2014 Carrying amount Fair value 23,608,377 40,895,407 5,220,977 27,631,463 8,628,872 3,551,301 109,536,397 - 16,840,766 - - 41,689,776 - 5,220,977 3,286,798 3,286,798 - 24,694,610 - 8,211,414 12,667,509 12,272,756 3,530,398 4,762,971 4,725,263 103,942,430 9,842,913 11,303,099 7,672,000 46,910 1,458,885 78,001 2,214,367 8,861,788 41,477,963 - 1,488,220 61,846 2,256,516 7,914,704 8,029,299 9,258,344 1,778,667 1,355,882 101,671 2,520,277 11,474,129 42,432,973 1,377,113 82,271 2,606,179 - 1 Assets and liabilities whose carrying amount is a reasonable approximation of fair value are excluded from the fair value disclosures. 2 Amounts measured at cost (September 30, 2015: 417,458 million, December 31, 2014: 394,753 million) are excluded as the range of reasonable fair value estimates is significant and the probabilities of the various estimates cannot be reasonably assessed. Samsung Electronics Interim Business Report 97 / 173 (2) The following table presents the assets and liabilities, by level, that are measured at fair value: (In millions of Korean won) 1) Assets Short-term available-for-sale financial assets Long-term available-for-sale financial assets1 Other 2) Liabilities Other Level 1 September 30, 2015 Level 2 Level 3 Total balance 4,889,610 - 5,220,977 33,379 66,160 3,288,425 840 5,220,977 8,211,414 67,000 - 44,643 - 44,643 (In millions of Korean won) 1) Assets Short-term available-for-sale financial assets Long-term available-for-sale financial assets1 Other 2) Liabilities Other Level 1 December 31, 2014 Level 2 Level 3 Total balance 1,016,878 5,776,836 - 2,269,920 3,050,338 45,898 - 3,445,582 102,513 3,286,798 12,272,756 148,411 - 78,348 - 78,348 1 Amounts measured at cost (September 30, 2015: 417,458 million, December 31, 2014: 394,753 million) are excluded as the range of reasonable fair value estimates is significant and the probabilities of the various estimates cannot be reasonably assessed. The levels of the fair value hierarchy and its application to financial assets and liabilities are described below. Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly Level 3: Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) The fair value of financial instruments traded in active markets is based on quoted market prices at the statement of financial position date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm's length basis. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in Level 1. Instruments included in Level 1 are listed equity investments classified as trading securities or available-for-sale financial assets. The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2. If one or more of the significant inputs are not based on observable market data, the instrument is included in Level 3. Samsung Electronics Interim Business Report 98 / 173 The Group performs the fair value measurements required for financial reporting purposes, including Level 3 fair values and discusses valuation processes and results at least once every quarter in line with the Group's quarterly reporting dates. The Group's policy is to recognize transfers between levels at the end of the reporting period, if corresponding events or changes in circumstances have occurred. Specific valuation techniques used to value financial instruments include: Quoted market prices or dealer quotes for similar instruments The fair value of forward foreign exchange contracts is determined using forward exchange rates at the statement of financial position date, with the resulting value discounted back to present value Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining financial instruments. For trade and other receivables, the book value approximates a reasonable estimate of fair value. (3) Valuation technique and the inputs The Group utilizes a present value technique to discount future cash flows at a proper interest rate for corporate bonds, government and public bonds, and bank debentures that are classified as Level 2 in the fair value hierarchy. The following table presents the valuation technique and the inputs used for major financial instruments classified as Level 3. (In millions of Korean won) Classification Fair Value Long-term available-for-sale financial assets Taewon Lighting \ 17,094 Samsung Venture Investment Corning Incorporated convertible preferred shares Derivatives Embedded derivatives (convertible bonds) 6,586 2,871,758 840 Valuation Technique Discounted cash flow Discounted cash flow Trinomial model Binomial model Level 3 Inputs Permanent growth rate Weighted average cost of capital Permanent growth rate Weighted average cost of capital Risk adjusted discount rate Price volatility Discount rate Stock price volatility Input Range (Weighted Average) -1.00% ~ 1.00% (0%) 7.76% ~ 9.76% (8.76%) -1.00% ~ 1.00% (0%) 7.74% ~ 9.74% (8.74%) 5.46% ~ 7.46% (6.46%) 29.8% ~ 35.8% (32.8%) 3.31% ~ 7.44% (5.22%) 15.84% ~ 22.28% (18.93%) (4) Changes in Level 3 instruments: (In millions of Korean won) Balance as of January 1 Purchases Disposals Amount recognized in profit or loss Amount recognized in other comprehensive income Other Balance as of September 30 September 30, 2015 \ 3,548,095 77,227 (123,798) (11,230) (195,051) (5,978) \ 3,289,265 September 30, 2014 \ 493,378 2,498,800 (10,871) (14,518) 192,453 (41,731) \ 3,117,511 Samsung Electronics Interim Business Report 99 / 173 (5) Sensitivity analysis for recurring fair value measurements categorized within Level 3 Sensitivity analysis of financial instruments is performed to measure favorable and unfavorable changes in the fair value of financial instruments which are affected by the unobservable parameters, using a statistical technique. When the fair value is affected by more than two input parameters, the amounts represent the most favorable or most unfavorable. The results of the sensitivity analysis for the effect on profit or loss (before-tax amount for other comprehensive income or loss) from changes in inputs for major financial instruments which are categorized within Level 3 and subject to sensitivity analysis, are as follows: (In millions of Korean won) Classification Long-term available-for-sale financial assets1 Embedded derivatives (convertible bonds)2 Total Favorable Changes Profit or Loss Equity \ - \ 247,116 262 262 \ 262 \ 247,378 Unfavorable Changes Profit or Loss Equity \ - \ (216,189) (261) (261) \ (261) \ (216,450) 1 Changes in fair value are calculated by increasing or decreasing the correlation between volatility (29.8%~35.8%) and discount rate for convertible preferred shares. Similarly, for other equity securities, changes in fair value are calculated with the correlation between growth ratio (1% to 1%) and discount rate, which are significant unobservable inputs. 2 For equity derivatives, changes in their fair value are calculated by increasing or decreasing the correlation between discount rate and volatility by 10%. 25. Segment Information (A) Operating segment information The Management Committee is responsible for making strategic decisions based on review of the Group's internal reporting. The Management Committee has determined the operating segments based on these reports. The Management Committee reviews operating profits of each operating segment in order to assess performance and to make decisions about allocating resources to the segment. The operating segments are product based and include CE, IM, Semiconductor, DP and others. Operating segment information was prepared after depreciation, amortization of intangible assets and the allocation of internal transaction adjustments. Total assets and liabilities of each operating segment are excluded from the disclosure as these have not been provided regularly to the Management Committee. (1) For the nine months ended September 30, 2015 (In millions of Korean won) Total segment revenue Intercompany revenue Net revenue2 Depreciation Amortization Operating profit CE 84,299,333 (51,254,388) 33,044,945 460,308 76,117 438,205 IM 169,253,449 (90,700,242) 78,553,207 852,159 140,316 7,908,699 DS Total1 Semiconductor 109,196,883 64,753,973 (53,911,422) (30,375,730) 55,285,461 12,824,193 566,295 11,910,394 34,378,243 9,271,232 459,094 9,990,399 Intercompany elimination within the DP Total1 Group Consolidated 41,162,726 363,165,879 (215,827,850) 147,338,029 (20,201,594) (215,827,850) 215,827,850 - 20,961,132 3,384,729 97,075 1,996,987 147,338,029 14,614,029 933,624 20,270,677 - 147,338,029 - 14,614,029 - 933,624 - 20,270,677 1 Includes other amounts not included in specific operating segments. 2 Segment net revenue includes intersegment revenues. Samsung Electronics Interim Business Report 100 / 173 (2) For the three months ended September 30, 2015 DS (In millions of Korean won) CE Semi- IM Total1 conductor Total segment revenue Intercompany revenue Net revenue2 Depreciation Amortization Operating profit 30,827,459 (19,242,367) 11,585,092 151,143 20,632 362,024 57,866,896 (31,255,601) 26,611,295 323,062 45,121 2,404,001 41,055,677 24,837,416 (20,746,233) (12,018,972) 20,309,444 4,468,168 206,687 4,653,904 12,818,444 3,242,521 170,002 3,657,889 1 Includes other amounts not included in specific operating segments. 2 Segment net revenue includes intersegment revenues. DP 15,063,382 (7,575,305) 7,488,077 1,162,569 33,249 927,941 Total1 Intercompany elimination within the Group Consolidated 129,928,744 (78,246,172) 51,682,572 (78,246,172) 78,246,172 - 51,682,572 5,103,838 318,966 7,393,373 - 51,682,572 - 5,103,838 - 318,966 - 7,393,373 (3) For the nine months ended September 30, 2014 (In millions of Korean won) Total segment revenue Intercompany revenue Net revenue2 Depreciation Amortization Operating profit CE 88,921,865 (53,005,877) 35,915,988 444,546 72,794 1,004,513 IM 180,415,490 (94,943,836) 85,471,654 552,221 138,126 12,601,764 DS Semi- Total1 conductor DP Total1 Intercompany elimination within the Group Consolidated 96,024,484 54,357,702 38,553,383 366,719,594 (213,243,729) 153,475,865 (47,948,414) (25,289,738) (19,872,808) (213,243,729) 213,243,729 - 48,076,070 11,018,437 394,232 6,295,992 29,067,964 7,736,673 296,337 6,074,097 18,680,575 3,195,519 86,665 187,880 153,475,865 12,531,487 845,103 19,736,644 - 153,475,865 - 12,531,487 - 845,103 - 19,736,644 1 Includes other amounts not included in specific operating segments. 2 Segment net revenue includes intersegment revenues. (4) For the three months ended September 30, 2014 DS (In millions of Korean won) CE Semi- IM Total1 conductor Total segment revenue Intercompany revenue Net revenue2 Depreciation Amortization Operating profit 29,440,211 (17,843,894) 11,596,317 146,442 24,655 46,179 51,069,111 (26,491,816) 24,577,295 193,609 46,511 1,750,723 32,768,424 (16,479,645) 16,288,779 3,765,499 157,752 2,331,290 18,964,059 (9,074,068) 9,889,991 2,729,683 124,487 2,263,497 1 Includes other amounts not included in specific operating segments. 2 Segment net revenue includes intersegment revenues. DP 12,828,069 (6,573,334) 6,254,735 1,053,466 29,646 55,129 Total1 Intercompany elimination within the Group Consolidated 113,821,900 (66,374,590) 47,447,310 (66,374,590) 66,374,590 - 47,447,310 4,326,214 312,151 4,060,522 - 47,447,310 - 4,326,214 - 312,151 - 4,060,522 Samsung Electronics Interim Business Report 101 / 173 (B) Regional information The regional segment information provided to the Management Committee for the reportable segments as of and for the three and nine months ended September 30, 2015 and 2014, is as follows: (1) As of and for the nine months ended September 30, 2015 (In millions of Korean won) Korea America Europe Asia and Africa China Intercompany elimination within the Group Consolidated Net segment revenue Non-current assets1 15,856,271 63,617,140 48,644,451 8,175,173 27,667,871 790,529 31,758,763 7,297,840 23,410,673 12,710,177 (470,133) 147,338,029 92,120,726 1 Total of non-current assets other than financial instruments, deferred tax assets, and investments in associates and joint ventures. (2) As of and for the three months ended September 30, 2015 (In millions of Korean won) Korea America Europe Asia and Africa China Intercompany elimination within the Group Consolidated Net segment revenue Non-current assets1 5,437,509 63,617,140 17,337,009 8,175,173 9,788,950 790,529 10,465,717 7,297,840 8,653,387 12,710,177 (470,133) 51,682,572 92,120,726 1 Total of non-current assets other than financial instruments, deferred tax assets, and investments in associates and joint ventures. (3) As of and for the nine months ended September 30, 2014 (In millions of Korean won) Korea America Europe Asia and Africa China Intercompany elimination within the Group Consolidated Net segment revenue Non-current assets1 16,270,185 60,478,871 48,433,424 7,206,280 31,545,843 906,949 31,631,619 3,515,095 25,594,794 9,118,247 (528,625) 153,475,865 80,696,817 1 Total of non-current assets other than financial instruments, deferred tax assets, and investments in associates and joint ventures. (4) As of and for the three months ended September 30, 2014 (In millions of Korean won) Korea America Europe Asia and Africa China Intercompany elimination within the Group Consolidated Net segment revenue Non-current assets1 5,010,254 60,478,871 15,104,078 7,206,280 9,982,172 906,949 9,669,548 3,515,095 7,681,258 9,118,247 (528,625) 1 Total of non-current assets other than financial instruments, deferred tax assets, and investments in associates and joint ventures. \ 47,447,310 80,696,817 Samsung Electronics Interim Business Report 102 / 173 26. Related Party Transactions (A) Sale and purchase transactions Sales and purchases with related parties for the nine months ended September 30, 2015 and 2014, are as follows: (In millions of Korean won) Associates and Joint ventures Other related parties Name of Company1 Samsung SDS Samsung Electro-Mechanics Samsung Card Other Total (Associates and Joint Samsung C&T. 2 Samsung SDI Other Total (Other related parties) Sales \21,475 9,042 5,036 209,427 244,980 4,401 33,955 87,332 \125,688 September 30, 2015 Disposal of fixed assets Purchases \ - \1,198,281 - 2,142,304 - 27,226 3,525 4,043,370 3,525 7,411,181 - 56,515 20 1,166,700 - 754,819 \ 20 \1,978,034 Purchase of fixed assets \ 142,574 2 231,508 374,084 578,764 23,722 231,682 \ 834,168 1 Transactions with separate entities that are related parties of the Group. 2 During the nine months ended September 30, 2015, Cheil Industries merged with Samsung C&T and adopted Samsung C&T as the name of the new company. (In millions of Korean won) Associates and Joint ventures Other related parties Name of Company1 Samsung SDS Samsung Electro-Mechanics Samsung Card Other Total (Associates and Joint Samsung C&T. 2 Samsung SDI Other Total (Other related parties) Sales \ 23,858 25,487 6,574 344,575 400,494 5,259 49,695 191,589 \246,543 September 30, 2014 Disposal of fixed assets Purchases \ - \1,425,420 110 1,791,478 - 30,429 11,080 11,190 3,950,970 7,198,297 324,246 73,637 785,149 - 1,503,008 \324,246 \2,361,794 Purchase of fixed assets \ 165,878 169,049 328,931 663,858 312,696 354,004 81,602 \748,302 1 Transactions with separate entities that are related parties of the Group 2 During the nine months ended September 30, 2015, Cheil Industries merged with Samsung C&T and adopted Samsung C&T as the name of the new company. Samsung Electronics Interim Business Report 103 / 173 (B) Balances of receivables and payables Balances of receivables and payables arising from sales and purchases of goods and services as of September 30, 2015 and December 31, 2014, are as follows: (In millions of Korean won) Associates and Joint ventures Other related parties Name of Company1 Samsung SDS Samsung Electro-Mechanics Samsung Card Other Total (Associates and Joint ventures) Samsung C&T2 Samsung SDI Other Total (Other related parties) September 30, 2015 Receivables \ 4,085 451 13,174 65,247 82,957 204,139 919 24,433 \ 229,491 Payables \ 277,816 345,956 1,158,643 464,561 2,246,976 363,604 148,122 143,296 \ 655,022 1 Balances due from and to separate entities that are related parties of the Group. 2 During the nine months ended September 30, 2015, Cheil Industries merged with Samsung C&T and adopted Samsung C&T as the name of the new company. (In millions of Korean won) Associates and Joint ventures Other related parties Name of Company1 Samsung SDS Samsung Electro-Mechanics Samsung Card Other Total (Associates and Joint ventures) Samsung C&T2 Samsung SDI Other Total (Other related parties) December 31, 2014 Receivables \ 3,353 1,431 5,431 82,873 93,088 187,108 4,771 18,052 \ 209,931 Payables \ 359,001 237,816 1,124,240 463,647 2,184,704 288,984 122,936 126,422 \ 538,342 1 Balances due from and to separate entities that are related parties of the Group. 2 During the nine months ended September 30, 2015, Cheil Industries merged with Samsung C&T and adopted Samsung C&T as the name of the new company. (C) The Group invested 137,917 million Korean won in associates and joint ventures including 133,600 million Korean won in Samsung Biologics during the nine months ended September 30, 2015 (655,067 million Korean won during the nine months ended September 30, 2014) (D) Key management compensation Key management includes directors (executive and non-executive) and members of the Executive Committee. The compensation paid or payable for employee services for the nine months ended September 30, 2015 and 2014 consists of: (In millions of Korean won) September 30, 2015 September 30,2014 Salaries and other short-term employee benefits Termination benefits Other long-term benefits \ 6,944 420 6,237 \ 17,865 730 5,353 Samsung Electronics Interim Business Report 104 / 173 27. Business Combination Significant business combinations for the nine months ended September 30, 2015 are as follow: Samsung Electronics America, the Group's subsidiary, acquired 100% of the equity shares of Samsung Pay, Inc. (formerly LoopPay) on February 23, 2015. (A) Overview of the acquired company Name of the acquired company Headquarters location Representative director Industry (B) Purchase price allocation (In millions of Korean Won) I. Consideration transferred II. Identifiable assets and liabilities Cash and cash equivalents Short-term financial instruments Trade and other receivables Property, plant and equipment Intangible assets Other assets Trade and other payables Deferred income tax liabilities Total net identifiable assets III. Goodwill (I II) LoopPay(currently Samsung Pay, Inc.) Burlington, MA. USA Will Graylin Mobile Payments Development and Services Amount 275,325 3,042 57 17,559 122 20,293 22 (23,268) (5,220) 12,607 262,718 Had Samsung Pay (formerly LoopPay) been consolidated from January 1, 2015, revenues would increase by 85 million and net income would decrease by 2,151 million on the interim consolidated statement of income. The revenues and net loss contributed by Samsung Pay (formerly LoopPay) since the acquisition by SEA amount to 112 million and 13,790 million, respectively. Samsung Electronics Interim Business Report 105 / 173 28. Non-Current Assets Held-for-Sale (Sold Assets) (A) Summary (1) Sale of Samsung Techwin Co., Ltd. During the year ended December 31, 2014, the management of the Group decided to sell all its shares in Samsung Techwin Co., Ltd. to Hanwha Corporation. The contract was entered into on November 26, 2014, and the transaction was completed in June 2015. (2) Sale of Samsung General Chemicals Co., Ltd. During the year ended December 31, 2014, the management of the Group decided to sell all its shares of Samsung General Chemicals Co., Ltd. to Hanwha Chemical and Hanwha Energy Corporation, and the transaction was completed in April 2015. (3) Sale of Optical Materials Business During the year ended December 31, 2014, the management of the Group decided to sell the Optical Materials business segment and accordingly, the related assets and liabilities are classified as held-for-sale. Since the business does not represent a separate major line of the Group, related profit or loss was not presented as profit or loss of discontinued operations. The contract was entered into on December 2, 2014, and the transaction was completed in March 2015. (B) Details of assets and liabilities reclassified as held-for-sale, as of September 30, 2015 and December 31, 2014 are as follows: (In millions of Korean Won) Assets held-for-sale Trade receivables Inventories Other current assets Property, plant and equipment Investment Other non-current assets Total Liabilities held-for-sale Current liabilities Non-current liabilities Total September 30, 2015 - - - - - - - - - - December 31, 2014 60,173 9,703 22,523 37,955 511,441 3,696 645,491 25,939 2,377 28,316 (C) Details of cumulative income or expense recognized in other comprehensive income relating to the sold assets classified as held-for-sale as of September 30, 2015 and December 31, 2014 are as follows: (In millions of Korean Won) September 30, 2015 December 31, 2014 Gain on valuation of available-for-sale securities Changes in equity under the equity-method Foreign exchange translation adjustment Total - 24,750 - 54,118 - 1,233 - 80,101 Samsung Electronics Interim Business Report 106 / 173 29. Events After the Reporting Period (A) On October 29, 2015, the board of directors approved share buyback and retirement of common and preferred stocks. Estimated total number of shares to be repurchased is 3.47 million (common stock 2.23 million, preferred stock 1.24 million) and all repurchased shares will be cancelled after the buyback is completed. Period of Purchase will be ended on January 29, 2016. (B) On October 30, 2015, the Group has authorized the sale of its entire stake in Samsung Fine Chemicals Co., LTD. to Lotte Chemical Corporation. The transaction is expected to be closed within the first half of 2016. Samsung Electronics Interim Business Report 107 / 173 3. Other Financial Information A. Matters of Interest - Restatement of Financial Statements: N/A - Acquisitions and Divestments (Separate only) Refer to 8.Acquisition and Divestments (XI. Other Information) B. Allowance for Bad Debt The allowances for bad debts over the past 3 years are as follows: Bad debt allowance by account Period 2015.3Q 2014 2013 Account Trade receivables Short-term loans Other receivables Advances Trade receivables (Long-term) Other receivables (Long-term) Advances (Long-term) Long-term loans Total Trade receivables Short-term loans Other receivables Advances Trade receivables (Long-term) Other receivables (Long-term) Advances (Long-term) Long-term loans Total Trade receivables Short-term loans Other receivables Advances Trade receivables (Long-term) Other receivables (Long-term) Advances (Long-term) Long-term loans Total Receivables Amount 28,012,685 8,490 3,098,359 1,784,980 27,678 178,011 306,524 190,954 33,607,681 24,972,069 9,650 3,549,692 1,993,788 35,944 9,419 176,949 176,232 30,923,743 25,256,002 33,382 2,907,221 1,932,530 36,229 24,384 76,429 152,005 30,418,182 Allowance Amount 381,223 79 35,487 3,717 269 1,731 793 1,426 424,724 277,459 118 9,817 4,318 329 77 793 1,246 294,157 267,470 271 19,819 4,342 205 227 792 36,727 329,853 (Unit: KRW million, %) Allowance (%) 1.4% 0.9% 1.1% 0.2% 1.0% 1.0% 0.3% 0.7% 1.3% 1.1% 1.2% 0.3% 0.2% 0.9% 0.8% 0.4% 0.7% 1.0% 1.1% 0.8% 0.7% 0.2% 0.6% 0.9% 1.0% 24.2% 1.1% Receivables amount is based on net present value (Consolidated) Presented in accordance with Korean International Financial Reporting Standards ("K-IFRS") Samsung Electronics Interim Business Report 108 / 173 Allowance for Bad Debt (Roll Forward) 1. Allowance for bad debts (beginning balance) 2. Net Bad Debt Expense (±) Bad Debt Expense (Write-off) Bad Debt Recovered Others 3. Bad debts expense 4. Allowance for bad debts (Ending balance) 2015.3Q 294,157 4,380 4,524 144 - 134,947 424,724 2014 329,853 49,349 50,705 1,356 13,653 294,157 (Unit: KRW million) 2013 283,869 17,833 20,393 2,560 63,817 329,853 Based on consolidated financial statements. The guideline for Bad Debts Allowances (1) Calculation of Bad Debts Allowances Bad Debts are calculated based on write-off experiences and future expected bad debts. (2) Calculation Method for Write-Off Experience Rate: Experience rate of write-off: the actual write-off rate for the average receivables balance of previous three (3) years Future expected bad debts: Cases of debtor bankruptcy, compulsory execution, death, or disappearance are reflected in the bad debt allowance, ranging from 1% ~ 100% of the balance of trade-other receivable [Bad Debt Allowance] Situation Dispute or Conflict Receivable through utilization of third party collection agency Receivable under litigation Customer filed or in the process of filing bankruptcy Rate of Allowance 25% 50% 75% 100% Samsung Electronics Interim Business Report 109 / 173 (3) Instruction: Write-off is recorded when trade receivables contain the following characteristics: Objective proof of bad debts, such as bankruptcy, compulsory execution, discontinuance of business, debtor's death or disappearance Legal action has failed or the right of collection is extinguished. When the collection agency gives as notice that collection is not possible. When the collateral is sold or insurance is received. The collection expenses exceed the amount of receivables. The outstanding period of trade receivables Amount Less than 6 months 27,841,103 6 months ~ 1 year 101,593 1 year ~ 3 years 82,913 More than 3 years (Unit : KRW million) Total 14,754 28,040,363 Ratio 99.3% 0.4% 0.3% 0.1% 100.0% * Receivables amount on net present value (consolidated) Samsung Electronics Interim Business Report 110 / 173 C. Inventory - The inventory status by Division over the last three years is as follows: Division Category Finished Goods Work In Process CE Raw Material Material In Transit Total Finished Goods Work In Process IM Raw Material Material In Transit Total Finished Goods SemiConductor Work In Process Raw Material Material In Transit Total Finished Goods Work In Process DS DP Raw Material Material In Transit Total Finished Goods Work In Process DS Total Raw Material Material In Transit Total Finished Goods Work In Process Total Raw Material Material In Transit Total Inventory Ratio (%) Total Assets [Inventory ÷ Total Assets] Inventory Turn-over [ Yearly CGS ÷{(Beginning of Inventory End of Inventory)÷2}] 2015.3Q 2,237,699 124,922 2,181,396 3,035,655 7,579,672 2,405,546 423,417 3,273,669 784,363 6,886,995 1,541,442 5,137,524 627,216 112,241 7,418,423 377,648 319,240 301,408 53,678 1,051,974 1,961,202 5,628,930 973,010 169,366 8,732,508 7,110,111 6,157,553 7,936,699 1,636,706 22,841,069 9.3% 6.3 2014 1,946,482 80,122 1,566,121 1,694,448 5,287,173 2,210,160 279,861 2,751,331 488,877 5,730,229 777,450 3,677,543 419,398 121,477 4,995,868 409,516 244,324 281,223 55,176 990,239 1,228,783 4,105,675 750,929 178,218 6,263,605 5,773,448 4,465,071 5,957,006 1,121,979 17,317,504 7.5% 7.0 (Unit: KRW million) 2013 Note 1,927,784 73,876 1,435,023 1,689,040 5,125,723 2,896,647 333,109 3,363,195 1,026,147 7,619,098 1,219,189 3,022,125 351,646 89,670 4,682,630 553,108 443,611 328,955 4,988 1,330,662 1,810,852 3,663,346 726,455 98,897 6,299,550 7,429,350 4,070,266 6,809,112 826,140 19,134,868 8.9% 7.5 Samsung Electronics Interim Business Report 111 / 173 Inventory Counts (1) Inspection Date End of May and November (twice a year) Performed check of the existence of inventories included in an accounting books and records on the inspection date (2) Inspection Method Internal warehouse: Closed & Total Inspection Sample check in semiconductor and DP inventory, SVC materials Outside warehouse Performed check of the possession confirmation documents and sample tests at third party warehouse and Inventory in transit External auditors join and observe the inspection and carry out sample test to check the existence and completeness. Inventory Aging and Valuation Inventories are stated at the lower of cost or net realizable value. Inventory as at September 30th, 2015 is as follows: Category Finished Goods Work In Process Raw Material Material In Transit Total Acquisition Cost 7,285,098 6,542,848 8,254,137 1,636,706 23,718,789 Prepared on a consolidated basis Inventory Valuation Reserve 174,987 385,295 317,438 0 877,720 Balance 7,110,111 6,157,553 7,936,699 1,636,706 22,841,069 (Unit : KRW million) Note D. Fair Value Estimation Refer to 2- 3. Financial Instruments by Category and 2-24. Financial Risk Management in . Financial Affairs. Samsung Electronics Interim Business Report 112 / 173 IV. Auditor's Report 1. Introduction Samil PwC has reviewed the interim consolidated/separate financial position of the Company as of September 30, 2015, and the related interim consolidated/separate statements of income and comprehensive income for the three and nine months ended September 30, 2015, and the interim consolidated/separate statements of changes in equity and cash flows for the nine months ended September 30, 2015. Nothing has come to attention that causes them to believe the accompanying interim consolidated/separate financial statements are not presented fairly, in all material respects, in accordance with the K-IFRS 1034, Interim Financial Reporting. Samil PwC also conducted audits on the consolidated/separate financial statement of financial position of the Company as of December 31, 2013 and 2014, and the related consolidated/separate statements of income, comprehensive income, changes in equity and cash flows for the year then ended and expressed an unqualified opinion on those financial statements. There are 157 subsidiaries as of September 30, 2015. Three subsidiaries have changed the auditor to PwC for the nine months ended September 30, 2015 and newly incorporated/acquired entities are in progress of appointing auditors. Year end 30 September 2015 31 December 2014 31 December 2013 Group Auditor Samil PwC Samil PwC Samil PwC Audit(Review) Opinion Not applicable Unqualified Unqualified Remarks Not applicable Not applicable Not applicable <Review plan for nine-month period ended September 30, 2015> 2015 1Q 2015 2Q 2015 3Q Review Period Pre-review Review Pre-review Review Pre-review Review Planned dates 2015.03.09 ~ 2015.03.27 2015.04.07 ~ 2015.05.11 2015.06.08 ~ 2015.06.26 2015.07.07 ~ 2015.08.07 2015.09.07 ~ 2015.09.25 2015.10.07 ~ 2015.11.12 Samsung Electronics Interim Business Report 113 / 173 [Audit Contract Description] Fiscal Year Group Auditor Nine months ended September 30, 2015 Samil PwC Year ended December 31, 2014 Samil PwC Year ended December 31, 2013 Samil PwC Description - Review of the interim consolidated/separate financial statements - Review of the interim consolidated/separate financial statements - Audit on consolidated/separate financial statements - Review of the interim consolidated/separate financial statements - Audit on consolidated/separate financial statements (In millions of Korean won) Compensation Total Hours 1,806 20,763 3,690 43,411 3,840 44,702 Samil PwC has performed non-audit services and has been paid KRW 503 million by the Company for the nine months ended September 30, 2015. [Non-Audit Service Contract Description] Fiscal Year Contract Date Nine months ended September 30, 2015 June 2014 Year ended December 31, 2014 September 2013 August 2013 October 2013 Non-audit Service Description Incorporation, M&A and Divestiture Advisory Subtotal Incorporation, M&A and Divestiture Advisory Tax Advisory Process Improvement Advisory Others (In millions of Korean won) Period for Service 2015.01~2015.09 Compensation Note 503 503 2014.01~2014.12 1,161 2014.01~2014.12 533 2014.01~2014.12 996 297 Year ended December 31, 2013 November 2012 August 2012 June 2012 Subtotal Incorporation, M&A and Divestiture Advisory Tax Advisory Process Improvement Advisory Others Subtotal 2013.01~2013.12 2013.01~2013.12 2013.01~2013.12 2,987 2,466 2,272 1,896 1,573 8,207 Samsung Electronics Interim Business Report 114 / 173 V. Management Discussion and Analysis Pursuant to the reporting guidelines set forth by the Financial Supervisory Service of South Korea, the Management Discussion and Analysis section, reported in the annual Business Report, is not included in quarterly and half year reports. Samsung Electronics Interim Business Report 115 / 173 VI. Corporate Governance 1. Board of Directors A. Overview of Board of Directors As of September 30, 2015, the Board of Directors (BOD) consists of nine (9) directors, four (4) of whom are executive directors (Oh-Hyun Kwon, Boo-Keun Yoon, Jong-Kyun Shin, and Sang-Hoon Lee) and five (5) independent directors (InHo Lee, Han-Joong Kim, Kwang-Soo Song, Byeong-Gi Lee, and Eun-Mee Kim). The Board has six (6) committees as follows: Management Committee, Audit Committee, Independent Director Recommendation Committee, Related Party Transactions Committee, Compensation Committee, and CSR Committee. B. The BOD Agendas considered and voting results Date Agenda Results Jan 29, 2015 Feb 13, 2015 Mar 13, 2015 Apr 29, 2015 Jul 30, 2015 Aug 28, 2015 Approval of FY2014 financial statements and annual business report Approval of FY2015 business plan Application for Venture Capital Union Reported Items Report on the internal accounting management system Assessment of the internal accounting management system Report on the results of establishment of research committee for environmental safety Decision to convene the 46th (FY2015) AGM Decision of the 46th AGM agenda items - report items: 1) FY2014 annual audit report 2) FY2014 annual business report - Item 1: Approval of FY2014 financial statements, including balance sheet, income statement, and the statement of appropriation of retained earnings, etc. -Item 2: Appointment of Directors Item 2-1: Appointment of Independent Directors Item 2-1-1: Appointment of Han-Joong Kim as an Independent Director Item 2-1-1: Appointment of Byeong-Gi Lee as an Independent Director Item 2-2: Appointment of Executive Directors Item 2-3: Appointment of Audit Committee members - Item 3: Approval of remuneration limit for Directors Donation Reported Item Report on the results of compliance review Report on review on the suggestions from the advancement of corporate ecosystem research council Appointment of CEO and Directors Appointment of BOD Committee members Approval of the 47th 1Q15 financial statements and business report Donation to Sungkyunkwan University Approval of the (47th) 1H15 financial statements, business report, and interim dividend Application for property insurance Approval of changes in large-scale goods and services transactions in 2015 Approval of purchase contract regarding assets of Samsung Fine Chemicals Approved Approved Approved Approved Approved Approved Approved Approved Approved Approved Approved Approved Approved Approved In-Ho Lee For For For Independent directors HanJoong Kim For For For KwangSoo Song For For For ByeongGi Lee For For For Eun-Mee Kim For For For For For For For For For For For For For For For For For For For For For For For For For For For For For For For For For For For For For For For For For For For For For For For For For For For For For For For For For Absent Samsung Electronics Interim Business Report 116 / 173 C. The Committees of BOD (1) Composition of the BOD Committees as of September 30, 2015 Committee Name Management Related Party Transactions Compensation CSR Members 4 Executive Directors 3 Independent Directors 3 Independent Directors 5 Independent Directors Member Name Oh-Hyun Kwon, Boo-Keun Yoon, Jong-Kyun Shin, Sang-Hoon Lee In-Ho Lee, Han-Joong Kim, Kwang-Soo Song Kwang-Soo Song, In-Ho Lee, Byeong-Gi Lee Byeong-Gi Lee, In-Ho Lee, Han-Joong Kim, Kwang-Soo Song, Eun-Mee Kim Responsibility and Authority See description below The Audit Committee and Independent Director Recommendation Committee were excluded according to Corporate Disclosure Guidelines set forth by the Financial Supervisory Service Authority of South Korea. i) The Management Committee - Responsibility: The Management Committee deliberates and decides on matters specified by the BOD regulations and resolutions or specifically delegated by the BOD. The composition and operation of the management committee are determined by the BOD. - Authority The Management Committee deliberates and decides on the following matters: (A) General management 1. Annual or mid to long-term management policy and strategy 2. Key management strategy 3. Business planning and restructuring 4. Establishment, relocation, and withdrawal of overseas branch and corporation 5. Initiating cooperation such as strategic partnership with foreign companies 6. Acquisition or disposal of domestic and overseas subsidiaries 7. Other major management matters 8. Establishment, relocation, and withdrawal of branches and operations 9. Appointment or dismissal of supervisors 10. Suspension or shutdown of production over 5% of the total production in the recent year 11. Licensing agreements and technology transfer, partnership in regards to technology of over 0.5% of the total equity 12. Acquisitions and transfers of patents related to new material and new technology of over 0.5% of the total equity 13. Collection and destruction of products corresponding to over 5% of the total sales in the recent business year 14. Contracting for over 5% of the total sales in the recent business year 15. Contracting or canceling of single sales agency and suppliers over 5% of the total sales in the recent business year 16. Set basic principles of organization management 17. Decision making on basic principles and any changes related to wages, bonus, and fringe benefits 18. Appointments, dismissals and changes of transfer agent 19. Closing of shareholder register and setting reference date 20. Establishing corporate guidelines for business and management related activities 21. Donations over KRW 50 billion per donation. Donation to related parties between KRW 1 billion and KRW 5 billion Samsung Electronics Interim Business Report 117 / 173 (B) Matters related to Finance 1. Acquisitions or disposals of equity investments with a value between 0.1% and/or less than 2.5% of the total equity 2. Direct overseas investments with a value of over 0.1% and/or less than 2.5% of the total equity 3. New debt guarantee (excluding extension of period) or collateral issuance with a value of over 0.1% and/or less than 2.5% of the total equity A. Collateral: Only in the case of providing collateral for others B. Guarantee: Excludes performance guarantee (e.g., bid, contract, defect, difference guarantee) and tax payment guarantee 4. New credit agreement contract (excluding extension of period) with a value of over 0.1% and/or less than 5% of the total equity 5. Approval of related party transactions: Related party transactions with affiliates involving cash (loans and payments), equity (stocks and bonds) or assets (such as real estate and intangible property rights) with a value between KRW 1 billion and/or less than KRW 5 billion, as defined in the Monopoly Regulation and Fair Trade Act Excluding cases where existing contracts are renewed without significant change. 6. Issuance of Corporate Bond 7. Acquisition and disposal of real estate with a value of over 0.1% of the total equity, provided that the transaction is with the third party 8. Any matters that the CEO deems necessary and important for the business (e.g., CAPEX) (C) All other matters except for those delegated to the BOD and other committees in accordance with BOD regulations ii) Related Party Transactions Committee - Responsibility: Improve management transparency through establishment of a voluntary compliance system - Authority 1) Right to receive reports on related party transactions: The Committee can request reports on related party transactions with affiliates According to the Monopoly Regulation and Fair Trade Act, the Related Party Transactions committee is permitted to conduct preliminary reviews and approves on related party transactions over KRW 5 billion and other transactions that are deemed as significant. 2) Right to order ex officio investigation of related party transactions 3) Right to propose corrective measures for related party transactions Samsung Electronics Interim Business Report 118 / 173 iii) Compensation Committee - Responsibility: Provide transparent and objective decision making process related to remuneration of directors - Authority 1) Propose remuneration limit of directors at annual general shareholders' meeting 2) Establish the director remuneration system 3) Other matters delegated by the Board iv) CSR Committee - Responsibility: Address social responsibilities of the Company and make contributions to public interest - Authority 1) Make decisions on matters related to social contributions of the Company 2) Establish research groups under the committee, appoint researchers, and devise CSR management plan 3) Other matters delegated by the Board (2) The BOD Committee Activities The Audit Committee and Independent Director Recommendation Committee were excluded according to Corporate Disclosure Guidelines set forth by the Financial Supervisory Service Authority of South Korea. The Management Committee Name Management Committee Date Agenda Jan 14, 2015 Capital increase for regional office Stake acquisition Purchase of insurance Jan 28, 2015 Stake acquisition Asset transfer Feb 11, 2015 Stake acquisition Mar 11, 2015 Memory investment Rental contract Apr 29, 2015 Appointment of the head of the Management Committee Construction of semiconductor line Construction of new research building Donation Purchase of liability insurance May 13, 2015 Memory investment and capital increase for corporate entities Jun 3, 2015 Establishment of training institute Closing of shareholder register for interim dividend Jul 30, 2015 Sep 13, 2015 Liquidation of a subsidiary Asset disposal Investment in establishment of Daegu-Samsung Creative Economic Zone Fund raising regarding retired semiconductor workers Purchase of Erection All Risks insurance policy Rental contract regarding Samsung Materials Research Complex Consolidation of overseas corporate entities in Russia through mergers Voting Results Approved Approved Approved Approved Approved Approved Approved Approved Approved Approved Approved Approved Approved Approved Approved Approved Approved Approved Approved Approved Approved Approved Approved Attendance/Voting Results of Independent Directors N/A (All comprised of executive directors) Samsung Electronics Interim Business Report 119 / 173 The Related Party Transactions Committee Date Agenda Jan 28, 2015 - Preliminary review on large-scale related party transactions 1) Application for Venture Capital Union - Report on 4Q14 related party transactions Feb 13, - Preliminary review on large-scale related party transactions 2015 1) Donation Apr 28, 2015 Jul 29, 2015 Aug 28, 2015 - Preliminary review on large-scale related party transactions 1) Donation to Sungkyunkwan University - Report on 1Q15 related party transactions - Preliminary review of large-scale related party transactions 1) Application for property insurance 2) Approval of changes in large-scale goods and services transactions in 2015 - Report on 2Q 15 related party transactions - Preliminary review on large-scale related party transactions 1) Approval of purchase contract of Samsung Fine Chemicals assets Voting Results N/A N/A N/A N/A N/A Name of independent directors In-Ho Lee (Attendance: 100%) Han-Joong Kim (Attendance: 80%) Kwang-Soo Song (Attendance: 100%) For/against - - - - - - - - - - - - - - - - - (Absent) - - - - - Samsung Electronics Interim Business Report 120 / 173 The Compensation Committee Date Agenda Feb 11, Preliminary review on remuneration limit 2015 for Directors Voting Results Approved Name of Independent Directors Kwang-Soo Song (Attendance: 100%) In-Ho Lee (Attendance: 100%) Byeong-Gi Lee (Attendance: 100%) For/Against For For For The CSR Committee Date Agenda Voting Results - Report on research results of the - Jan 29, Research Committee for 2015 Environmental Safety Name of Independent Directors Byeong-Gi Lee (Attendance: 100%) In-Ho Lee (Attendance: 100%) Han-Joong Kim (Attendance: 100%) For/Against Kwang-Soo Song (Attendance: 100%) - - - - Eun-Mee Kim (Attendance: 100%) - - Appointment of the head of the Approved For For For For For committee Apr 29, 2015 - Operation of the 2nd term of the research committee for the Approved For For For For For advancement of corporate system Jul 30, - Report on corporate social - - - - - - 2015 contribution activities Samsung Electronics Interim Business Report 121 / 173 D. Director Independence (1) Appointment of Directors Directors are appointed by shareholders at the annual general meeting of shareholders. The Board is responsible for nominating candidates for Executive Directors, and the Independent Director Recommendation Committee nominates independent director candidates, who are presented to shareholders as separate agendas and voted on at the annual general meeting. The Board submits shareholders' proposal for appointment of Directors at the annual general shareholder meeting as a separate agenda if the proposal satisfies related laws and regulations. The composition of the Board of Directors, as appointed by shareholders, is as follows: [As of September 30, 2015] Position Name Nominated by Executive Director Executive Director Executive Director Executive Director Oh-Hyun Kwon Boo-Keun Yoon Jong-Kyun Shin Sang-Hoon Lee Independent Director In-Ho Lee Independent Director Han-Joong Kim Independent Director Kwang-Soo Song Independent Director Byeong-Gi Lee Independent Director Eun-Mee Kim As of September 30, 2015 BOD BOD BOD BOD Independent Director Recommendation Committee Independent Director Recommendation Committee Independent Director Recommendation Committee Independent Director Recommendation Committee Independent Director Recommendation Committee Responsibility Chairman of BOD Head of DS Division Head of CE Division Head of IM Division Head of Corporate Management Office Overall management of the Company Overall management of the Company Overall management of the Company Overall management of the Company Overall management of the Company Transactions with the Company Relation with the controlling shareholder N/A N/A Samsung Electronics Interim Business Report 122 / 173 (2) Independent Director Recommendation Committee The Independent Director Recommendation Committee assesses the independence and ability of potential candidates and recommends selected candidates to be appointed at the annual general meeting of shareholders. The committee is composed of three Independent Directors (Han-Joong Kim, Byeong-Gi Lee, and Eun-Mee Kim) and one Executive Director (Oh-Hyun Kwon) based on related laws that states more than a majority of members should be independent directors in accordance with clause 4 of Article 542-8 of the Commercial Law. (3) Professionalism of Independent Directors The Company provides the independent directors with access to support staff so they are able to perform their duties professionally in the BOD and the Board committees. The support staff provides the Directors with reference materials corresponding to the meeting agendas well in advance so Directors will have the ample opportunity thoroughly review the topics to be discussed before the Board and committee meetings. If necessary, the Directors are provided with separate information sessions on any item on the agenda and they are also frequently provided updates on other key management issues. In addition, the support staff conducts internal education programs which allow Independent Directors to visit and conduct inspect domestic and overseas business sites and receive reports of the current state of business operation. Samsung Electronics Interim Business Report 123 / 173 2. Audit System A. Profile of the member of the Audit Committee As of September 30, 2015, the Company operates an Audit Committee consisting of three (3) Independent Directors. Name In-Ho Lee Career - Corporate Advisor, Shinhan Bank (2009-2011) - Chief Executive Officer, Shinhan Financial Group (2005-2009) - President & CEO, Shinhan Bank (1999-2003) Han-Joong Kim - Professor Emeritus, Yonsei University (2012~Present) - President, Yonsei University (2008-2012) - Professor, Dept. of Preventive Medicine & Public Health (1982-2012) Kwang-Soo Song - Advisor, Kim & Chang Law Office (2007-Present) - Prosecutor General, Supreme Prosecutors' Office (2003-2005) - Chief Prosecutor, Daegu High Prosecutors' Office (2002-2003) Note Independent director Independent director Independent director B. Audit Committee Independence Pursuant to related laws and the Articles of Incorporation, the Company has prepared internal audit regulations which encompass composition, operation, authority, and responsibility of the Audit Committees to carry out audit related activities. The Audit Committee is exclusively composed of Independent Directors appointed at the annual general shareholder meeting and includes audit and financial experts. Also, the Audit Committee satisfies requirements of relevant laws. (e.g., The stipulation that the role of head of the committee be held by an Independent Director. The Audit Committee reviews accounting documents including financial statements and audit process related documents presented by the external auditor, and if needed, requests the external auditor to perform additional reviews on accounting books and records. To ensure the reliability of accounting related disclosures, the audit committee receives and reviews a report on internal accounting control systems prepared by internal accounting managers. In addition, the Committee attends the BOD meetings and other significant meetings. The Committee receives reports on deliberations of the Management Committee and on business performance from Directors and requests additional reviews and supplementation of data as needed. Samsung Electronics Interim Business Report 124 / 173 C. Major Activities of the Audit Committee See the table below for major activities of the Audit Committee by reporting date. Name Date Agenda Voting Results - 2014 financial and business reports - Jan 28, - Report on 2014 internal accounting management system activities - 2015 - Report on 4Q14 non-audit activities - - Report on 2014 audit activities - Audit Committee Feb 13, 2015 - Review of the 2015 AGM agenda - Assessment of 2014 activities of internal compliance system - Apr 28, - Report on 1Q15 financial statement and business report - 2015 - Report on 1Q15 non-audit activities - Jul 29, 2015 - 1H 2015 financial statement and business report - Report on 2Q15 non-audit activities - Report on 2Q15 audit activities - Name of independent directors In-Ho Lee (Attendance: 100%) Han-Joong Kim (Attendance: 75%) Kwang-Soo Song (Attendance: 100%) For/Against - - - - - - - - - - - - - - - - - - - - - - - - - - - (Absent) - - - D. Compliance Officer 1. Compliance Officer Name Age Academic Background Current Position Career 2. Date of BOD resolution 3. Disqualifications 4. Others Jae-wan Chi 58 Illinois, Urbana-Champaign(UIUC) Juris Doctor Executive Vice President of the Samsung Electronics Global Legal Affairs & Compliance Team - Jan '04: Deputy vice president of Samsung SDI Corporate Management & Planning Dept. Corporate Legal Group - May '08: Deputy senior vice president of Samsung SDI Corporate Legal Group - Dec '11: Executive vice president of Samsung Electronics IP Center Licensing Team Jan 24, 2014 N/A N/A 3. Voting Rights of Shareholders A. Voting Method The Company has not adopted a concentrated voting system, voting in writing, or an electronic voting system. B. Minority Shareholder Right No minority shareholder right was exercised during the reporting period. C. Competition over Management Right No competition over management rights occurred during the reporting period. Samsung Electronics Interim Business Report 125 / 173 VII. Information on Shareholders 1. Ownership of Shares by the Major Shareholder and Related Parties The following table presents changes in shares held by the major shareholder and related parties as of the beginning and end of the reporting period. [As of September 30, 2015] Name Relationship Kun-Hee Lee Kun-Hee Lee Samsung C&T (formerly Samsung C&T) Samsung C&T (formerly Cheil Industries) Samsung Welfare Foundation Samsung Foundation Of Culture Ra-Hee Hong Major shareholder Major shareholder Affiliate Affiliate Affiliate Affiliate Affiliate Type of share Common Preferred Common Common Common Common Common Number of Shares owned Beginning of period End of period # shares owned % # shares owned % 4,985,464 3.38 4,985,464 3.38 (Unit: Shares, %) Note - 12,398 0.05 12,398 0.05 - 5,976,362 4.06 0 0.00 89,683 0.06 0 5,976,362 89,683 0.00 Merged with Cheil Industries Changed the name after the 4.06 merger with the former Samsung C&T 0.06 - 37,615 0.03 37,615 0.03 - 1,083,072 0.74 1,083,072 0.74 - Jae-Yong Lee Samsung Life Insurance Samsung Life Insurance Samsung Life Insurance (special accounts) Samsung Life Insurance (special accounts) Samsung Fire & Marine Insurance Oh-Hyun Kwon Affiliate Affiliate Affiliate Affiliate Common Common Preferred Common Affiliate Affiliate Affiliate Preferred Common Common 840,403 0.57 10,622,814 7.21 879 0.00 486,926 0.33 52,332 0.23 1,856,370 1.26 3,000 0.00 840,403 10,622,814 879 493,293 45,086 1,856,370 3,000 0.57 - 7.21 - 0.00 - 0.33 Open market sales 0.20 Open market sales 1.26 - 0.00 - Sang-Hoon Lee Affiliate Common 1,473 0.00 1,473 0.00 - Common 25,983,182 17.64 25,989,549 17.64 - Total Preferred 65,609 0.29 58,363 0.26 - Note: According to the shareholder register, as at June 30, 2015, Yong-Jin Jeong, CEO of Shinsegye, holds 245,000 shares. The definition of `major shareholder' is as defined in the Monopoly Regulation and Fair Trade Act of Korea Samsung Electronics Interim Business Report 126 / 173 [The major shareholder] Name of the major shareholder: Kun-Hee Lee Career (recent 5 years): Chairman of Samsung Electronics (2010.3 ~) Vice Chairman of the Federation of Korean Industries (1987 ~) Member of the International Olympic Committee (1996 ~) - The major shareholder of record has not changed during the reporting period. 2. Ownership of shares As at June 30, 2015, the date of Suspension of Entry in the Register of Shareholders, shareholders with over 5% voting shares, excluding the major shareholder, are as follows: [As of June 30, 2015] (Unit: Shares) Classification Name Number of shares owned Share ratio Note Shareholders with National Pension Service 12,064,074 8.19 over 5% voting shares Samsung Life Insurance 11,105,480 7.54 Employee Stock Ownership Association - - Note: According to the shareholder register, as at June 30, 2015. The number of shares owned and share ratio of Samsung Life Insurance includes special accounts. - 3. Minority Shareholders [As of June 30, 2015] (Unit: Person, Shares, %) Shareholder Shares owned Classification Note # of shareholders Portion # of shares Portion Minority shareholder 115,972 99.93 82,230,608 55.83 Shareholders with total issued stocks shares less than 1/100 of Total 116,053 100.00 147,299,337 Note: According to the shareholder register, as at June 30, 2015. Based on the number of common stock with voting rights. 100.00 Samsung Electronics Interim Business Report 127 / 173 4. Stock Affairs 1. New shares to be issued by the Company shall be allocated to the shareholders in proportion to their respective shareholdings in accordance with Paragraph 6, Article 8. If shareholders wave or lose their preemptive right to new shares issues or if there are fractional shares at the time of allocation of new shares, such shares may be handled by a resolution of the Board of Directors. 2. Notwithstanding the above Paragraph 1, new shares may be allocated to persons other than shareholders in the following cases: Preemptive Rights in the Articles of Incorporation a. If the Company issues new shares or causes underwriters to underwrite new shares by a resolution of the Board of Directors in accordance with the applicable laws and regulations including the Securities and Exchange Act ("SEA"); b. If the Company allocates new shares preferentially to members of the Employee Stock Ownership Association by a resolution of the Board of Directors in accordance with the applicable laws and regulations including SEA; c. If the Company issues new shares for the issuance of depositary receipts (DR) by a resolution of the Board of Directors in accordance with the applicable laws and regulations including SEA; d. If the Company issues new shares by public offering in accordance with Article 11-3; e. If new shares are issued by the exercise of stock options in accordance with Article 11-4; f. If the Company issues new shares to the extent of 30% of the total issued and outstanding shares, to domestic or foreign financial institutions to obtain financing urgently, or to partner companies to induce technology therefrom, etc., by a resolution of the Board of Directors; provided that the issue price of the new shares shall not be less than the price prescribed by Article 84-5 of the Enforcement Decree of SEA. (Note) Paragraph 6, Article 8 In the case of rights issues, bonus issues or stock dividends, common shareholders shall be entitled to common shares, and preferred shareholders shall be entitled to preferred shares, in proportion to their respective shareholdings; provided that in the case of rights issue and stock dividend the Company may, if necessary, issue only one kind of shares, where all the shareholders, regardless of the class of their shares, shall be entitled to the kind of shares to be issued. (Note) Article 11-3 (Public Offering) 1. The Company may issue new shares by public offering to the extent that the new shares do not exceed 30% of the total number of issued and outstanding shares by a resolution of the Board of Directors, pursuant to Article 189-3 of the SEA. 2. If the Company issues new shares by public offering, the type, number and issue price of the new shares shall be determined by a resolution of the Board of Directors; provided that the issue price of such new shares shall not be less than the price prescribed by Article 84-5 of the Enforcement Decree of the SEA. Samsung Electronics Interim Business Report 128 / 173 (Note) Article 11-4 (Stock Options) 1. The Company may grant stock options to its officers and employees (in this Article, "officers and employees" include officers and employees of the related companies as set forth in Article 189-4, Paragraph 1 of the SEA) by a special resolution of the general meeting of shareholders pursuant to Article 189-4 of the SEA, to the extent permitted by the SEA; provided, however, that the Company may grant the stock options to its officers and employees (except for the directors of the Company) by a resolution of the Board of Directors to the extent determined by the relevant laws and regulations.<Amended, Feb.28, 2002> 2. The persons to whom stock options may be granted are the officers and employees who have contributed or have the capacity to contribute to the establishment, management, overseas business, technical innovation, etc. of the Company; provided, however, that the officers and employees who are not entitled to stock options under the relevant laws and regulations shall be excluded.<Amended, Feb.28, 2002> 3. The shares to be issued to the officers or employees by the exercise of their stock options (in case the Company pays, either in cash or treasury shares, the difference between the exercise price of stock options and the market price, they refer to the shares which are the basis for such calculation) shall be common shares in registered form or preferred shares in registered form. 4. Total number of shares to be delivered in accordance with the exercise of stock options shall be up to the extent permitted by the relevant laws and regulations. Preemptive Rights in the Articles of Incorporation 5. The stock options may be exercised until an expiry date determined by a resolution of the general meeting of shareholders or the Board of Directors and the expiry date shall be in no more than eight (8) years from when two (2) years have elapsed from the date of the general meeting of shareholders or the Board of Directors' meeting at which a resolution to grant such stock options was; provided, however, that the person to whom a stock option is granted should serve the Company for at least two (2) years after the date of such resolution in order to exercise such stock option, unless otherwise set forth by relevant laws and regulations.<Amended, Feb.28, 2002> 6. The terms and conditions of stock options, such as the contents and exercise price thereof shall be determined by a special resolution of the general meeting of shareholders or by a resolution of the Board of Directors in accordance with the relevant laws and regulations and the Articles of Incorporation; provided, however, that such matters which are not provided for as matters reserved for resolutions of the general meeting of shareholders or the Board of Directors' meeting under the relevant laws and regulations or the Articles of Incorporation may be determined by the Board of Directors or a committee authorized by the Board of Directors.<Amended, Feb.28, 2002> 7. The Company may cancel the grant of stock options by a resolution of the Board of Directors in any of the following cases: <Amended, Feb.28, 2002> a. In case the option grantees voluntarily retire from their office or leave the Company after the grant of stock options; b. In case the option grantees cause substantial damage to the Company due to their willful misconduct or negligence; c. In case any of the causes for cancellation set forth in the stock option agreement occur Settlement date December 31 Annual General Meetings of Shareholders Within 3 months after the end of every business year Shareholder register closing period One month from January 1 Stock type 1,5,10,50,100,500,1000,10000(8 types) Transfer agent Korea Securities Depository(T: +82-2-3774-3000): 23, Yeouinaru-ro 4-gil, Yeongdeungpo-gu, Seoul, Korea Shareholder benefit n/a Published on Joongang Daily Samsung Electronics Interim Business Report 129 / 173 5. Stock Price and Stock Transactions A. Domestic stock market Type Highest April `15 1,490,000 Stock price Lowest 1,366,000 Common stock Average Highest (day) 1,443,318 381,798 Volume Lowest (day) 125,403 Monthly 4,966 Highest 1,166,000 Stock price Lowest 1,051,000 Preferred stock Average Highest (day) 1,119,136 91,094 Volume Lowest (day) 7,659 Monthly 685 Monthly trading volume in 1,000 shares May 1,400,000 1,307,000 1,341,889 347,615 144,212 3,852 1,111,000 1,018,000 1,053,667 85,288 10,942 475 June 1,341,000 1,254,000 1,283,955 388,239 127,418 4,778 1,060,000 975,000 1,007,727 50,853 7,384 529 July 1,305,000 (Unit: KRW, Shares) August September 1,182,000 1,190,000 1,185,000 1,067,000 1,085,000 1,251,522 1,122,500 1,130,450 399,794 558,952 458,936 128,928 114,450 132,721 5,356 6,362 5,219 1,001,000 920,000 940,000 919,000 821,000 861,000 953,739 877,650 910,800 75,018 81,508 392,632 11,025 16,578 21,642 729 851 1,549 Samsung Electronics Interim Business Report 130 / 173 B. Overseas stock market Name of stock exchange: London Stock Exchange (common stock) Type Highest April `15 681.50 May 653.00 June 599.50 July 582.50 (Unit: $, KRW, DR) August September 511.50 502.00 Stock price Common stock (Converted to KRW) Lowest (Converted to KRW) Average 745,152 634.00 681,233 662.75 697,469 592.00 655,936 617.97 663,047 560.50 625,630 578.16 651,410 507.00 591,314 546.98 596,000 445.60 531,155 477.41 Highest (day) 124,206 68,441 86,564 92,544 126,153 Volume Lowest (day) 13,476 10,402 14,240 13,453 10,278 Monthly 821 769 742 746 834 Monthly volume in 1,000 Depository Receipt (DR) shares. Stock price converted to KRW is based on the closing price of the KRW/USD exchange rate of the applicable trading day. Ratio: Common one (1) share equals DR two (2) shares 587,189 456.20 539,685 473.40 129,480 7,730 665 Name of stock exchange: Luxembourg Stock Exchange (Preferred stock) Type Highest April `15 529.50 May 510.00 June 475.20 July 445.90 Preferred stock Stock price (Converted to KRW) Lowest (Converted to KRW) Average 576,996 492.20 546,047 512.67 545,445 466.50 508,438 481.94 525,571 438.90 489,417 453.24 498,739 390.80 455,790 415.20 Highest (day) 61,134 13,986 35,559 23,651 Volume Lowest (day) 1,613 1,137 1,222 609 Monthly 244 106 170 136 Monthly volume in 1,000 DR shares. Stock price converted to KRW is based on KRW/USD exchange rate of closing price of trading day. Ratio: Common one (1) share equals DR two (2) shares (Unit: USD, KRW, DR ) August September 395.00 400.00 460,254 471,760 344.40 363.30 411,420 429,784 373.80 379.43 58,797 60,338 1,543 929 278 233 Samsung Electronics Interim Business Report 131 / 173 VIII. Executives and Employees 1. Executives and Employees A. Registered Executives [As of September 30, 2015] Name Gender Date of birth Position Registered executive Full/ parttime Responsibility Major career Number of shares owned Common Preferred Oh- Hyun M 1952.10 CEO Kwon Chairman of BOD Registered executive Full time Head of DS Division Head of DS Division 3,000 0 Length of Service 43 mo. Boo- Keun M 1953.02 CEO Yoon Registered executive Full time Head of CE Head of CE Division Division 0 0 31 mo. Jong- Kyun M 1956.01 CEO Shin Registered executive Full time Head of IM Division Head of IM Division 0 0 31 mo. SangHoon M Lee 1955.06 Executive Director Registered executive Full time CFO, Head of Corporate Management Office Head of Corporate Management Office 1,473 0 In-Ho Lee M 1943.11 Independent Director Registered executive Part time Overall management of the Company President & CEO of Shinhan Bank 0 0 HanJoong M Kim 1948.11 Independent Director Registered executive Part time Overall management of the Company President of Yonsei University 0 0 31 mo. 67 mo. 43 mo. KwangSoo M Song 1950.01 Independent Director Registered executive Part time Overall management of the Company Advisor at Kim & Chang Law Office 0 0 Professor of ByeongGi Lee M 1951.05 Independent Director Registered executive Part time Overall management of the Company Electrical Engineering at Seoul National 0 0 University Dean of Graduate EunMee Kim F 1958.09 Independent Director Registered executive Part time Overall management of the Company School of International Studies at Ewha 0 0 Womans University 31 mo. 43mo. 31 mo. (Unit: # of shares) Term expiration 2018.03.15 2016.03.14 2016.03.14 2016.03.14 2016.03.14 2018.03.15 2016.03.14 2018.03.15 2016.03.14 Samsung Electronics Interim Business Report 132 / 173 B. Concurrent position with other companies Concurrent office holder Name Kwang-Soo Song Position Independent director Company Name of company Doosan Corp. Position Independent director C. Employees [As of September 30, 2015] (Unit: KRW million) Division CE Gender Regular M 16,902 No. of employees Contractbased 442 Others - Total 17,344 Average length of service (years) Total Compensation Average Compensation per employee 11.5 - - CE F 3,277 315 - 3,592 6.8 - - IM M 18,727 340 - 19,067 10.3 - - IM F 7,342 217 - 7,559 7.7 - - DS M 29,694 255 - 29,949 10.1 - - DS F 13,031 310 - 13,341 9.3 - - Others M 5,715 279 - 5,994 13.0 - - Others F 1,374 337 - 1,711 7.7 - - Gender Total M 71,038 1,316 - 72,354 10.7 4,679,407 64 Gender Total F 25,024 1,179 - 26,203 8.4 1,148,735 43 Total 96,062 2,495 - 98,557 10.1 5,828,142 59 Total compensation and average compensation per employee were calculated before income tax and other deductions based on the earned income payment record submitted to the district tax office in accordance with Article 20 of the Income Tax Law. The number of employees represent domestic employees resident in Korea, excluding four executive directors. Average compensation per employee was calculated based on total average employee figure of 99,400 (male: 72,862; female: 26,538) Samsung Electronics Interim Business Report 133 / 173 2. Remuneration for Directors A. Summary on Total Remuneration (1) Remuneration approved at the annual general meetings of shareholders Executive Directors Number of Persons 4 Amount Approved at Shareholders' Meeting - (Unit: KRW million) Note - Independent Directors 2 - - Audit Committee member or Auditor 3 - - Total 9 39,000 - Number of persons as of the Reporting Date. The amount approved at shareholders' meeting is the remuneration limit for directors registered pursuant to Article 388 of the Korean Commercial Act ("Registered Directors"). It includes compensation for Registered Directors who retired this fiscal year and in past years. (2) Remuneration Paid Executive Directors Number of Persons 4 Total amount of remuneration 10,017 Average remuneration per Director 2,504 (Unit: KRW million) Note - Independent Directors 2 132 66 - Audit Committee member or Auditor 3 190 63 - Total 9 10,339 - - Number of persons is as of the reporting date. The total amount is the income based on the Income Tax Law that incumbent or retired executive directors, independent directors, and members of audit committee in the fiscal year received as a Registered Director in accordance with Article 159 of the Financial Investment Services and Capital Markets Act and Article 168 of the enforcement decree of the same law. Average remuneration per Director was calculated by dividing total remuneration by annual average number of persons. There is no recognized expenses (compensation expenses) in this term from granting stock options. Samsung Electronics Interim Business Report 134 / 173 3. Remuneration for Individual Executive Directors (1) Summary on Remuneration by Executive (Unit: KRW million) Name position Total amount of remuneration Remuneration not included in total amount Oh-Hyun Kwon CEO 3,820 - Boo-Keun Yoon CEO 2,341 - Jong-Kyun Shin CEO 2,289 - Sang-Hoon Lee President 1,567 - Total amount of compensation for each individual is the sum of earned, retirement, and other related income based on the Income Tax Law that incumbent or retired executive directors, independent directors, and members of audit committee in the fiscal year received as a Registered Director in accordance with Article 159 of the Financial Investment Services and Capital Markets Act and Article 168 of the enforcement decree of the same law. (2) Criteria and Methodology CEO Oh-Hyun Kwon Criteria and methodology Total compensation of KRW 3,820 million Earned Income · Salary: KRW 1,562 million (consists of monthly wage) · Bonus: KRW 2,233 million (consists of traditional holiday bonus, performance/Long-term Incentive) · Profit from exercising stock option : n/a · Other earned income: KRW 24 million Retirement Income: n/a Other Income: n/a Compensation criteria and calculation method Salary: According to internal regulation for executive treatment (Board resolution) Bonus: According to internal regulation for executive treatment (Board resolution) · Traditional holiday bonus: 100% of monthly wage · Performance Incentive: CEO decides the amount depending on each division's performance; an amount equal to 0~200% of the monthly wage is paid in two installments over a year (Adjusted according to organization's performance) · Long-term incentive: Calculated within the director remuneration limit, based on the average salary of 3 years, using ROE, stock performance, and EBIT margin as criteria. Paid over the course of 3 years. Other earned income: According to internal regulation for executive treatment (Board resolution) · Consists of a special bonus (one-off) and fringe benefits Samsung Electronics Interim Business Report 135 / 173 CEO Boo-Keun Yoon CEO Jong-Kyun Shin President Sang-Hoon Lee Total compensation of KRW 2,341 million Earned Income · Salary: KRW 1,296 million (consists of monthly wage) · Bonus: KRW 1,002 million (consists of traditional holiday bonus, performance/Long-term Incentive) · Profit from exercising stock option : n/a · Other earned income: KRW 43 million Retirement Income: n/a Other Income: n/a Compensation criteria and calculation method Salary: According to internal regulation for executive treatment (Board resolution) Bonus: According to internal regulation for executive treatment (Board resolution) · Traditional holiday bonus: 100% of monthly wage · Performance Incentive: CEO decides the amount depending on each division's performance; an amount equal to 0~200% of the monthly wage is paid in two installments over a year (Adjusted according to organization's performance) · Long-term incentive: Calculated within the director remuneration limit, based on the average salary of 3 years, using ROE, stock performance, and EBIT margin as criteria. Paid over the course of 3 years. Other earned income: According to internal regulation for executive treatment (Board resolution) · Consists of a special bonus (one-off) and fringe benefits Total compensation of KRW 2,289 million Earned Income · Salary: KRW 1,296 million (consists of monthly wage) · Bonus: KRW 984 million (consists of traditional holiday bonus, performance/Long-term Incentive) · Profit from exercising stock option : n/a · Other earned income: KRW 9 million Retirement Income: n/a Other Income: n/a Compensation criteria and calculation method Salary: According to internal regulation for executive treatment (Board resolution) Bonus: According to internal regulation for executive treatment (Board resolution) · Traditional holiday bonus: 100% of monthly wage · Performance Incentive: CEO decides the amount depending on each division's performance; an amount equal to 0~200% of the monthly wage is paid in two installments over a year (Adjusted according to organization's performance) · Long-term incentive: Calculated within the director remuneration limit, based on the average salary of 3 years, using ROE, stock performance, and EBIT margin as criteria. Paid over the course of 3 years. Other earned income: According to internal regulation for executive treatment (Board resolution) · Consists of a special bonus (one-off) and fringe benefits Total compensation of KRW 1,567 million Earned Income · Salary: KRW 842 million (consists of monthly wage) · Bonus: KRW 668 million (consists of traditional holiday bonus, performance/Long-term Incentive) · Profit from exercising stock option : n/a · Other earned income: KRW 56 million Retirement Income: n/a Other Income: n/a Compensation criteria and calculation method Salary: According to internal regulation for executive treatment (Board resolution) Bonus: According to internal regulation for executive treatment (Board resolution) · Traditional holiday bonus: 100% of monthly wage Samsung Electronics Interim Business Report 136 / 173 · Performance Incentive: CEO decides the amount depending on each division's performance; an amount equal to 0~200% of the monthly wage is paid in two installments over a year (Adjusted according to organization's performance) · Long-term incentive: Calculated within the director remuneration limit, based on the average salary of 3 years, using ROE, stock performance, and EBIT margin as criteria. Paid over the course of 3 years. Other earned income: According to internal regulation for executive treatment (Board resolution) · Consists of a special bonus (one-off) and fringe benefits Samsung Electronics Interim Business Report 137 / 173 B. Stock Options Granted and Exercised (1) Status of Stock Options Granted to Registered Directors There have been no stock options granted to, or exercised by, the executive BOD or Audit Committee members during the reporting period. (2) Status of Stock Options Granted to Non-Registered Executives As of September 30, 2015, the accumulated weighted average exercise price of unexercised stock options is KRW 606,700. [Weighted average exercise price = Sum of (no. of unexercised stocks per period x exercise price per period) / total no. of unexercised stocks] [As of September 30, 2015] (Unit: KRW, shares) Grantee Relationship Date Method Type of stock Grant Changes Exercise Unexercised Cancel Exercise period Exercise price Young-Soo Kwak and - Dec 20, 2005 Treasury share Common 10,000 5,000 '07.12.21~ 0 5,000 '15.12.20 606,700 other 1 As of September 30, 2015, the closing price was KRW 1,134,000. `Relationship' is as of the reporting date (September 30, 2015). Samsung Electronics Interim Business Report 138 / 173 IX. Affiliates and Subsidiaries 1. Affiliates & Subsidiaries A. Affiliates - Name of affiliated group: Samsung Group As at September 30, 2015, Samsung Group had a total of sixty-four (64) domestic affiliates, where eight (8) affiliates (RAY, Samsung SGL Carbon Composite Materials, Samsung General Chemicals, Samsung Total Petrochemicals, Songdo Land Mark City, former Samsung C&T, Hanwha Techwin, Hanwha Thales) were excluded and three (3) affiliates (Samsung Life Financial Service, HDC Shilla Duty Free, Core-Bridge Consulting) were added. Among the Samsung Group's sixty four (64) domestic affiliates, sixteen (16) affiliates including Samsung Electronics are listed, and forty-eight (48) affiliates are unlisted. [As of September 30, 2015] Listed No. of affiliates 16 Name of affiliates Samsung C&T, Samsung Electronics, Samsung SDI, SEMCO, Samsung Heavy Industries, Hotel Shilla, Samsung Card, Samsung Life Insurance, Samsung Fire & Marine Insurance, Samsung Securities, Samsung Fine Chemicals, Samsung Engineering, S1, Cheil Worldwide, Samsung SDS, CREDU Unlisted Samsung Lions, SERI, STECO, SEMES, Samsung Electronics Sales, Samsung Electronics Service, Samsung Electronics Logitech, Hantok Chemicals, CVnet Corporation, Allat., SECUI, Open Tide Korea, Samsung Futures, Samsung Venture Investment Corporation, Samsung Asset Management, Saengbo, SD Flex, Samsung Claim Adjustment Service, Samsung Fire & Marine Insurance Service, Suwon Samsung Bluewings FC, S-Core, Human TSS, 48 S-1CRM, OpenHands, S-EnPol, Samsung Medison, Samsung Biologics, STM, Nuri Solution, Colombo Korea, Miracom, Samsung Life Service, SU Materials, Natural9, Samsung Display, Samsung Bioepis, Samsung Corning Advanced Glass , Daejung Offshore Wind Power Co., Ltd., Samsung SRA Asset Management, Samsung Welstory, Jeongahm Wind Power, Samsung Card Customer Service, Seoul Lakeside CC, Shilla Stay, Samoo Architects & Engineers, HDC Shilla Duty Free LTD, Samsung Life Financial Service, CORE-BRIDGE CONSULTING Total 64 Cheil Industries merged with Samsung C&T and adopted Samsung C&T as the name of the new company. Samsung Electronics Interim Business Report 139 / 173 B. Ownership Status of Affiliates and Subsidiaries 1) Domestic Investee Samsung Investor C&T Corp Samsung Electronics Samsung SDI Samsung ElectroMechanics Samsung Heavy Industries Hotel Shilla Samsung Engineering Cheil Worldwide Samsung Fine Chemicals S1 Corpo ration Samsung SDS Hantok Chemicals Samsung Lions Samsung C&T Corporation 4.1 0.1 7.8 12.6 5.6 17.1 9.5 Samsung Electronics 19.6 23.7 17.6 5.1 12.6 8.4 22.6 27.5 Samsung SDI 4.8 0.4 0.1 13.1 14.7 11.0 15.0 Samsung ElectroMechanics 2.6 2.4 0.3 12.5 Samsung Heavy Industries Cheil Worldwide 0.1 3.0 Samsung Fine Chemicals 50.0 Hotel Shilla 2.2 S1 Corporation SERI Samsung SDS Samsung Life Insurance 0.0 7.5 0.2 0.1 3.4 7.9 0.0 0.2 0.0 6.1 0.0 Samsung Fire & Marine Insurance 1.4 1.3 1.1 1.0 Samsung Securities. 3.1 1.3 Samsung Card 1.3 3.0 1.9 SDC Samsung BioLogics Open Tide Korea Total 8.8 12.9 19.7 23.8 24.1 17.4 22.0 28.4 31.1 21.3 39.7 50.0 67.5 (% of Ownership; As of September 30, 2015; Based on Common shares) Samsung Electronics Interim Business Report 140 / 173 Investee Investor Samsung C&T Corporation SERI STECO 1.0 SEMES Samsung Samsung Electronics Electronics Service Sales Suwon Samsung Bluewings FC Samsung Electronics Logitech Samsung Display Samsung Medison Samsung BioLogics Samsung BioEpis Samsung Corning Advanced Glass SU Materials 51.0 Samsung Electronics 29.8 70.0 91.5 99.3 100.0 100.0 84.8 68.5 46.8 Samsung SDI 29.6 15.2 Samsung ElectroMechanics 23.8 Samsung Heavy Industries 1.0 Cheil Worldwide 100.0 Samsung Fine Chemicals Hotel Shilla S1 Corporation SERI Samsung SDS Samsung Life Insurance Samsung Fire & Marine Insurance Samsung Securities. 14.8 Samsung Card SDC Samsung BioLogics Open Tide Korea Total 100.0 70.0 91.5 99.3 100.0 100.0 100.0 100.0 68.5 50.0 50.0 91.2 97.8 91.2 50.0 50.0 (% of Ownership; As of September 30, 2015; Based on Common shares) Samsung Electronics Interim Business Report 141 / 173 Investee Investor CVnet Seoul Samwoo Lakeside Architects & CC Engineers SD Flex Colombo Korea Natural9 Samsung Welstory Daejung Offshore Wind Power Jeongah m Wind Power SECUI Human TSS S-1CRM S-EnPol Samsung C&T Corporation 40.1 100.0 100.0 100.0 51.0 100.0 8.7 Samsung Electronics Samsung SDI 50.0 Samsung ElectroMechanics Samsung Heavy Industries 50.1 50.0 Cheil Worldwide Samsung Fine Chemicals 100.0 Hotel Shilla S1 Corporation 100.0 93.4 SERI Samsung SDS 9.4 Samsung Life Insurance Samsung Fire & Marine Insurance Samsung Securities. Samsung Card 56.5 SDC Samsung BioLogics Open Tide Korea Total 49.5 100.0 100.0 50.0 100.0 51.0 100.0 50.1 50.0 65.2 100.0 93.4 100.0 (% of Ownership; As of September 30, 2015; Based on Common shares) Samsung Electronics Interim Business Report 142 / 173 Investee Investor STM CREDU Open Tide Korea S-Core Open Hands Miracom Nuri Solution Shilla Stay HDC CORE Samsung Samsung Shilla BRIDGE Life Saengbo Life Duty Free LTD CONSULTING Insurance Service Samsung C&T Corporation 19.3 Samsung Electronics Samsung SDI 71.8 Samsung ElectroMechanics Samsung Heavy Industries Cheil Worldwide 9.8 9.8 Samsung Fine Chemicals Hotel Shilla 100.0 50.0 S1 Corporation 1.1 1.1 SERI 15.2 Samsung SDS Samsung Life Insurance Samsung Fire & Marine Insurance Samsung Securities. Samsung Card 47.2 70.2 94.8 100.0 100.0 100.0 0.0 70.2 50.0 99.8 SDC Samsung BioLogics Open Tide Korea 1.0 Total 71.8 62.4 81.1 94.8 100.0 100.0 100.0 100.0 50.0 82.1 19.3 50.0 99.8 (% of Ownership; As of September 30, 2015; Based on Common shares) Samsung Electronics Interim Business Report 143 / 173 Investee Investor Samsung SRA Asset Management Samsung Life Financial Service Samsung Fire & Marine Insurance Samsung Claim Adjustment Service Samsung Fire & Marine Insurance Service Samsung Securitie Samsung Card Samsung C&T Corporation Allat 30.0 Samsung Card Customer Service Samsung Asset Management Samsung Futures Samsung Venture Investment Samsung Electronics 37.5 16.3 Samsung SDI 16.3 Samsung ElectroMechanics Samsung Heavy Industries 17.0 17.0 Cheil Worldwide Samsung Fine Chemicals Hotel Shilla S1 Corporation SERI Samsung SDS Samsung Life Insurance Samsung Fire & Marine Insurance Samsung Securities. Samsung Card 100.0 100.0 15.0 11.2 34.4 100.0 100.0 8.0 30.0 100.0 98.7 100.0 16.7 SDC Samsung BioLogics Open Tide Korea Total 100.0 100.0 15.0 100.0 100.0 19.2 71.9 60.0 100.0 98.7 100.0 83.3 (% of Ownership; As of September 30, 2015; Based on Common shares) Samsung Electronics Interim Business Report 144 / 173 2) Overseas Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Investor Investee MYODO METAL CO., LTD. Samsung C&T Japan Corporation Samsung C&T America Inc. Samsung Finance Corporation. Samsung E&C America, INC. SAMSUNG OIL & GAS USA CORP Samsung Renewable Energy Inc. SCNT Power Norte S. De R.L. de C.V. QSSC, S.A. de C.V. Samsung C&T Oil & Gas Parallel Corp. Samsung C&T Automation Inc. Samsung C&T Canada Ltd. Samsung C&T Deutchland GmbH Samsung C&T U.K. Ltd. Xiod Distribution Samsung C&T ECUK Limited Whessoe Project Limited SCNT Investment Atlantic SPRL POSS-SLPC, s.r.o Solluce Romania 1 B.V. SAM investment Manzanilo.B.V Solluce Slovenia 1 B.V. Ecosolar OOD Ecoenergy Solar OOD Agirlplam EOOD Fishtrade EOOD Manageprojekt EOOD Solar Park EOOD Veselinovo Energy OOD Samsung C&T Construction Hungary Kft. Samsung C&T (KL) Sdn.,Bhd. Samsung C&T Malaysia SDN. BHD Erdsam Co., Ltd. Samsung Chemtech S-print Inc Cassava Investment Korea Pte. Ltd. P.T. Samsung Development Samsung Development (Thailand) Co., Ltd. Samsung C&T Thailand Co., Ltd Cheil Holding Inc. Samsung Const. Co. Phils.,Inc. Samsung Design Philippines Inc Samsugn Oil & Gas Australia PTY. LTD PT. INSAM BATUBARA ENERGY Samsung C&T India Pte., Ltd. Samsung C&T Corporation India Private Limited Malaysia Samsung Steel Center Sdn.Bhd Samsung C&T Singapore Pte., Ltd. S&G Biofuel PTE.LTD SAMSUNG C&T Mongolia LLC. Samsung C&T Eng.&Const. Mogolia LLC. Samsung C&T Hongkong Ltd. GUANGDONG XINGPU STEEL CENTER CO.,LTD Samsung C&T Taiwan Co., Ltd. Samsung Precision Stainless Steel(pinghu) Co.,Ltd. SAMSUNG C&T (SHANGHAI) CO., LTD. Samsung Nigeria Co., Ltd. LOBINAVE - Estaleiro Naval do Lobito, Limitada SAMSUNG C&T CORPORATION SAUDI ARABIA Ownership 100.0 100.0 100.0 80.0 100.0 90.0 100.0 100.0 60.0 100.0 70.0 100.0 100.0 100.0 25.0 100.0 100.0 100.0 50.0 80.0 53.3 80.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 51.7 40.0 29.7 100.0 33.0 43.9 40.0 25.0 100.0 100.0 90.0 100.0 100.0 70.0 100.0 50.5 70.0 100.0 100.0 51.6 100.0 55.0 100.0 99.9 40.0 100.0 Samsung Electronics Interim Business Report 145 / 173 Investor Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T Corporation Samsung C&T America Inc. Samsung C&T America Inc. Samsung C&T America Inc. Samsung C&T America Inc. Samsung C&T America Inc. Samsung C&T America Inc. Samsung C&T America Inc. Samsung Renewable Energy Inc. Samsung Renewable Energy Inc. Samsung Renewable Energy Inc. Samsung Renewable Energy Inc. Samsung Renewable Energy Inc. Samsung Renewable Energy Inc. Samsung Renewable Energy Inc. Samsung Renewable Energy Inc. Samsung Renewable Energy Inc. Samsung Renewable Energy Inc. Samsung Renewable Energy Inc. Samsung Renewable Energy Inc. Samsung Renewable Energy Inc. Samsung Renewable Energy Inc. Samsung Renewable Energy Inc. Samsung Renewable Energy Inc. Samsung Renewable Energy Inc. Samsung Renewable Energy Inc. Samsung Renewable Energy Inc. Samsung Renewable Energy Inc. Samsung Renewable Energy Inc. Samsung Renewable Energy Inc. Samsung Renewable Energy Inc. Samsung Renewable Energy Inc. Samsung Renewable Energy Inc. Samsung Renewable Energy Inc. Samsung Renewable Energy Inc. Samsung Renewable Energy Inc. Samsung Renewable Energy Inc. Samsung Renewable Energy Inc. Samsung Green repower, LLC KINGSTON SOLAR GP INC. K2 Wind Ontario Inc. SP Armow Wind Ontario GP Inc Samsung C&T Oil & Gas Parallel Corp. Samsung C&T Oil & Gas Parallel Corp. SRE GRW EPC GP Inc. SRE SKW EPC GP Inc. Investee Samsung C&T Chile Copper SpA SCNT Power Kelar Inversones Limitada SAMSUNG C&T do BRASIL CONSTRUCTORA LTDA. Samsung C&T Corporation Rus LLC KSI LLP JSC BALKHASH THERMAL POWER PLANT Samsung SDI America, Inc. Samsung SDI(Malaysia) Sdn, Bhd. Samsung SDI(Hong Kong) Ltd. Samsung SDI Brasil Ltda. Beijing Samsung Real Estate Co.. Ltd Cheil Industries Corp., USA CHEIL INDUSTRIES ITALY SRL Samsung Fashion Trading (Shanghai) Co. ,Ltd CHEIL INDUSTRIES INC. VIETNAM COMPANY LIMITED iMarket Asia Co., Ltd. Meadowland Distribution SAMSUNG OIL & GAS USA CORP Samsung Green repower, LLC Samsung Solar Construction Inc. QSSC, S.A. de C.V. Samsung C&T Automation Inc. S-print Inc SRE GRW EPC GP Inc. SRE GRW EPC LP SRE SKW EPC GP Inc. SRE SKW EPC LP SRE GRW LP Holdings LP SRE SKW LP Holdings LP SRE WIND PA GP INC. SRE WIND PA LP SRE GRS Holdings GP Inc. SRE GRS Holdings LP SRE K2 EPC GP Inc. SRE K2 EPC LP SRE K2 LP HOLDINGS LP SRE KS HOLDINGS GP INC. SRE KS HOLDINGS LP SOUTHGATE SOLAR GP INC. SOUTHGATE SOLAR LP WINDSOR SOLAR GP INC. WINDSOR SOLAR LP SRE Belle River LP Holdings LP SRE Armow EPC GP Inc. SRE Armow EPC LP SRE Armow LP Holdings LP SRE North Kent 1 LP H.LP SRE Wind GP Holding Inc. SP Ontario Wind Development LP Inc. SP Southgate Wind LP SRE North Kent 2 LP Holdings LP Mountsberg Solar GP Inc. Mountsberg Solar LP SOLAR PROJECTS SOLUTIONS,LLC KINGSTON SOLAR LP INC. K2 WIND ONTARIO LP SP Armow Wind Ontario LP PLL Holdings LLC PLL E&P LLC SRE GRW EPC LP SRE SKW EPC LP Ownership 100.0 99.0 100.0 100.0 25.0 75.0 8.3 6.4 2.4 0.0 10.0 100.0 100.0 100.0 100.0 19.3 100.0 10.0 100.0 100.0 20.0 30.0 24.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 50.0 50.0 100.0 100.0 100.0 66.0 0.0 0.0 0.0 83.6 90.0 0.0 0.0 Samsung Electronics Interim Business Report 146 / 173 Investor PLL Holdings LLC SRE GRW LP Holdings LP SRE SKW LP Holdings LP SRE WIND PA GP INC. SRE GRS Holdings GP Inc. SRE GRS Holdings GP Inc. SRE K2 EPC GP Inc. SRE K2 LP HOLDINGS LP SRE KS HOLDINGS GP INC. SRE KS HOLDINGS GP INC. SRE KS HOLDINGS LP SOUTHGATE SOLAR GP INC. WINDSOR SOLAR GP INC. SRE Belle River LP Holdings LP SP Belle River Wind GP Inc SRE Armow EPC GP Inc. SRE Armow LP Holdings LP SRE North Kent 1 LP H.LP SRE Wind GP Holding Inc. SRE Wind GP Holding Inc. SRE Wind GP Holding Inc. SRE Wind GP Holding Inc. SRE Wind GP Holding Inc. SRE Wind GP Holding Inc. SRE Wind GP Holding Inc. SRE Wind GP Holding Inc. SRE Wind GP Holding Inc. SRE Wind GP Holding Inc. SRE Wind GP Holding Inc. SRE Wind GP Holding Inc. SRE Wind GP Holding Inc. SRE Wind GP Holding Inc. SRE Wind GP Holding Inc. SRE Wind GP Holding Inc. SP Ontario Wind Development GP Inc. South Kent Wind GP Inc. Grand Renewable Wind GP Inc. North Kent Wind 1 GP Inc SRE North Kent 2 LP Holdings LP North Kent Wind 2 GP Inc Mountsberg Solar GP Inc. Samsung C&T Deutchland GmbH Samsung C&T Deutchland GmbH Samsung C&T Deutchland GmbH Samsung C&T Deutchland GmbH Samsung C&T Deutchland GmbH Samsung C&T Deutchland GmbH Samsung C&T Deutchland GmbH Samsung C&T U.K. Ltd. Samsung C&T U.K. Ltd. Solluce Romania 1 B.V. Solluce Slovenia 1 B.V. Cassava Investment Korea Pte. Ltd. Cassava Investment Korea Pte. Ltd. Samsung C&T Thailand Co., Ltd Samsung C&T Thailand Co., Ltd Samsung C&T Thailand Co., Ltd Cheil Holding Inc. Samsung C&T Singapore Pte., Ltd. Samsung C&T Singapore Pte., Ltd. Samsung C&T Singapore Pte., Ltd. Investee Parallel Petroleum LLC Grand Renewable Wind LP Inc. South Kent Wind LP Inc. SRE WIND PA LP Grand Renewable Solar GP Inc. SRE GRS Holdings LP SRE K2 EPC LP K2 WIND ONTARIO LP KINGSTON SOLAR GP INC. SRE KS HOLDINGS LP KINGSTON SOLAR LP INC. SOUTHGATE SOLAR LP WINDSOR SOLAR LP SP Belle River Wind LP SP Belle River Wind LP SRE Armow EPC LP SP Armow Wind Ontario LP North Kent Wind 1 LP K2 Wind Ontario Inc. SP Armow Wind Ontario GP Inc SP Southgate Wind GP SRE GRW LP Holdings LP SRE SKW LP Holdings LP SRE K2 LP HOLDINGS LP SRE Belle River LP Holdings LP SP Belle River Wind GP Inc SRE Armow LP Holdings LP SRE North Kent 1 LP H.LP SP Ontario Wind Development GP Inc. South Kent Wind GP Inc. Grand Renewable Wind GP Inc. North Kent Wind 1 GP Inc SRE North Kent 2 LP Holdings LP North Kent Wind 2 GP Inc SP Ontario Wind Development LP Inc. South Kent Wind LP Inc. Grand Renewable Wind LP Inc. North Kent Wind 1 LP North Kent Wind 2 LP North Kent Wind 2 LP Mountsberg Solar LP Samsung C&T Italia S.A.R.L SCNT Investment Atlantic SPRL POSS-SLPC, s.r.o Solluce Romania 1 B.V. Solluce Slovenia 1 B.V. S.C. Otelinox S.A KSI LLP Xiod Distribution Samsung Nigeria Co., Ltd. LJG GREEN SOURCE ENERGY ALPHA S.R.L. ZE Solar 1 D.O.O. PT. Cahaya Borneo Sukses Agrosindo PT. Cassava Borneo Sukses Plantation Samsung Development (Thailand) Co., Ltd. Samsung Engineering (Thailand) Co., Ltd. Cheil (Thailand) Ltd. Samsung Const. Co. Phils.,Inc. Samsung Chemtech S-print Inc Cassava Investment Korea Pte. Ltd. Ownership 61.0 44.5 50.0 0.0 50.0 0.0 0.0 33.3 50.0 0.0 25.0 0.0 0.0 50.0 0.0 0.0 50.0 50.0 50.0 50.0 50.0 0.0 0.0 0.0 0.0 50.0 0.0 0.0 50.0 50.0 50.0 50.0 0.0 50.0 0.0 0.0 0.0 0.0 50.0 0.0 0.0 100.0 0.0 20.0 20.0 20.0 94.3 25.0 75.0 0.1 78.0 70.0 49.0 49.0 67.0 0.0 0.0 75.0 48.3 16.0 12.7 Samsung Electronics Interim Business Report 147 / 173 Investor Samsung C&T Singapore Pte., Ltd. Samsung C&T Singapore Pte., Ltd. Samsung C&T Singapore Pte., Ltd. S&G Biofuel PTE.LTD S&G Biofuel PTE.LTD Samsung C&T Hongkong Ltd. Samsung C&T Hongkong Ltd. Samsung C&T Hongkong Ltd. Samsung C&T Hongkong Ltd. Samsung C&T Hongkong Ltd. Samsung C&T Hongkong Ltd. Samsung C&T Chile Copper SpA Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Investee PT. INSAM BATUBARA ENERGY Malaysia Samsung Steel Center Sdn.Bhd S&G Biofuel PTE.LTD PT. Gandaerah Hendana PT. Inecda Samsung C&T Thailand Co., Ltd SAMSUNG (TIANJIN) INTERNATIONAL TRADING CO., LTD SAMSUNG TRADING (SHANGHAI) CO., LTD SAMSUNG TRADING (SHENZHEN) CO., LTD Samsung Precision Stainless Steel(pinghu) Co.,Ltd. Samsung Corporation (Gaungzhou) Limited. PAMPA CAMARONES S.A. Samsung Japan Corporation Samsung R&D Institute Japan Co. Ltd Samsung Electronics America, Inc. Samsung Electronics Canada Inc. Samsung Electronics Mexico S.A. De C.V. Samsung Electronics (UK) Ltd. Samsung Electronics Ltd. Samsung Electronics Holding GmbH Samsung Electronics Iberia, S.A. Samsung Electronics France S.A.S Samsung Electronics Hungarian RT. Samsung Electronics Italia S.P.A. Samsung Electronics Europe Logistics B.V. Samsung Electronics Benelux B.V. Samsung Electronics Overseas B.V. Samsung Electronics Polska, SP.Zo.o Samsung Electronics Portuguesa S.A. Samsung Electronics Nordic Aktiebolag Samsung Electronics Austria GmbH Samsung Electronics Slovakia s.r.o Samsung Electronics Europe Holding Cooperatief U.A. Samsung Electronics Display (M) SDN.Bhd. Samsung Electronics(M) SDN.BHD. Samsung Vina Electronics Co., Ltd. Samsung Asia Private Ltd. Samsung India Electronics Private Ltd. Samsung R&D Institute India-Bangalore Private Limited Samsung Electronics Australia Pty. Ltd. PT Samsung Electronics Indonesia Thai Samsung Electronics Co., Ltd. Samsung Malaysia Electronics(SME) Sdn.Bhd. Samsung Electronics Hong Kong Co., Ltd. Suzhou Samsung Electronics Co., Ltd. Samsung (CHINA) Investment Co., Ltd. Samsung Electronics Suzhou Semiconductor Co., Ltd. Samsung Electronics (Shandong) Digital Printing Co., Ltd. Samsung Electronics Huizhou Co., Ltd. Tianjin Samsung Electronics Co., Ltd. Samsung Electronics Taiwan Co., Ltd. Tianjin Samsung Telecom Technology Co., Ltd. Shanghai Samsung Semiconductor Co., Ltd. Samsung Electronics Suzhou Computer Co., Ltd. Shenzhen Samsung Electronics Telecommunication Co., Ltd. Samsung Electronics Shanghai Telecommunication Co., Ltd. Samsung Semiconductor (China) R&D Co., Ltd. Samsung (China) Semiconductor Co., Ltd. Samsung Gulf Electronics Co., Ltd. Samsung Electronics Egypt S.A.E Samsung Electronics South Africa(Pty) Ltd. Ownership 10.0 30.0 12.6 95.0 95.0 13.2 100.0 100.0 100.0 45.0 100.0 46.5 100.0 100.0 100.0 100.0 63.6 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 55.7 100.0 75.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 91.8 100.0 100.0 69.1 100.0 100.0 87.1 89.6 48.2 100.0 90.0 100.0 73.7 95.0 100.0 100.0 100.0 100.0 0.1 100.0 Samsung Electronics Interim Business Report 148 / 173 Investor Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung Electronics Samsung BioEpis Samsung BioEpis Samsung Display Samsung Display Samsung Display Samsung Display Samsung Display Samsung Display Samsung Display Samsung Display SEMES SEMES Samsung Medison Samsung Medison Samsung Electronics America, Inc. Samsung Electronics America, Inc. Samsung Electronics America, Inc. Samsung Electronics America, Inc. Samsung Electronics America, Inc. Samsung Electronics America, Inc. Samsung Electronics America, Inc. Samsung Electronics America, Inc. Samsung Electronics America, Inc. Samsung Electronics America, Inc. Samsung Semiconductor, Inc. Samsung Semiconductor, Inc. Samsung Electronics Canada Inc. PrinterOn Corporation PrinterOn Corporation Samsung International, Inc. Samsung Electronics Mexico S.A. De C.V. Samsung Electronics (UK) Ltd. Samsung Electronics Holding GmbH Samsung Electronics Holding GmbH Samsung Electronics Hungarian RT. Samsung Electronics Hungarian RT. Samsung Electronics Benelux B.V. Samsung Electronics Benelux B.V. Samsung Electronics Benelux B.V. Samsung Electronics Benelux B.V. Samsung Electronics Benelux B.V. Samsung Electronics Benelux B.V. Samsung Electronics Benelux B.V. Samsung Electronics Benelux B.V. Samsung Electronics Benelux B.V. Samsung Electronics Benelux B.V. Samsung Electronics Benelux B.V. Samsung Electronics Benelux B.V. Samsung Electronics Benelux B.V. Samsung Electronics Benelux B.V. Samsung Electronics Benelux B.V. Investee Samsung Electronics Latinoamerica (Zona Libre) Samsung Electronica da Amazonia Ltda. Samsung Electronics Argentina S.A. Samsung Electronics Chile Limitada Samsung Electronics Rus Company LLC Samsung Electronics Rus Kaluga LLC Samsung Russia Service Centre LLC Samsung SDI Brasil Ltda. Tianjin Samsung LED Co., Ltd. Tianjin Samsung Opto-Electronics Co., Ltd. SAMSUNG BIOEPIS UK LIMITED Samsung Bioepis CH GmbH Intellectual Keystone Technology LLC Samsung Display Slovakia s.r.o. Samsung Display Vietnam Co., Ltd. Samsung Suzhou Module Co., Ltd. Samsung Suzhou LCD Co., Ltd. Samsung Display Dongguan Co., Ltd. Samsung Display Tianjin Co., Ltd. Novaled GmbH SEMES America, Inc. SEMES (XIAN) Co., Ltd. SonoAce Deutschland GmbH Samsung Medison India Private Ltd. NexusDX, Inc. NeuroLogica Corp. Samsung Receivables Corporation Quietside SmartThings Samsung Pay, Inc(Former LoopPay, Inc) YESCO Electronics LLC Samsung Semiconductor, Inc. Samsung Information Systems America, Inc. Samsung International, Inc. Grandis, Inc. Samsung Austin Semiconductor LLC. PrinterOn Corporation PrinterOn America Corporation PrinterOn Europe Limited Samsung Mexicana S.A. de C.V Samsung Electronics Digital Appliance Mexico, SA de CV Samsung Semiconductor Europe Limited Samsung Semiconductor Europe GmbH Samsung Electronics GmbH Samsung Electronics Czech and Slovak s.r.o. Samsung Electronics Slovakia s.r.o Samsung Electronics Mexico S.A. De C.V. SAMSUNG ELECTRONICS BALTICS SIA Samsung Electronics West Africa Samsung Electronics East Africa Samsung Electronics Egypt S.A.E Samsung Electronics Israel Ltd. Samsung Electronics Tunisia S.A.R.L Samsung Electronics Pakistan(Private) Ltd. Samsung Electronics South Africa Production (Propr Samsung Electronics Turkey Samsung Semiconductor Israel R&D Center,Ltd. Samsung Electronics Levant Co.,Ltd. Samsung Electronics Morocco SARLAU Samsung Electronics Venezuela, C.A. Samsung Electronica da Amazonia Ltda. Ownership 100.0 87.0 98.0 4.1 100.0 100.0 100.0 0.1 100.0 82.0 100.0 100.0 41.9 100.0 100.0 100.0 60.0 100.0 95.0 9.9 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 30.0 44.3 36.4 100.0 100.0 100.0 99.9 100.0 99.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 13.0 Samsung Electronics Interim Business Report 149 / 173 Investor Samsung Electronics Benelux B.V. Samsung Electronics Benelux B.V. Samsung Electronics Benelux B.V. Samsung Electronics Benelux B.V. Samsung Electronics Benelux B.V. Samsung Electronics Benelux B.V. Samsung Electronics Benelux B.V. Samsung Electronics Benelux B.V. Samsung Electronics Benelux B.V. Samsung Electronics Austria GmbH Samsung Electronics Europe Holding Cooperatief U.A. Samsung Electronics Europe Holding Cooperatief U.A. Samsung Electronics Europe Holding Cooperatief U.A. Samsung Electronics Europe Holding Cooperatief U.A. Samsung Electronics Europe Holding Cooperatief U.A. Samsung Electronics Europe Holding Cooperatief U.A. Samsung Electronics Europe Holding Cooperatief U.A. Samsung Electronics Europe Holding Cooperatief U.A. Samsung Electronics Europe Holding Cooperatief U.A. Samsung Electronics Europe Holding Cooperatief U.A. Samsung Electronics Display (M) SDN.Bhd. Samsung Asia Private Ltd. Samsung Asia Private Ltd. Samsung Asia Private Ltd. Samsung Asia Private Ltd. Samsung Asia Private Ltd. Samsung Asia Private Ltd. Samsung Asia Private Ltd. Samsung Asia Private Ltd. Samsung Asia Private Ltd. Samsung Asia Private Ltd. Samsung Asia Private Ltd. Samsung Asia Private Ltd. PT Samsung Electronics Indonesia Samsung Electronics Hong Kong Co., Ltd. Suzhou Samsung Electronics Co., Ltd. Samsung (CHINA) Investment Co., Ltd. Samsung (CHINA) Investment Co., Ltd. Samsung (CHINA) Investment Co., Ltd. Samsung (CHINA) Investment Co., Ltd. Samsung (CHINA) Investment Co., Ltd. Samsung (CHINA) Investment Co., Ltd. Samsung (CHINA) Investment Co., Ltd. Samsung (CHINA) Investment Co., Ltd. Samsung (CHINA) Investment Co., Ltd. Samsung (CHINA) Investment Co., Ltd. Samsung (CHINA) Investment Co., Ltd. Samsung (CHINA) Investment Co., Ltd. Samsung (CHINA) Investment Co., Ltd. Samsung Gulf Electronics Co., Ltd. Samsung Electronics Morocco SARLAU Samsung Electronics Latinoamerica (Zona Libre) Samsung Electronics Latinoamerica (Zona Libre) Samsung Electronics Latinoamerica (Zona Libre) Samsung Electronica da Amazonia Ltda. Samsung Electronica da Amazonia Ltda. Samsung Electronics KZ and Central Asia LLP Samsung SDI Samsung SDI Samsung SDI Samsung SDI Investee Samsung Electronics Chile Limitada Samsung Electronics Peru S.A.C. Samsung Electronics Rus LLC Samsung Electronics Ukraine LLC Samsung Electronics Ukraine Company LLC Samsung R&D Institute Rus LLC Samsung Electronics Kazakhstan LLP Samsung Electronics KZ and Central Asia LLP Samsung Electronics Caucasus Co., Ltd Samsung Electronics Switzerland GmbH Samsung Electronics Czech and Slovak s.r.o. Samsung Electronics Romania LLC Porta Nuova Varesine Building 2 S.r.l. Samsung Electronics Poland Manufacturing SP.Zo.o Samsung Electronics Greece S.A. Samsung Nanoradio Design Center Samsung Denmark Research Center ApS Samsung France Research Center SARL Samsung Cambridge Solution Centre Limited Novaled GmbH Tianjin Samsung Electronics Co., Ltd. Samsung Electronics Japan Co., Ltd. Samsung Electronics Display (M) SDN.Bhd. Samsung Electronics New Zealand Limited Samsung Electronics Philippines Corporation Samsung R&D Institute BanglaDesh Samsung Electronics Vietnam Co., Ltd. Samsung Telecommunications Malaysia Sbn. Bhd. Samsung Electronics Vietnam THAINGUYEN Co., Ltd. Samsung Electronics HCMC CE Complex Co. Ltd,. Samsung SDI(Malaysia) Sdn, Bhd. Samsung Electro-Mechanics(Thailand) Co., Ltd. iMarket Asia Co., Ltd. PT Samsung Telecommunications Indonesia iMarket Asia Co., Ltd. Samsung Suzhou Electronics Export Co., Ltd. Suzhou Samsung Electronics Co., Ltd. Samsung Mobile R&D Center China-Guangzhou Samsung Mobile R&D Center China - Tianjin Samsung Network R&D Center China-Shenzhen Samsung R&D Institute China-Xian Samsung Electronics (Shandong) Digital Printing Co., Ltd. Samsung Electronics Huizhou Co., Ltd. Tianjin Samsung Electronics Co., Ltd. Beijing Samsung Telecom R&D Center Samsung Electronics Suzhou Computer Co., Ltd. Samsung R&D Institute China - Nanjing Samsung Electronics (Beijing) Service Company Limited Tianjin Samsung Opto-Electronics Co., Ltd. Samsung Electronics Egypt S.A.E Samsung Electronics Tunisia S.A.R.L Samsung Electronics Latinoamerica Miami, Inc. Samsung Electronica Colombia S.A. Samsung Electronics Panama. S.A Simpress Comercio, Locacao e Servicos S.A. Samsung Electronics Argentina S.A. Samsung Electronics Caucasus Co., Ltd Intellectual Keystone Technology LLC Samsung SDI Japan Co., Ltd. Samsung SDI America, Inc. Samsung SDI Hungary Rt. Ownership 95.9 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 70.0 100.0 49.0 100.0 100.0 100.0 100.0 100.0 100.0 40.0 2.2 100.0 25.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 25.0 25.0 11.4 99.0 11.3 100.0 19.2 100.0 100.0 100.0 100.0 12.9 10.3 40.8 100.0 26.3 100.0 100.0 8.0 0.1 1.0 100.0 100.0 100.0 100.0 2.0 0.0 41.0 100.0 91.7 100.0 Samsung Electronics Interim Business Report 150 / 173 Investor Samsung SDI Samsung SDI Samsung SDI Samsung SDI Samsung SDI Samsung SDI Samsung SDI Samsung SDI Samsung SDI Samsung SDI Samsung SDI Samsung SDI Samsung SDI Samsung SDI Samsung SDI Samsung SDI Samsung SDI Samsung SDI Samsung SDI Samsung SDI Samsung SDI Samsung SDI Samsung SDI America, Inc. Samsung SDI America, Inc. Samsung SDI(Hong Kong) Ltd. Samsung SDI(Hong Kong) Ltd. Samsung SDI(Hong Kong) Ltd. Samsung SDI(Hong Kong) Ltd. Samsung Electro-Mechanics Samsung Electro-Mechanics Samsung Electro-Mechanics Samsung Electro-Mechanics Samsung Electro-Mechanics Samsung Electro-Mechanics Samsung Electro-Mechanics Samsung Electro-Mechanics Samsung Electro-Mechanics Samsung Electro-Mechanics Samsung Electro-Mechanics Samsung Electro-Mechanics Samsung Electro-Mechanics Samsung Electro-Mechanics Samsung Electro-Mechanics Samsung Electro-Mechanics Samsung Electro-Mechanics Japan Advanced Technology Co., Ltd. Samsung Electro-Mechanics America, Inc. Calamba Premier Realty Corporation Samsung Fire & Marine Insurance Samsung Fire & Marine Insurance Samsung Fire & Marine Insurance Samsung Fire & Marine Insurance Samsung Fire & Marine Insurance Samsung Fire & Marine Insurance Samsung Fire & Marine Insurance Samsung Heavy Industries Co.,Ltd. Samsung Heavy Industries Co.,Ltd. Samsung Heavy Industries Co.,Ltd. Samsung Heavy Industries Co.,Ltd. Samsung Heavy Industries Co.,Ltd. Samsung Heavy Industries Co.,Ltd. Samsung Heavy Industries Co.,Ltd. Investee Samsung SDI Europe GmbH Samsung SDI Battery Systems GmbH Samsung SDI(Malaysia) Sdn, Bhd. Samsung SDI Vietnam Co., Ltd. Samsung SDI Energy Malaysia Sdn, Bhd. Samsung SDI(Hong Kong) Ltd. Samsung SDI China Co., Ltd. Samsung SDI-ARN (Xi'An) Power Battery Co., Ltd. Samsung SDI-Sungrow Energy Storage Battery Co., Lt Samsung SDI (Changchun) Power Battery Co., Ltd. Samsung SDI Brasil Ltda. Samsung Chemical U.S.A. Inc. Samsung Chemical Europe GmbH Samsung Chemical Hungary LLC Novaled GmbH Samsung Chemical (Thailand) Co., Ltd. Samsung Chemical Material Trading(Shanghai) Co.,Ltd. Tianjin Samsung Engineering Plastics Co., Ltd. Dongguan Samsung Engineering Plastics Co., Ltd. SAMSUNG SDI WUXI CO.,LTD. Samsung Chemical Electronic Materials (SuZhou) Co., Ltd. iMarket Asia Co., Ltd. Samsung SDI Mexico, S.A. de C.V. Samsung SDI Brasil Ltda. Shenzhen Samsung SDI Co., Ltd. Tianjin Samsung SDI Co., Ltd. Shanghai Samsung SVA Electronic Devices Co., Ltd. Samsung SDI Brasil Ltda. Samsung Electro-Machanics Japan Co., Ltd. Samsung Electro-Mechanics Japan Advanced Technology Co., Ltd. Samsung Electro-Mechanics America, Inc. SAMSUNG ELECTRO-MECHANICS GMBH Samsung Hungary Electro-Mechanics Private Limited Liability Company Samsung Electro-Mechanics(Thailand) Co., Ltd. Samsung Electro-Mechanics Philippines, Corp. Calamba Premier Realty Corporation Samsung Electro-Mechanics Pte Ltd. Samsung Electro-Mechanics Vietnam Co., Ltd. Dongguan Samsung Electro-Mechanics Co., Ltd. Tianjin Samsung Electro-Mechanics Co., Ltd. Samsung High-Tech Electro-Mechanics(Tianjin) Co., Ltd. Samsung Electro-Mechanics (Shenzhen) Co., Ltd. Kunshan Samsung Electro-Mechanics Co., Ltd. iMarket Asia Co., Ltd. Samsung Electro-Mechanics Nakhonratchasima Co., Ltd. Samsung Electro-Mechanics do Brasil Intermediacoes de Negocios Ltda. Batino Realty Corporation SAMSUNG FIRE & MARINE MANAGEMENT CORPORATION SAMAUNG FIRE & MARINE INSURANCE COMPANY OF EUROPE P.T. Asuransi Samsung Tugu Samsung Vina Insurance Co. Ltd. SAMSUNG REINSURANCE PTE. LTD Samsung Property and Casualty Insurance Co(China) Ltd. SAMSUNG FIRE & MARINE CONSULTORIA EM SEGUROS LTDA. Camellia Consulting Corporation Samsung Wind Energy,Inc Offshore 1 consulting Corporation Samsung heavy Industries Hamburg GmbH Samsung Heavy Industries India Pvt.Ltd. SAMSUNG HEAVY INDUSTRIES (M) SDN.BHD Samsung Heavy Industries(Ningbo) Co., Ltd Ownership 100.0 100.0 68.6 100.0 100.0 97.6 100.0 50.0 65.0 50.0 45.0 100.0 100.0 100.0 50.1 59.4 100.0 100.0 100.0 100.0 100.0 8.7 100.0 40.4 80.0 80.0 60.3 14.5 100.0 100.0 100.0 100.0 100.0 75.0 100.0 39.8 100.0 100.0 100.0 81.7 95.0 100.0 100.0 8.7 100.0 100.0 100.0 100.0 100.0 70.0 75.0 100.0 100.0 100.0 100.0 100.0 51.0 100.0 100.0 100.0 100.0 Samsung Electronics Interim Business Report 151 / 173 Investor Samsung Heavy Industries Co.,Ltd. Samsung Heavy Industries Co.,Ltd. Samsung Heavy Industries Co.,Ltd. Samsung Heavy Industries Co.,Ltd. Samsung Heavy Industries Co.,Ltd. Samsung Heavy Industries Co.,Ltd. Offshore 1 consulting Corporation SAMSUNG HEAVY INDUSTRIES NIGERIA LIMITED Samsung Life Insurance Samsung Life Insurance Samsung Life Insurance Samsung Life Insurance Samsung Life Insurance Samsung Asset Management Samsung Asset Management Samsung Asset Management 30 GRESHAM STREET(JERSEY) LIMITED Samsung Chemical U.S.A. Inc. CHEIL INDUSTRIES ITALY SRL Samsung Chemical (Thailand) Co., Ltd. Samsung Welstory Samsung Welstory Credu PengTai Greater China Co., Ltd. PengTai Greater China Co., Ltd. PengTai Greater China Co., Ltd. PengTai China Co., Ltd. PengTai China Co., Ltd. PengTai Interactive Advertising Co.,Ltd. iMarket Asia Co., Ltd. Samsung Fine Chemicals Samsung Fine Chemicals Samsung Securities Samsung Securities Samsung Securities Samsung SDS Samsung SDS Samsung SDS Samsung SDS Samsung SDS Samsung SDS Samsung SDS Samsung SDS Miracom Samsung SDS America, Inc. Samsung SDS America, Inc. Samsung SDS America, Inc. Samsung SDS America, Inc. Samsung SDS America, Inc. Samsung SDS America, Inc. Samsung SDS Europe Ltd. Samsung SDS Europe Ltd. Samsung SDS Europe Ltd. Samsung SDS Europe Ltd. Samsung SDS Europe Ltd. Samsung SDS Europe Ltd. Samsung SDS Europe Ltd. Samsung SDS Europe Ltd. Samsung SDS Europe Ltd. Samsung SDS Global SCL Netherlands Cooperatief U.A Samsung SDS Global SCL Netherlands Cooperatief U.A Investee Samsung Heavy Industries(Rongcheng) Co., Ltd Rongcheng Gaya Heavy Industries Co., Ltd Samsung Heavy Industries Trade(Shanghai) Co., Ltd SAMSUNG HEAVY INDUSTRIES NIGERIA LIMITED SANGSUNG HEAVY INDUSTRIES BRAZIL ASSESSORIA EM PRO SHI BRAZIL CONSTRUCTION AMEC Samsung Oil&Gas, LLC SHI - MCI FZE Porta Nuova Varesine Building 2 S.r.l. Samsung Life Investment (U.K.) Limited. 30 GRESHAM STREET(JERSEY) LIMITED THAI SAMSUNG LIFE INSURANCE CO., LTD. Beijing Samsung Real Estate Co.. Ltd Samsung Asset Management (New York), Inc. Samsung Private Equity Manager I Co., Ltd Samsung Asset Management (Hong Kong) Ltd. 30 GRESHAM STREET (SINGAPORE) LIMITED Stacom Mexico S.A. de C.V.. COLOMBO VIA DELLA SPIGA S.R.L Samsung Engineering (Thailand) Co., Ltd. WELSTORY VIETNAM COMPANY LIMITED Shanghai Ever-Hongjun Business Mgt Service Co.,LTD LANGUAGE TESTING INTERNATIONAL, INC PengTai China Co., Ltd. PengTai Taiwan Co., Ltd. PengTai Interactive Advertising Co.,Ltd. PengTai e-Commerce Co.,Ltd. PengTai Marketing Service Co., Ltd. MEDIALYTICS Inc. iMarket China Co., Ltd. Samsung Fine Chemicals Europe GmbH Samsung Fine Chemicals Trading (Shanghai) Co., Ltd Samsung Securities (America), Inc. Samsung Securities (Europe) Limited. Samsung Securities (Asia) Limited. iMarket Asia Co., Ltd. Samsung SDS America, Inc. Samsung SDS Europe Ltd. Samsung SDS Global SCL Netherlands Cooperatief U.A Samsung SDS Asia Pacific Pte. Ltd. Samsung SDS India PVt. Ltd. Samsung SDS China, Ltd. Samsung SDS Latin America Solucoes Em Tecnologia Ltda MIRACOM INC ASIA PACIFIC LTD SAMSUNG SDS LATIN AMERICA SOLUCOES EM TECNOLOGIA L Samsung SDS Mexico, S.A. DE C.V. Samsung SDS Global SCL Panama S. A. Samsung SDS Global SCL Chile Limitada Samsung SDS Global SCL Peru S.A.C. Samsung SDS Global SCL Colombia S.A.S. Samsung SDS Global SCL Hungary Kft. Samsung SDS Global SCL Slovakia, s.r.o. SAMSUNG SDS GSCL POLAND Samsung SDS Global SCL Netherlands Cooperatief U.A SAMSUNG SDS Global SCL Egypt Co. Ltd. Samsung SDS global SCL South Africa Samsung SDS Global SCL Transport and Logistics Joint Stock Company Samsung SDS Global Supply Chain Logistics Middle East DWC-LLC Samsung SDS Global SCL Rus Limited Liability Company SAMSUNG SDS GSCL POLAND Samsung SDS Global SCL Rus Limited Liability Company Ownership 100.0 100.0 100.0 100.0 100.0 100.0 51.0 70.0 51.0 100.0 100.0 35.8 90.0 100.0 100.0 100.0 100.0 100.0 100.0 19.0 100.0 51.0 82.4 100.0 100.0 100.0 100.0 100.0 51.0 80.0 100.0 100.0 100.0 100.0 100.0 40.6 100.0 100.0 100.0 100.0 100.0 100.0 99.7 100.0 0.3 99.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 0.0 100.0 100.0 100.0 100.0 100.0 0.0 0.0 Samsung Electronics Interim Business Report 152 / 173 Investor Samsung SDS Asia Pacific Pte. Ltd. Samsung SDS Asia Pacific Pte. Ltd. Samsung SDS Asia Pacific Pte. Ltd. Samsung SDS Asia Pacific Pte. Ltd. Samsung SDS Asia Pacific Pte. Ltd. Samsung SDS Asia Pacific Pte. Ltd. Samsung SDS Asia Pacific Pte. Ltd. Samsung SDS China, Ltd. Samsung SDS China, Ltd. MIRACOM INC ASIA PACIFIC LTD Samsung Engineering Samsung Engineering Samsung Engineering Samsung Engineering Samsung Engineering Samsung Engineering Samsung Engineering Samsung Engineering Samsung Engineering Samsung Engineering Samsung Engineering Samsung Engineering Samsung Engineering Samsung Engineering Samsung Engineering Samsung Engineering Samsung Engineering Samsung Engineering Samsung Engineering Samsung Engineering Samsung Engineering America Inc. Samsung Engineering America Inc. Samsung Engineering (Malaysia) SDN. BHD. Samsung Engineering (Thailand) Co., Ltd. Samsung Engineering India Private Ltd. Samsung Saudi Arabia Company Limited. Muharraq Holding Company 1 Ltd. Muharraq Holding Company 2 Ltd. S1 Corporation S1 Corporation Cheil Worldwide Cheil Worldwide Cheil Worldwide Cheil Worldwide Cheil Worldwide Cheil Worldwide Cheil Worldwide Cheil Worldwide Cheil Worldwide Cheil Worldwide Cheil Worldwide Cheil Worldwide Cheil Worldwide Cheil Worldwide Cheil Worldwide Cheil Worldwide Cheil Worldwide Cheil Worldwide Cheil Worldwide Cheil Worldwide Cheil Worldwide Investee Samsung SDS GSCL Vietnam Co Ltd PT. Samsung SDS Global SCL Indonesia Samsung SDS Global SCL Philippines Co., Ltd. Samsung SDS Global SCL Thailand Co.,Ltd Samsung SDS Global SCL Malaysia SDN.BHD. SAMSUNG SDS GLOBAL SCL AUSTRALIA PTY., LTD. Samsung SDS Global SCL Hong Kong Ltd Samsung SDS Global Development Center Xi'an Samsung SDS Global SCL Beijing Co., Ltd MIRACOM INC CHINA LTD Offshore 1 consulting Corporation Samsung Engineering America Inc. Samsung Engineering (Malaysia) SDN. BHD. PT Samsung Engineering Indonesia Co., Ltd. Samsung Engineering (Thailand) Co., Ltd. Samsung Engineering India Private Ltd. Samsung Engineering Vietnam Samsung Engineering Construction(Shanghai) Co., Lt Samsung Saudi Arabia Company Limited. Muharraq Wastewater Services Company W.L.L. Muharraq STP Company B.S.C. Muharraq Holding Company 1 Ltd. Samsung Ingenieria Minatitlan, S.A. De C.V. Samsung Engineering Trinidad Co., Ltd. Samsung Ingenieria Manzanillo, S.A. De C.V. Grupo Samsung Ingenieria Mexico, S.A. De C.V. Samsung Ingenieria Energia S.A. De C.V. Samsung Engineering Bolivia S.A Samsung Ingenieria DUBA S.A. de C.V. Samsung Engineering Kazakhstan LLP SEA Construction, LLC SEA Louisiana Construction, L.L.C. Muharraq Wastewater Services Company W.L.L. Samsung Chemical (Thailand) Co., Ltd. Samsung Saudi Arabia Company Limited. Samsung EPC Company Ltd. Muharraq Holding Company 2 Ltd. Muharraq STP Company B.S.C. SOCM LLC Samsung Beijing Security Systems Cheil USA Inc. Cheil Central America Inc. IRIS Worldwide Holdings Limited Cheil Europe Ltd. Cheil Germany GmbH Cheil France SAS Cheil Nordic AB Cheil India Pvt. Ltd. Cheil (Thailand) Ltd. Cheil Singapore Pte. Ltd. Cheil Vietnam Co. Ltd. Cheil Integrated Marketing Philippines, Inc. Cheil Malaysia SDN BHD Cheil China Cheil Hong Kong Ltd. Bravo Asia Limited Bravo Asia-Shanghai Cheil MEA FZ-LLC Cheil South Africa Pty., Ltd. CHEIL KENYA LIMITED Cheil Communications Nigeria Ltd. Ownership 51.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 49.0 100.0 100.0 100.0 81.0 100.0 100.0 100.0 95.0 64.8 4.6 45.0 99.9 100.0 99.9 100.0 100.0 99.9 100.0 100.0 100.0 100.0 0.3 40.6 5.0 75.0 100.0 79.7 100.0 100.0 100.0 100.0 71.1 100.0 100.0 100.0 100.0 100.0 100.0 100.0 90.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 99.0 99.0 Samsung Electronics Interim Business Report 153 / 173 Investor Cheil Worldwide Cheil Worldwide Cheil Worldwide Cheil Worldwide Cheil Worldwide Cheil Worldwide Cheil Worldwide Cheil Worldwide Hotel Shilla Hotel Shilla Hotel Shilla Hotel Shilla Hotel Shilla Hotel Shilla Hotel Shilla Cheil USA Inc. Cheil USA Inc. Cheil USA Inc. Cheil USA Inc. Samsung Hospitality America Inc. Cheil Europe Ltd. Cheil Europe Ltd. Cheil Europe Ltd. Cheil Europe Ltd. Cheil Germany GmbH Cheil (Thailand) Ltd. Cheil Singapore Pte. Ltd. Cheil Singapore Pte. Ltd. Cheil Integrated Marketing Philippines, Inc. Cheil Hong Kong Ltd. Cheil MEA FZ-LLC Cheil MEA FZ-LLC Cheil South Africa Pty., Ltd. Cheil South Africa Pty., Ltd. One Agency FZ LLC One Agency FZ LLC One Agency FZ LLC One Agency FZ LLC One Agency FZ LLC Cheil Rus LLC Investee Cheil Jordan Cheil Ghana Limited Cheil Brazil Communications Ltda. Cheil Mexico Inc. SA de CV Cheil Chile SpA. Cheil Rus LLC Cheil Ukraine LLC Cheil Kazakhstan LLC Samsung Hospitality America Inc. SAMSUNG HOSPITALITY U.K. Limited Shilla Travel Retail Pte.Ltd SAMSUNG HOSPITALITY VIETNAM CO.,LTD SHILLA LIMITED Macao Samsung Shilla Business Service Beijing Co., Ltd. SHILLA LIMITED Hong Kong The Barbarian Group LLC McKinney Ventures LLC Cheil India Pvt. Ltd. Cheil Mexico Inc. SA de CV Samsung Hospitality Europe GmbH BEATTIE MCGUINNESS BUNGAY LIMITED Cheil Italia S.r.l CHEIL SPAIN S.L CHEIL BENELUX B.V. Cheil Austria GmbH Samsung Chemical (Thailand) Co., Ltd. PengTai Greater China Co., Ltd. PT. CHEIL WORLDWIDE INDONESIA Cheil Philippines Inc. PengTai Greater China Co., Ltd. One Agency FZ LLC One Agency Istanbul Advertisement, Communication &Production LLC CHEIL KENYA LIMITED Cheil Communications Nigeria Ltd. One Agency Istanbul Advertisement, Communication &Production LLC One Agency Interior Design LLC One Agency Printing LLC One Agency South Africa Pty., Ltd. One Agency Russia LLC One Agency Russia LLC Ownership 100.0 100.0 100.0 98.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 0.0 2.0 100.0 75.0 100.0 100.0 100.0 100.0 0.0 95.0 100.0 30.0 3.1 100.0 0.0 1.0 1.0 100.0 100.0 100.0 100.0 99.9 0.1 Samsung Electronics Interim Business Report 154 / 173 C. Related Statute & Regulation Restrictions on cross-holdings within Samsung Group in accordance with the Monopoly Regulation and Fair Trade Act (1) Date of announcement by authorities of companies deemed Samsung Group companies for the current year: April 1, 2015 (2) Summary of Regulation - Restriction of cross-holdings - Restriction of debt guarantee between affiliates - Restriction of voting rights at financial affiliates, including insurance - Decision by board committee and public disclosure of large-scale related party transactions - Public disclosure of important matters of unlisted companies - Other public disclosures related to Group status Samsung Electronics Interim Business Report 155 / 173 D. Equity Investments in other corporations (1) The total book value of equity investments in other corporations as of September 30, 2015 is KRW 46,279 billion [As of September 30, 2015] (Unit: 1,000 shares, KRW million, %) Account Name of Acquisition Company Date Objective Acquisition Cost Listed Listed Listed Unlisted Samsung ElectroMechanics Samsung Card Hanwha Techwin STECO 1977.01 1988.12 1977.12 1995.06 Management Management Management Business 250 10,000 336 24,000 Beginning Balance Increase/Decrease Qty Ownership (%) 17,693 23.69 Book Value Acquisition/Disposal Valuation Qty Amount 445,244 0 0 43,393 37.45 1,455,485 0 0 13,527 25.46 235,638 -13,527 -235,638 0 2,448 51.00 32,724 142 3,137 0 Ending Balance Current Financial Stats Qty Ownership (%) 17,693 23.69 Book Value Total Asset Net Income (Loss) 445,244 7,718,612 508,912 43,393 0 2,590 37.45 1,455,485 17,736,627 656,025 0 0 3,601,728 -118,182 70.00 35,861 93,819 4,532 Unlisted SEMES 1992.12 Business 1,000 2,173 91.54 71,906 0 0 2,173 91.54 71,906 692,721 39,080 Unlisted SERI 1991.05 Management 320 3,576 29.80 24,942 0 Unlisted Samsung SDS 1992.07 Management 6,160 17,472 22.58 560,827 0 Domestic* Unlisted Samsung Lions 1986.08 Management 240 55 27.50 -102 0 Samsung Unlisted Electronics 1998.01 Business 30,000 6,000 99.33 48,121 0 Service Samsung Unlisted Electronics Sales 2000.12 Business 3,100 1,767 100.00 247,523 0 Samsung Unlisted Electronics Logitech 1999.04 Business 76 1,011 100.00 46,669 0 0 3,576 0 17,472 0 55 0 6,000 29.80 22.58 27.50 24,942 130,715 252 560,827 5,546,045 434,273 -102 61,737 -17,141 99.33 48,121 330,184 12,524 0 1,767 100.00 247,523 603,933 1,662 0 1,011 100.00 46,669 150,390 8,940 Unlisted Samsung Display 2012.04 Business 16,009,547 221,969 84.78 18,509,307 0 Domestic account noted here reflects approved for sales securities 0 221,969 84.78 18,509,307 37,939,965 1,698,239 Samsung Electronics Interim Business Report 156 / 173 Account Unlisted Name of Company SVIC #6 Acquisition Date 2005.07 Objective Business Acquisition Cost 26,800 Beginning Balance Increase/Decrease Qty Ownership (%) Book Value Acquisition/Disposal Valuation Qty Amount 0 99.00 2,277 0 -2,277 0 Ending Balance Current Financial Stats Qty Ownership (%) 0 0.00 Book Value Total Asset 0 42,633 Net Income (Loss) 458 Unlisted SVIC #14 2009.05 Business 18,000 0 99.00 0 0 0 0 99.00 0 57,146 2,434 Unlisted SVIC #21 2011.11 Business 19,800 2 99.00 150,634 0 6,633 0 2 99.00 157,267 130,290 -4,984 Unlisted SVIC #22 2011.11 Business 19,800 2 99.00 155,796 0 0 2 99.00 155,796 145,501 -43 Unlisted SVIC #26 2014.11 Business 19,800 0 99.00 19,800 0 45,441 0 0 99.00 65,241 20,057 -699 Unlisted SVIC #27 2014.09 Business 5,940 0 99.00 5,940 0 2,772 0 0 99.00 8,712 5,898 -483 Unlisted SVIC #28 2015.02 Business 7,425 0 Domestic* Unlisted Samsung Medison Unlisted Samsung BioLogics Unlisted Listed Listed Intellectual Discovery Samsung Heavy Industries Samsung Fine Chemicals 2011.02 2011.04 2011.05 1977.09 1995.05 Business Management Management Management Management 286,384 87,350 30,000 9,298 5,000 1,784 125 40,676 1,346 2,165 Listed Hotel Shilla 1979.12 Management 252 2,005 Listed Cheil Worldwide 1988.09 Management 185 14,499 Listed A-Tech Solution 2009.11 Management 26,348 1,592 Domestic account noted here reflects approved for sales securities 0.00 0 0 27,225 0 0 68.45 477,648 0 45.65 412,065 3,601 133,600 0 87,350 0 12,899 15.71 5,241 0 0 1,784 17.61 811,479 0 -311,169 40,676 8.39 70,795 0 5.11 183,231 0 12.60 249,378 0 15.92 7,578 0 16,346 2,165 47,311 2,005 14,499 14,499 1,465 1,592 99.00 27,225 0 0 68.45 477,648 326,260 8,817 46.79 545,665 1,357,295 -83,939 15.71 5,241 44,353 -7,792 17.61 500,310 17,122,234 147,320 8.39 87,140 1,845,960 58,683 5.11 230,542 1,907,452 73,483 12.60 263,877 1,843,852 102,022 15.92 9,043 184,201 490 Samsung Electronics Interim Business Report 157 / 173 Account Listed Name of Company Acquisition Date Objective Acquisition Cost iMarket Korea 2000.12 Management 1,900 Beginning Balance Increase/Decrease Qty Ownership (%) 647 1.80 Book Value Acquisition/Disposal Valuation Qty Amount 18,384 0 647 Ending Balance Qty Ownership (%) Book Value Current Financial Stats Net Total Asset Income (Loss) 647 1.80 19,031 1,090,486 44,140 Listed KT Skylife 2001.12 Management 3,344 240 0.50 4,404 0 480 240 0.50 4,884 683,009 55,162 Listed Samsung SDI 1977.01 Management 304 13,463 19.58 1,561,670 0 -100,970 13,463 19.58 1,460,700 15,968,550 -80,314 Listed Wonik IPS Unlisted Hanwha General Chemicals Unlisted SSLM Unlisted Domestic* Unlisted Kihyup Technology Banking Pusan Newport 2013.12 1988.07 2012.04 1995.01 1997.09 Business Management Management Management Management Unlisted Unlisted The Korea Economic Daily Samsung Venture Investment Unlisted Cyber Bank 1987.05 1999.11 2000.12 Management Management Management 31,625 3,610 1,500 3,017 52,296 4,378 5,000 1,000 590 1,135 150 72 4,900 980 8,000 1,083 4.48 50,361 0 -17,365 3,610 5.29 100,051 -3,017 -100,051 0 0 18.24 0 0 0 4,378 17.24 5,000 0 0 1,000 0.98 5,677 0 0.39 365 0 0 1,135 0 72 16.33 6,586 0 0 980 7.46 0 0 0 1,083 4.48 32,996 658,929 57,128 0.00 0 2,245,888 -23,537 12.16 0 177,022 -46,587 17.24 5,000 91,722 762 0.98 5,677 680,228 50,481 0.39 365 289,901 15,395 16.33 6,586 67,044 3,274 7.46 0 0 0 Unlisted FineChips 2001.12 Management 10 2 3.81 10 0 0 2 3.81 10 3,653 707 Unlisted SK Telink 2010.11 Management 4,357 15 1.13 4,357 0 0 15 1.13 4,357 253,332 16,093 Unlisted Inkel 2006.11 Management 130 0 0.00 0 0 Unlisted Yongpyong Resort 2007.05 Management 1,869 400 1.05 1,869 0 Domestic account noted here reflects approved for sales securities 0 0 0 400 0.00 0 153,629 974 1.05 1,869 734,627 12,019 Samsung Electronics Interim Business Report 158 / 173 Account Unlisted Unlisted Unlisted Name of Company E-SCOM Sambo Computer Icube #1 Acquisition Date Objective Acquisition Cost 2007.12 Management 0 Beginning Balance Increase/Decrease Qty Ownership (%) 0 0.01 Book Value Acquisition/Disposal Valuation Qty Amount 0 0 0 Ending Balance Qty Ownership (%) Book Value Current Financial Stats Net Total Asset Income (Loss) 0 0.01 0 14,329 -7,482 2012.09 Management 0 0 0.01 0 0 0 0 0.01 0 37,940 1,467 2009.12 Management 4,000 0 16.23 4,000 0 0 0 16.23 4,000 22,756 -1,648 Unlisted KT Wibro 2010.07 Management 60,000 600 24.2 60,000 0 Unlisted Shinsung Eng & Construction 2010.07 Management 1 0 0.01 0 0 Unlisted Unlisted Domestic* Unlisted Unlisted Unlisted Unlisted Woobang Heehoon Design & Global Daewoo Development Daewoo Songdo Development Zyle Motor Sales Woojung Construction 2010.07 Management 2010.07 Management 2012.12 Management 2012.12 Management 2012.12 Management 2014.04 Withdrawal 0 1 0.00 0 2 0.02 0 0 0.02 0 9 0.02 0 1 0.00 0 5 0.35 0 0 0 0 0 0 0 0 0 0 0 0 Unlisted Hyunjin 2014.04 Withdrawal 0 23 0.25 Unlisted Unlisted Sungwon Construction Inhee 2014.04 2014.04 Withdrawal Withdrawal 0 1 0.03 0 2 0.17 Unlisted Samsung Solution 2014.04 Withdrawal 0 4 6.70 Domestic account noted here reflects approved for sales securities 0 0 0 0 0 0 0 0 0 600 0 0 0 1 0 2 0 0 0 9 0 1 0 5 0 23 0 1 0 2 0 4 24.2 60,000 266,331 3,545 0.01 0 58,865 425 0.00 0 159,892 7,234 0.02 0 42,516 -8,168 0.02 0 143,190 -14,700 0.02 0 1,216,605 -7,984 0.00 0 292,265 3,083 0.35 0 23,920 -6,902 0.25 0 44,332 2,004 0.03 0 34,337 -1,733 0.17 0 11,239 -2,034 6.70 0 11,713 173 Samsung Electronics Interim Business Report 159 / 173 Account Unlisted Unlisted Name of Company STX Construction Poonglim Acquisition Date Objective Acquisition Cost 2014.04 Withdrawal 0 2014.05 Withdrawal 0 Beginning Balance Increase/Decrease Qty Ownership (%) 0 0.01 Book Value Acquisition/Disposal Valuation Qty Amount 0 0 0 52 0.37 0 0 0 Ending Balance Current Financial Stats Qty Ownership (%) 0 0.01 Book Value 0 Total Asset 199,475 Net Income (Loss) -14,036 52 0.37 0 405,404 32,142 Unlisted SamGong Development 2014.1 debt-equity swap 0 0 0.09 0 0 0 0 0.09 0 180,549 -4,186 Unlisted JNT Unlisted Unlisted SV Seoul Investment Partners Unlisted Daishin Aju IB 2011.02 2011.02 2011.1 2011.08 Investment Investment Investment Investment 1,800 1,850 1,550 258 0 24.00 3,360 0 14.85 3,403 0 19.38 2,872 0 3.00 1,898 0 -240 0 -215 0 -135 0 -325 0 0 24.00 3,120 14,579 417 0 0 14.85 3,188 19,433 -469 0 0 19.38 2,737 17,978 323 0 0 3.00 1,574 63,869 7,656 Domestic* Unlisted TS 2011.11 Investment Unlisted IMM 2011.11 Investment Unlisted L&S 2012.07 Investment Unlisted Taewon Electric 2012.04 Management Unlisted Pantech 2013.06 Business 1,700 0 760 0 848 0 16,544 45 53,000 53,000 20.32 7.60 7.46 15.00 10.03 2,682 3,294 2,848 17,094 0 0 0 -720 0 -75 0 0 0 0 0 0 0 0 0 45 0 53,000 20.32 7.60 7.46 15.00 10.03 2,682 2,574 2,773 17,094 0 13,470 -128 44,114 342 33,885 -5,301 64,677 1,478 279,464 -249,327 Unlisted KTCNP-GC 2013.12 Business 960 Unlisted Unlisted Postech Technology Investment High Pioneer Private Investment Trust #1 2013.12 2011.09 Business Business 600 29,244 Domestic account noted here reflects approved for sales securities 0 3.56 918 0 10.00 600 0 100.00 19,470 0 3,164 0 0 -19,470 0 0 3.56 4,082 24,289 -869 0 0 10.00 600 175,836 3,625 0 0 0.00 0 19,179 -303 Samsung Electronics Interim Business Report 160 / 173 Account Name of Acquisition Company Date Objective Acquisition Cost Unlisted SECA 1992.08 Position Security 3,823 Beginning Balance Increase/Decrease Qty Ownership (%) 0 100.00 Book Value Acquisition/Disposal Valuation Qty Amount 90,922 0 0 Ending Balance Qty Ownership Book (%) Value Current Financial Stats Total Asset Net Income (Loss) 0 100.00 90,922 529,348 -515 Unlisted SEA 1978.07 Position Security 59,362 492 100.00 5,027,880 0 623,315 0 492 100.00 5,651,195 10,697,787 -80,403 Unlisted SELA 1989.04 Position Security 319 40 100.00 86,962 0 0 40 100.00 86,962 347,502 571 Unlisted SEM 1995.07 Position Security 3,032 3,837 63.58 165,638 0 0 3,837 63.58 165,638 795,138 -245,143 Unlisted SEASA 1996.06 Position Security 4,696 21,854 Unlisted SEDA Unlisted Int'l* Unlisted Unlisted SECH Nvelo, Inc. CMLA LLC 1994.01 2002.12 2012.12 2008.02 Position Security Position Security Position Security Management 13,224 62,816,336 597 0 42,892 100 654 0 Unlisted SESA 1989.01 Position Security 3,276 8,021 Unlisted SENA Unlisted SEH Unlisted SEP Unlisted SEF Unlisted SEUK Unlisted SEHG 1992.03 1991.05 1982.09 1991.08 1995.07 1982.02 Position Security Position Security Position Security Position Security Position Security Position Security 392 1,954 204 230 33,908 28,042 1,000 753 1,751 2,700 109,546 0 * International account noted here reflects approved for sales securities 98.00 6,779 0 87.04 577,483 14,389,373 70,137 4.10 597 0 100.00 42,892 -100 -42,892 25.00 4,115 0 -4,115 100.00 142,091 0 100.00 69,372 0 100.00 650,157 0 100.00 37,616 0 100.00 234,115 0 100.00 433,202 0 100.00 354,846 0 0 21,854 0 77,205,709 0 0 0 0 0 0 0 8,021 0 1,000 0 753 0 1,751 0 2,700 0 109,546 0 0 98.00 6,779 52,003 5,937 87.04 647,620 3,797,166 887,715 4.10 597 262,414 -8,240 0.00 0 1,774 225 0.00 0 0 0 100.00 142,091 665,617 19,153 100.00 69,372 467,393 39,396 100.00 650,157 1,287,972 109,549 100.00 37,616 136,282 6,198 100.00 234,115 1,031,342 44,771 100.00 433,202 1,235,239 72,231 100.00 354,846 840,716 84,393 Samsung Electronics Interim Business Report 161 / 173 Account Name of Company Acquisition Date Objective Acquisition Cost Beginning Balance Qty Ownership (%) Book Value Unlisted SEAG 2002.01 Position Security 40 0 Unlisted SEI 1993.05 Position Security 862 677 Unlisted SEBN 1995.07 Position Security 236 530,589 Unlisted SELS 1991.05 Position Security 18,314 1,306 Unlisted SEPOL 1996.04 Position Security 5,462 106 Unlisted SSA 1998.12 Position Security 263 2,000 Unlisted Int'l* Unlisted SESK SEEH 2002.06 2008.01 Position Security Position Security 8,976 0 4,214 0 Unlisted SEO 1997.01 Position Security 120 0 Unlisted SRSC 1997.11 Position Security 707 0 Unlisted Unlisted Unlisted Unlisted Unlisted SERC SERK SEAU SEMA SGE 2006.01 2007.07 1987.11 1989.09 1995.05 Position Security Position Security Position Security Position Security Position Security 24,877 0 4,600 0 392 53,200 4,378 16,247 827 0 * International account noted here reflects approved for sales securities 100.00 32,162 100.00 143,181 100.00 904,308 100.00 24,288 100.00 78,267 100.00 32,622 55.68 263,767 100.00 1,369,992 100.00 -10,043 100.00 8,211 100.00 100.00 100.00 100.00 100.00 180,079 204,555 111,964 153,602 32,836 Increase/Decrease Acquisition/Disposal Valuation Qty Amount 0 0 0 0 8,549 10,443 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Ending Balance Qty Ownership (%) Book Value 0 100.00 32,162 677 100.00 143,181 539,138 100.00 914,751 1,306 100.00 24,288 106 100.00 78,267 2,000 100.00 32,622 0 55.68 263,767 0 100.00 1,369,992 0 100.00 -10,043 0 0 0 53,200 16,247 0 100.00 8,211 100.00 100.00 100.00 100.00 100.00 180,079 204,555 111,964 153,602 32,836 Current Financial Stats Total Asset Net Income (Loss) 290,346 9,100 759,637 107,593 1,207,723 30,404 1,621,583 38,209 419,043 38,817 712,489 -38,887 1,869,697 142,416 7,022,746 93,605 176,271 57 29,243 796,220 785,584 437,351 129,214 921,338 1,664 31,587 88,557 -48,132 28,018 -66,153 Samsung Electronics Interim Business Report 162 / 173 Account Name of Company Acquisition Date Objective Acquisition Cost Beginning Balance Qty Ownership (%) Book Value Unlisted SEEG 2012.07 Position Security 23 0 Unlisted SEIN 1991.08 Position Security 7,463 46 Unlisted SDMA 1995.03 Position Security 21,876 71,400 Unlisted SIEL 1995.08 Position Security 5,414 216,787 Unlisted SRI-B 2005.05 Position Security 7,358 17 Unlisted SAVINA 1995.01 Position Security 5,839 0 Unlisted TSE Int'l* Unlisted STE 1988.01 1996.01 Position Security Position Security 1,390 11,020 4,206 2,499 Unlisted SME 2003.05 Position Security 4,796 17,100 Unlisted SAPL 2006.07 Position Security 793 741,378 Unlisted Unlisted Unlisted Unlisted Unlisted SEHK SET SESS SCIC SEHZ 1988.09 1994.11 1994.12 1996.03 1992.12 Position Security Position Security Position Security Position Security Position Security 349 274,250 456 27,270 18,875 0 23,253 0 792 0 * International account noted here reflects approved for sales securities 0.05 39 99.99 118,909 75.00 244,382 100.00 75,263 100.00 31,787 100.00 28,365 91.83 279,163 49.00 4,474 100.00 7,644 100.00 870,623 100.00 100.00 100.00 100.00 89.56 79,033 112,949 504,313 617,941 255,535 Increase/Decrease Acquisition/Disposal Valuation Qty Amount 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 135,755 110,860 0 0 0 0 0 0 0 0 0 0 0 Ending Balance Qty Ownership (%) Book Value 0 0.05 39 46 99.99 118,909 71,400 75.00 244,382 216,787 100.00 75,263 17 100.00 31,787 0 100.00 28,365 11,020 91.83 279,163 2,499 49.00 4,474 17,100 100.00 7,644 877,133 274,250 27,270 0 0 0 100.00 981,483 100.00 100.00 100.00 100.00 89.56 79,033 112,949 504,313 617,941 255,535 Current Financial Stats Total Asset Net Income (Loss) 512,426 44,697 806,451 147,666 278,239 38,955 2,949,605 428,757 190,104 24,805 219,356 43,367 1,654,988 202,647 6,159 100 328,645 3,473 3,110,433 1,057,873 984,732 1,583,027 749,914 9,603,679 4,966,486 20,662 44,559 64,345 162,677 829,880 Samsung Electronics Interim Business Report 163 / 173 Account Name of Company Acquisition Date Objective Acquisition Cost Unlisted SSEC 1995.04 Position Security 32,128 Beginning Balance Increase/Decrease Qty Ownership (%) 0 69.06 Book Value Acquisition/Disposal Valuation Qty Amount 130,551 0 0 Unlisted TSEC 1993.04 Position Security 15,064 0 48.20 138,101 0 0 Unlisted SSDP 1993.08 Position Security 4,446 0 87.10 65,319 0 0 Unlisted TSTC 2001.03 Position Security 10,813 0 90.00 490,041 0 0 Unlisted SSTC 2001.11 Position Security 15,799 0 100.00 -1,186 0 23,698 0 Unlisted SSET 2002.02 Position Security 6,009 0 95.00 121,624 0 0 Unlisted Int'l* SESC 2002.09 Position Security 5,471 0 73.70 34,028 0 0 Unlisted SSS 2001.01 Position Security 1,200 0 100.00 19,189 0 0 Unlisted SEHF 2004.04 Position Security 17,204 0 100.00 53,869 0 -53,869 0 Unlisted SSCR 2006.09 Position Security 3,405 0 100.00 9,332 0 0 Unlisted TSOE 2010.04 Position Security 33,837 0 82.00 93,154 0 0 Unlisted TSLED 2012.04 Position Security 119,519 0 100.00 119,519 0 0 Unlisted SCS 2012.09 Position Security 111,770 0 100.00 2,712,096 0 0 Unlisted SJC 1975.12 Position Security 273 1,560 100.00 370,647 0 0 Unlisted SRJ 1992.08 Position Security 3,120 122 100.00 117,257 0 0 * International account noted here reflects approved for sales securities Ending Balance Qty Ownership (%) Book Value 0 69.06 130,551 Current Financial Stats Total Asset Net Income (Loss) 689,430 99,282 0 48.20 138,101 933,487 140,983 0 87.10 65,319 777,128 136,272 0 90.00 490,041 2,316,054 510,357 0 100.00 22,512 124 -3,478 0 95.00 121,624 146,482 13,509 0 73.70 34,028 812,755 66,091 0 100.00 19,189 2,560,852 125,239 0 0.00 0 108,183 -2,549 0 0 0 0 1,560 122 100.00 9,332 20,548 3,257 82.00 93,154 177,394 100.00 119,519 411,558 100.00 2,712,096 6,765,278 100.00 370,647 831,649 100.00 117,257 160,614 17,427 27,308 166,754 5,690 3,625 Samsung Electronics Interim Business Report 164 / 173 Account Name of Company Acquisition Date Objective Acquisition Cost Beginning Balance Qty Ownership (%) Book Value Increase/Decrease Acquisition/Disposal Valuation Qty Amount Unlisted TSST Japan 2004.03 Management 1,639 30 49.03 0 0 0 Ending Balance Current Financial Stats Qty Ownership (%) Book Value Total Asset Net Income (Loss) 30 49.03 0 234,785 -24,594 Unlisted SDIB 1996.09 Management 3,110 586 0.08 0 0 Unlisted Semiconductor Portal 2002.12 Management 38 0 1.21 10 0 Unlisted FTS 2008.12 Management 1,952 116 41.50 563 0 0 586 0.08 0 0 1.21 0 116 41.5 0 29,290 10 1,255 563 2,371 2,294 3 -128 Unlisted Nanosys, Inc 2010.08 Management 4,774 1,747 1.49 2,387 0 Unlisted ONE BLUE LLC 2011.07 Management 1,766 0 16.67 1,766 0 Unlisted TidalScale 2013.08 Management 1,112 2,882 18.98 1,112 0 0 1,747 0 0 0 2,882 1.51 16.67 8.87 2,387 1,766 1,112 23,134 36,941 7,734 861 860 -2,631 Int'l* Unlisted Mantis Vision Unlisted Argus Cyber Security Unlisted INEDA 2014.01 2015.09 2014.04 Business Business Business 1,594 301 356 0 3,181 3,918 3.53 1,594 53 386 0.00 0 10 356 5.55 3,181 2,182 2,216 0 355 0 10 0 6,100 2.94 1,980 0.39 356 6.50 5,397 4,969 -8,275 0 0 8,221 -15,439 Unlisted Leman 2014.08 Business 1,019 17 3.91 1,019 0 0 17 3.91 1,019 6,563 -3,340 Unlisted Alces 2014.09 Business 4,832 421 19.95 4,832 0 0 421 19.95 4,832 2,905 -1,937 Listed SSL 2014.05 Business 37,553 2,426 5.84 49,511 -2,426 -49,511 0 0 0.00 0 1,301,673 -100,027 Listed Rambus 2010.01 Business 185,363 4,788 4.19 58,368 0 9,121 4,788 4.11 67,489 620,811 27,650 Listed SEAGATE 2011.12 Business 788,454 12,539 3.80 916,597 0 * International account noted here reflects approved for sale securities * Based on separate financial statements * Ownership percentage is calculated based on the number of common shares issued -245,563 12,539 4.15 671,033 10,016,908 1,656,821 Samsung Electronics Interim Business Report 165 / 173 X. Related Party Transactions 1. Credit Offerings for Affiliates and Subsidiaries A. Details on Debt Guarantee (as at September 30, 2015) - Domestic: N/A - Overseas: (Unit: USD thousand) Company Relationship SEA Subsidiary Creditor SMBC, etc. Guarantee Expiry Date 2017-04-10 Beginning of period 1,000,000 Transactions Increase Decrease End of period 0 0 1,000,000 Limit of Guarantee 2,425,000 SEM Subsidiary Santander, etc. 2016-08-19 348,280 0 291,634 56,646 676,000 SAMCOL Subsidiary Citibank, etc. 2016-06-13 67,533 1,579 0 69,112 126,000 SEDA SECH SEPR SSA Subsidiary Subsidiary Subsidiary Subsidiary HSBC, etc. Citibank, etc. BBVA, etc. Citibank, etc. 2016-06-13 2016-06-13 2016-06-13 2016-06-13 0 54,332 62,718 161,095 553 0 2,022 4,489 0 54,332 0 0 553 0 64,740 165,584 794,000 178,000 180,000 335,000 SEMRC Subsidiary SocGen, etc. 2015-12-16 5,824 0 5,788 36 110,000 SETK SECE SEEG Subsidiary Subsidiary Subsidiary BTMU, etc. Citibank, etc. HSBC 2016-06-13 2016-07-21 2016-06-13 85,877 0 0 118,103 1,480 0 0 203,980 0 1,480 0 0 670,000 152,000 50,000 SEPCO Subsidiary Citibank, etc. - 9,379 0 9,379 0 0 SEIN SJC SRJ SEUC Subsidiary Subsidiary Subsidiary Subsidiary BNP, etc. Mizuho Bank, etc. SMBC Credit Agricole, etc. 2016-06-13 2016-05-31 2016-02-28 2016-06-13 0 211,882 20,928 0 0 74,109 0 0 0 0 0 285,991 53 20,875 0 0 161,000 890,000 21,000 175,000 SEDAM Subsidiary Citibank, etc. 2016-06-13 116,727 0 24,568 92,159 441,000 SECA Subsidiary Nova Scotia 2015-10-10 0 0 0 0 11,000 SELA SEEH SERK SELV Subsidiary Subsidiary Subsidiary Subsidiary Citibank HSBC, etc. BNP, etc. Citibank 2015-12-16 2016-09-05 2016-06-28 2015-12-16 0 0 0 0 30,000 0 0 0 0 639,200 0 0 0 0 370,000 0 0 0 0 10,000 SAPL Subsidiary BOA, etc. 2016-06-13 0 0 0 0 411,000 SEV SAVINA SET Subsidiary Subsidiary Subsidiary SCB SCB, etc. SCB 2015-11-08 2016-06-13 2015-11-08 0 0 0 0 15,000 0 0 0 0 71,000 0 0 0 0 30,000 SCIC Subsidiary HSBC, etc. 2016-06-13 0 0 0 0 200,000 SME SAMEX SEASA SSAP Subsidiary Subsidiary Subsidiary Subsidiary SCB Citibank Citibank SCB 2015-11-08 2015-12-16 2015-12-16 2015-11-08 0 0 0 7,779 0 0 0 0 0 0 0 0 0 0 1,344 6,435 120,000 5,000 1,000 20,000 Simpress Subsidiary BNP 2015-11-08 0 36,683 0 36,683 60,000 SEHK Subsidiary HSBC 2016-06-13 0 0 0 0 2,000 SEPM Subsidiary HSBC Total 2016-06-13 0 2,152,354 132,800 371,818 0 387,098 132,800 2,137,074 132,800 9,512,000 Samsung Electronics Interim Business Report 166 / 173 Other than the guarantee obligations presented above, the Company provides payment guarantees of KRW 18,490 million (HUF 4.32 billion) to SEH (Samsung Electronics Hungarian) in Hungary to guarantee fulfillment of an investment incentive contract with the Hungarian government. The Company requires BOD approval for individual guarantees exceeding 2.5% of total equity. When the guarantee amount is between 0.1% and/or less than 2.5%, the approval decision is delegated to the Management Committee. B. Purchase and Sales of Securities Company Samsung Asset Management Relationship Securities Type Affiliate Beneficiary certificate Purchase - Total - Changes Sale Total Profit & Loss 1,000,000 1,000,000 24,864 1,000,000 1,000,000 24,864 Balance (Unit: KRW million) Note - Asset management - Profit and loss from sales of securities is based on amount received from disposition and cost basis. Samsung Electronics Interim Business Report 167 / 173 2. Acquisitions and disposals of Assets with Affiliates and Subsidiaries During first three quarters of 2015, the Company disposed assets to affiliates including SCS (Samsung China Semiconductor Co., Ltd.) for the purpose of increasing production capacity. In addition, the Company acquired assets including facility equipment from affiliates to improve efficiency of domestic production. Company SCS Samsung Fine Chemicals Relationship Affiliates Affiliates Purpose Asset sale Asset purchase SESS Affiliates Asset sale/purchase SAS Affiliates Asset sale/purchase Samsung Bioepis Affiliates Asset sale SDC Affiliates Asset sale SEV Affiliates Asset sale/purchase TSTC Affiliates Asset purchase STECO Affiliates Asset sale SEIN Affiliates Asset sale/purchase TSLED Affiliates Asset sale/purchase TSOE Affiliates Asset sale/purchase SESC Affiliates Asset purchase SEVT Affiliates Asset sale SIEL Affiliates Asset sale SSKMT Affiliates Asset purchase SEDAM Affiliates Asset sale SCSC Affiliates Asset purchase SEDA Affiliates Asset sale/purchase Transaction date: most recent transaction Transaction Date 2015.09.30 Date based on Date of sale 2015.09.16 Date of purchase 2015.09.25 2015.08.13 2015.03.09 2015.07.31 2015.09.25 2015.09.24 2015.09.30 2015.09.22 2015.07.08 2015.07.16 2015.07.14 2015.08.01 2015.02.02 2015.09.15 2015.08.01 2015.07.13 2015.04.29 Date of sale/purchase Date of sale/purchase Date of sale Date of sale Date of sale/purchase Date of purchase Date of sale Date of sale/purchase Date of sale/purchase Date of sale/purchase Date of purchase Date of sale Date of sale Date of purchase Date of sale Date of purchase Date of sale/purchase Asset Machinery, etc. Buildings/structures, etc Machinery, etc. Machinery, etc. Machinery, etc. Machinery, etc. Machinery, etc. Machinery, etc. Machinery, etc. Machinery, etc. Machinery, etc. Machinery, etc. Machinery, etc. Machinery, etc. Machinery, etc. Machinery, etc. Machinery, etc. Machinery, etc. Machinery, etc. (Unit: KRW million) Amount 142,046 95,278 23,115 20,696 3,524 2,640 2,305 1,510 676 671 588 526 463 336 300 242 238 152 121 Samsung Electronics Interim Business Report 168 / 173 3. Business Transactions with Affiliates and Subsidiaries Company Relationship Type of Transaction Date Details (Unit: KRW million) Amount SEA Subsidiary Sales/Purchases 2015.01 - 2015.09 Purchase/sales of HHP and Home Appliance, etc. 21,446,861 SEHZ Subsidiary Sales/Purchases 2015.01 - 2015.09 Purchase/sales of HHP and CTV, etc. 10,439,629 SEVT Subsidiary Sales/Purchases 2015.01 - 2015.09 Purchases of HHP and Home Appliance, etc. 8,796,872 SEV Subsidiary Sales/Purchases 2015.01 - 2015.09 Purchases of HHP and Home Appliance, etc. 8,563,184 SSI Subsidiary Sales/Purchases 2015.01 - 2015.09 Purchase/sales of Semiconductor, etc. 11,566,812 During first three quarters of 2015, the Company conducted business transactions with the following subsidiaries: SEA (Samsung Electronics America, Inc.) and SSI (Samsung Semiconductor, Inc.). 4. Transactions with Stakeholders other than Affiliates and Subsidiaries As at September 30, 2015, the Company's outstanding loan amount is KRW 121.7 billion related to support for supplier companies for product competitiveness and mutual development as well as home loan and educational expenses for employee welfare. In addition, the Company provides debt guarantees up to KRW 10.8 billion for employees' loans from financial institutions relating to housing rental. (Unit: KRW million) Loans Company Relationship Jangwon Tech, etc Partner company Account title Beginning of period (January 1, 2015) Short-term loans 34,321 Transaction Increase Decrease 135 3,735 End of period (September 30, 2015) 30,721 Dooil I&D, etc Partner company and employee Total Long-term loans 81,534 115,855 25,503 25,638 16,092 19,827 90,945 121,666 The amount shown above reflects the discounted present value of debts before accounting for impaired debts. Samsung Electronics Interim Business Report 169 / 173 XI. Other Information 1. Public Disclosure - N/A 2. Summary of Results of Shareholder Meetings Date Agenda 1. Approval of Balance Sheet, Income Statement, and Statement of Appropriation of Retained Earnings (Draft), etc. for FY2014 FY2015 annual general meeting of shareholders ('15.3.13) 2. Appointment of Directors 2.1: Appointment of Independent Directors 2.1.1: Han-Joong Kim 2.1.2: Byeong-Gi Lee 2.2: Appointment of Executive Director (Oh-Hyun Kwon) 2.3: Appointment of Member of Audit Committee (Han-Joong Kim) 3. Approval of the limit on the remuneration for Directors FY2014 annual general meeting of shareholders ('14.3.14) 1. Approval of Balance Sheet, Income Statement, and Statement of Appropriation of Retained Earnings (Draft), etc. for FY2013 2. Approval of the limit on the remuneration for Directors 1. Approval of Balance Sheet, Income Statement, and Statement of Appropriation of Retained Earnings (Draft), etc. for FY2012 FY2013 annual general meeting of shareholders ('13.3.15) 2. Appointment of Directors 2.1 : Appointment of Independent Directors 2.1.1: In-Ho Lee 2.1.2: Kwang-Soo Song 2.1.3: Eun-Mee Kim 2.2: Appointment of Executive Directors 2.2.1: Boo-Keun Yoon 2.2.2: Jong-Kyun Shin 2.2.3: Sang-Hoon Lee 2-3: Appointment of Members of Audit Committee 2.3.1: In-Ho Lee 2.3.2: Kwang-Soo Song 3. Approval of the limit on the remuneration for Directors Results Approved Approved Approved Approved Approved Approved Approved Approved Samsung Electronics Interim Business Report 170 / 173 3. Litigation (1) The litigation with Apple Inc. ("Apple") is ongoing in the United States as of the reporting date. Regarding the ongoing lawsuit in the United States, on August 24, 2012, the jury determined that the Group partially infringed Apple's design and utility patent and should pay damages to Apple. On March 1, 2013, however, the Judge ordered a new trial for a certain portion of the damages, ruling that it was originally miscalculated. On March 6, 2014, the Judge denied Apple's bid for a permanent injunction against the Group and made a final judgment restating the total damages amount determined by a jury verdict. The Group appealed the decision on the amount of damages on March 7, 2014, and a hearing on the appeal was held on December 4, 2014. On May 18, 2015, the United States Court of Appeals for the Federal Circuit upheld the prior design infringement verdict, but reversed and remanded a previous decision related to a trademark finding. On June 17, 2015, the Group petitioned for an en banc rehearing regarding the design infringement, and on August 13, 2015, the Court of Appeals for the Federal Circuit dismissed the Group's request. The appellate court remanded the case to the district court, and the district court announced partial final judgment on the appeals on September 18, 2015. On October 19, 2015, the Group petitioned for an en banc rehearing since the immediate appeal had been dismissed on October 13, 2015. The final conclusion and the effect of the patent lawsuits with Apple are uncertain as at the reporting date. In August 2014, the Group and Apple reached an agreement to withdraw from ongoing litigation in all regions other than the United States, and the Group has withdrawn all non-United States based lawsuits. Additionally, on May 5, 2014, the jury in another ongoing lawsuit determined that the Group partially infringed Apple's utility patent and should pay damages to Apple. On November 25, 2014, the first trial judgment was pronounced to confirm the jury's verdict. The Group appealed the decision on the damages and the appeal is currently on-going. On October 19, 2015, the Group requested an en banc hearing following the remand and reversal by the appellate court on September 17, 2015 of a first trial decision to deny a sales ban on the Company's products on August 27, 2014. (2) The Group is involved in claims, disputes, and investigations conducted by regulatory bodies at the reporting date, including civil claims from some overseas buyers for price-fixing related to the sale of TFT-LCD. Although the outflow of resources and timing of these matters are uncertain, the Group believes the outcome will not have a material impact on the financial condition of the Group. (3) In addition, during the normal course of business with numerous companies, the Group has been involved in various claims, disputes, and investigations conducted by regulatory bodies. Although the outflow of resources and timing of these matters are uncertain, the Group believes the outcome will not have a material impact on the financial condition of the Group. 4. Guarantees Refer to Commitments and Contingencies notes in the Separate and Consolidated Financial Statements Samsung Electronics Interim Business Report 171 / 173 5. Sanctions and Others The Company is engaged in a lawsuit after being issued a corrective order and fine (KRW 14,126 million) on July 10, 2012 for violating Article 23 (Prohibition of Unfair Trade Practices) of the Monopoly Regulation and Fair Trade Act. The Company was ordered to pay a fine (KRW 26 million) on January 13, 2014 from the Fair Trade Commission for violating Article 4 (Announcement of Critical Information and Integrated Notification) of the Fair Labeling and Advertising Act, and has subsequently paid the fine. The Company was ordered to pay a fine (KRW 267 million) on March 7, 2013, for violating the Occupational Safety and Health Act in connection with a hydrofluoric acid gas leak that occurred on January 28, 2013, and has subsequently paid the fine. The Company was issued an improvement order and ordered to pay a fine (KRW 2.2 million) on April 1, 2013, for violating the Toxic Chemicals Control Act. The Company reported compliance with the improvement order and subsequently paid the fine. As a result of this incident, three employees and executives of the Company were ordered to pay a fine (KRW 15 million) at the first trial on October 31, 2014. The Company appealed the decision on November 7, 2014. For the hydrofluoric acid gas leak occurred on May 2, 2013, the Company was ordered to pay a fine (KRW 4.5 million) on February 27, 2014, for violating the Occupational Safety and Health Act and the Toxic Chemicals Control Act, and has subsequently paid the fine. The Company was ordered and paid a fine of KRW 166.7 million for not reporting the importation of certain chemicals in August 2013, following a joint inspection by the Ministry of Environment and Gyeong-Gi Province. Pursuant to the results of a joint inspection by the prosecutor's office and the Ministry of Employment and Labor conducted from June 16th through the 20th (2014), a current Executive Vice President of the Company and the Company were ordered and respectively paid a fine of KRW 2 million for violating the obligation of taking safety measures in accordance with the Occupational Safety and Health Act on July 29, 2015. The Company regularly provides compliance education and training to executives and employees to promote global standards of fair competition, and operates various compliance programs. The Company reinforced internal controls to comply with relevant laws on environmental safety and provides related education for executives and employees. 6. Return of Short-Swing Profits The Company has not received any notification of short-swing profits from the Securities & Futures Commission (the Governor of the Financial Supervisory Service) in the past three years and until the date of this report. 7. Subsequent Events (A) On October 29, 2015, the board of directors approved share buyback and cancellation of common and preferred stocks. Estimated total number of shares to be repurchased is 3.47 million (common stock 2.23 million, preferred stock 1.24 million) and all repurchased shares will be cancelled after the buyback is completed. Period of Purchase will be ended on January 29, 2016. (B) On October 30, 2015, the Group has authorized the sale of its entire stake in Samsung Fine Chemicals Co., LTD. to Lotte Chemical Corporation. The transaction is expected to be closed within the first half of 2016. Samsung Electronics Interim Business Report 172 / 173 8. Acquisition and Divestments There have been no significant acquisitions or divestment during reporting period. Please refer to the Business Combination and Non-current Assets Held-for-Sale (Sold Assets) notes in the Consolidated Financial Statements for acquisitions and divestments on a consolidated basis. 9. Green Management The Company is actively securing "Green Technology Certifications" to follow the Low Carbon Green Growth policy of the Korean government. (Green Technology Certification) The Company is acquiring Green Technology Certifications in accordance with Clause 2, Article 32 of the Framework Act on Low Carbon Green Growth. Green technology development is a part of our "Planet First" strategy, which strives to conduct business activities in a manner that respect people and nature. Since the certification system was introduced in 2010, the Company has secured 20 valid Green Technology Certifications as of September 30, 2015. In addition, the Company has acquired 34 `Green Technology' product certificates (264 models), for commercialized products. Certified Green Technologies as of September 30, 2015 are as follows: Division CE Business IM DS Semiconductor (Sub-Division) Name of green technology and green projects Low-power consumption SoC design technology for digital TVs, etc. Display power-saving technology that adapts to level of illumination of the surroundings ; User-based wireless LAN power-saving automation technology, etc. 3-bit NAND Flash semiconductor design technology, etc. Total No. 13 4 3 20 The data reported above is with respect to Samsung Electronics Co., Ltd. only. See 11. Other Information (B. Environmental regulations) in II. Businesses Overview for greenhouse gas emission and energy use. Samsung Electronics Interim Business Report 173 / 173MAXWELL KIM Adobe PDF Library 10.0