Samsung C&T Corporation and Subsidiaries Interim Consolidated Financial Statements June 30, 2016 and 2015 Samsung C&T Corporation and Subsidiaries Index June 30, 2016 and 2015 Pages Report on Review of Interim Consolidated Financial Statements ………………………........ 1 - 5 Interim Consolidated Financial Statements Interim Consolidated Statements of Financial Position …………………………………………….. 6 - 8 Interim Consolidated Statements of Comprehensive Income....................................................... 9 - 10 Interim Consolidated Statements of Changes in Equity..............................…………................... 11 - 12 Interim Consolidated Statements of Cash Flows…………………………………………………….. 13 - 14 Notes to Interim Consolidated Financial Statements...........................................……………... ... 15 - 92 Report on Review of Interim Financial Statements (English Translation of a Report Originally Issued in Korean) To the Board of Directors and Shareholders of Samsung C&T Corporation Reviewed Financial Statements We have reviewed the accompanying interim consolidated financial statements of Samsung C&T Corporation (the “Company”) and its subsidiaries (collectively the “Group”). These financial statements consist of the interim consolidated statement of financial position as of June 30, 2016, and the related interim consolidated statements of comprehensive income for the three-month and six- month periods ended June 30, 2016 and 2015, and interim consolidated statements of changes in equity and cash flows for the six-month periods ended June 30, 2016 and 2015, and a summary of significant accounting policies and other explanatory notes, expressed in Korean won. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of this interim financial information in accordance with the International Financial Reporting Standards as adopted by the Republic of Korea ("Korean IFRS") 1034, ‘Interim Financial Reporting’, and for such internal control as management determines is necessary to enable the preparation of interim consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s responsibility Our responsibility is to issue a report on these interim consolidated financial statements based on our reviews. We conducted our reviews in accordance with the quarterly and semi-annual review standards established by the Securities and Futures Commission of the Republic of Korea. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with the Korean Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our reviews, nothing has come to our attention that causes us to believe the accompanying interim consolidated financial statements are not presented fairly, in all material respects, in accordance with Korean IFRS 1034, ‘Interim Financial Reporting’. Emphasis of Matters 1 Without qualifying our opinion, we draw attention to the following area of focus: Auditor’s emphasis on area of focus on construction contracts Area of focus on construction contracts in accordance with the Practical Guidance of Auditing Standard 2016-1 are those matters that, in the auditor’s professional judgment and communication with those charged with governance, were of most significance in the review of the interim consolidated financial statements of the current period. These matters were addressed in the context of the review of the financial statements as a whole, and the auditor does not provide a separate opinion on these matters. As described in the "Auditor’s responsibility", it is our responsibility to conduct our reviews in accordance with the quarterly and semi-annual review standards established by the Securities and Futures Commission of the Republic of Korea and to issue a report based on our reviews. A review of the area of focus on construction contract consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. - Uncertainty of the estimated total contract costs As described in Note 2 to the interim consolidated financial statements, the Group recognizes contract revenue and contract costs associated with the construction contract as revenue and expense respectively based on the percentage of completion of the contract activity at the end of the reporting period when the outcome of a construction contract can be estimated reliably. The percentage of completion of the contract activity is the proportion that costs incurred to date, excluding any contract cost that does not reflect the work performed, bear to the estimated total costs of the contract. Also, as described in Note 4 to the interim consolidated financial statements, total contract costs are estimated based on future expectation of material costs, labor costs, construction period and others. In addition, Note 5 to the interim consolidated financial statements states that changes in the estimated total contract costs by construction types for the six-month period ended June 30, 2016, amount to 1,471,457 million, which is 149% of changes in the estimated total contract revenue. It also states that impact on profit or loss for the current period and in the succeeding periods amount to 165,570 million and 318,822 million, respectively. For a construction contract, it is probable that an unexpected change in the estimated total contract costs may incur due to changes in market price of raw materials, construction delays caused by natural disasters, changes in foreign currency exchange rates, and risks associated with developing a new market and others. Considering the impact that the increasing uncertainty in estimating total contract costs and changes in the estimates have on the Group’s profit or loss for the period, we identified the uncertainty of the estimated total contract costs as a significant risk. 1 This paragraph is being included in accordance with the “Practical Guidance of Auditing Standard 2016-1, Practical Guidance for Special Consideration in Auditing Construction Contracts”, prescribed by Korean Institute of Certified Public Accountants, and should not be considered as a communication of key audit matter described in the International Standards on Auditing 700 (Revised). 2 As of June 30, 2016, in respect of the uncertainty of the estimated total contract costs on the Group’s consolidated financial statements, we have performed the following review procedures. Made inquiries and performed analytical review procedures on how major components of the estimated total contract costs has changed by reporting periods. Made inquiries and performed analytical review procedures on appropriateness of estimated total contract cost component for each project. With regards to the projects where the estimated total contract costs has changed significantly, made inquiries about reasons for the significant changes in the estimated total contract costs. With regards to the projects where the ratio of estimated total contract costs to estimated total contract revenue and ratio of actual contract costs to estimated total contract revenue differ significantly, made inquiries about reasons for the difference. - Measurement of percentage of completion As described in Note 2 to the interim consolidated financial statements, the Group recognizes contract revenue and contract costs associated with the construction contract as revenue and expense respectively based on the percentage of completion of the contract activity at the end of the reporting period when the outcome of a construction contract can be estimated reliably. The percentage of completion of the contract activity is the proportion that costs incurred to date, excluding any contract cost that does not reflect the work performed, bear to the estimated total costs of the contract. For a construction contract, it is probable that costs which do not reflect the percentage of completion and costs which are not chargeable to the customers may be incurred due to additional costs incurrence from change of circumstances, delay in the customer’s progress payment, concentration of costs incurrence for certain periods, and other reasons. There is a risk that the percentage of completion measured by reference to the costs incurred and the actual construction progress may differ significantly; therefore, we identified the Group’s measurement of percentage of completion as a significant risk. We performed the following review procedures with regards to estimated total contract costs and cumulative contract costs incurred, which affect the Group’s measurement of percentage of completion. Made inquiries about reasons for quarterly changes in the percentage of completion. Made inquiries why contract costs have increased, and how they are expected to be. Made inquiries to determine the existence of costs that do not reflect the percentage of completion and are excluded from both cumulative contract costs incurred and estimated total contract costs. Made inquiries on how these costs have been accounted for, if any. - Collectability of the gross amount due