Global Leader in Ocean & Power

Samsung Heavy Industries Sustainability Report 2012 Global Leader in Ocean & Power About this report Contents Samsung Heavy Industries has published sustainability report on an annual basis since 2011. The company aims to inform 04 2012 Highlights internal/external stakeholders on its sustainability manage- 06 Message from the CEO ment practices and to better understand the needs and expectations of our stakeholders. Overview This report covers the period from January 1, 2012 to Decem- 10 Company Profile ber 31, 2012, and quantitative performance was calculated 12 Business Introduction based on the data of recent 3 years. The settling day (Decem- ber 31) was used as basis for data with annual variability, and 14 Eco-friendly Technologies specified information on term period of data collection were included when considered necessary. this report covers SHI Management headquarters, Shipbuilding&Offshore, Energy&Infra solution, 20 Vision & Strategy Power&control systems, wind energy. 22 Board of Directors

This report was prepared in accordance with the ‘GRI G3.1 24 Compliance Management Guideline’, with the primary goal to publicize performances 26 Risk Management and plans on each indicator with utmost transparency. Items 28 SHI Stakeholder Engagement recommended on GRI Guideline can be found on GRI Guide- line index on page 72. In order to ensure the reliability of this report, we received third party assurance on contents and data Corporate Social Responsibility credibility. For detailed assurance results, refer to page 70. 32 Employee

37 Client SHI sustainability report can be viewed and downloaded 42 Partner Companies through SHI website (www.shi.samsung.co.kr). For more information, please contact the communication team at the fol- 46 Local Community lowing address. Feedback is always welcome. 52 Health, Safety and Environment 58 Green Management Cover story 64 Relevant Data on Sustainability Management The shape of circle stands for earth and ocean and embodies our dream of becoming a global leader in off- Appendix shore industry. 68 Awards and Membership

70 Third Party Assurance Statement

72 GRI G3.1 Guideline Index

76 Report of Independent Auditors 77 Financial Statement communication team 33th FL, Samsung Life Insurance Seocho Tower, 1321-15 Seocho-Dong, Seocho-Gu, 137-955, Seoul, Korea Tel: +82-2-3458-6312 Fax: +82-2-3458-6398 2012 Highlights Samsung Heavy Industries 2012 Sustainability Report 4 5

2012 Highlights

01 Signed a contract with INPEX of Australia to build the world’s 06 Established an offshore engineering joint venture with AMEC of the U.K largest offshore gas disposal facility A joint investment among Samsung Heavy Industries, Samsung Engineering and AMEC of the U.K | As part of the efforts to The largest investment (KRW 3.48 trillion) & scale among plants of the enhance our business capacity in line with the rapid growth of the offshore plant market, SHI will establish the joint venture same kind | CPF is a type of floating offshore facility that produces and in Houston, U.S, to be fully utilized in designing offshore facilities. processes gas from gas fields. SHI has been once again recognized for its excellence in constructing offshore facilities by taking responsibility 07 Received an order for coal handling system ‘Samcheok Green Power’ for the entire production process, including design, purchase, An order for Samcheok Green Power 1 & 2 from Korea Southern Power | Samcheok Thermal Power Plant, which is to manufacturing and shipping. be completed by June 2016, will have a coal handling system ranging from loading and unloading at dock to storing and delivery. 02 Delivered the world’s first arctic drillship The world’s first & most expensive (USD 1,207 million) arctic drill 08 Shipped the 1000th SSAS ship | SHI has successfully constructed and delivered ‘STENA ICEMAX’, Control of a variety of equipment on ship through monitor- the world’s most expensive drill ship for polar regions, to the ship owner. ing | SHI has celebrated the shipment of the 1000th au- The drill ship has ice-resistant structure which allows drilling operation even tomatic system SSAS to the 105K shuttle tanker of the at 30 degrees below zero Celsius. 1967.

09 Delivered the world’s largest turbine installation vessel 03 Introduced the world’s first exclusive floating dock for offshore facilities wind Initiation of enlargement trend in the offshore facility market | The cooperation between the world’s first exclusive floating Simultaneous transportation and installa- dock for offshore facilities and an 8,000 ton offshore crane has contributed to cost competitiveness by shortening the tion of 12 units of 3.6MW-class wind farms construction schedule and reducing the cost of loading and unloading. | SHI has successfully delivered ‘Pacific Orca’, the world’s largest wind turbine installation vessel, to SPO in Singapore. This 04 Undertook the construction of FLNG for Shell vessel allows the installation of wind farms to a depth of 60m under water as well as LNG-FPSO at the world’s largest scale | SHI received an order from Royal Dutch Shell of ultra-large wind farms with a capacity of to construct a LNG-FPSO, the world's largest floating dock for offshore facilities 10MW or higher, which are currently under that has the dead load of 0.2 million tons, and began the construction with a steel development. cutting ceremony in the Geoje Shipyard on October.

10 Received an order for 12 units of 7MW-class 05 Advanced into the offshore wind power market in Scotland wind farms A MOU on offshore wind development project with the Scottish Development The world’s largest capacity and high efficiency |The order International and Fife Regional Council | SHI will base its offshore wind project was made by Daejeong Offshore Wind Power, and the wind farms at Methil, Fife, for pilot production and test of 7MW-class wind farms, and build a will be completed by the end of 2014 and operated from 2015 transmission network within the region to sell electricity from 2014. for commercial service. Message from the CEO Samsung Heavy Industries 2012 Sustainability Report 6 7

SHI aspires to be a global leader, enriching the future with the best products and technologies and seeking harmonious co-existence with nature.

Respected stakeholders of Samsung Heavy Industries, I extend my sincere gratitude for your continuous interest and support for us.

I am very glad to see the publication of the SHI Sustainability Report 2012 which discusses SHI's performance in sustainable management and shares the meaning with stakeholders. Last year SHI witnessed continuous growth based on the expansion of high value-added products, such as offshore facilities and special-purpose vessels, despite the lingering global economic crisis. In addition, SHI has become the first among industry competitors to achieve the ISO 50001 energy management standard, solidifying its position as the leader in the standardization of shipbuilding industry in areas ranging from quality and environment management to energy management. In an effort to promote shared growth, a variety of social contribution activities have been conducted; for instance, supporting local communities and the underprivileged. In 2013, the company will continue its commitment to sustainable management through ceaseless efforts for change and fundamental improvement.

First of all, SHI will focus on expanding future growth engines, consolidating the foundation to grow into a world-class global shipbuilder. To that end, we will maximize profits by differentiating SHI offshore plants and special-purpose vessels from its competitors, while diversifying the business portfolio, which currently focuses on shipbuilding and offshore plant only, to include deep sea offshore and wind power facilities, and shipbuilding and offshore key equipment. Furthermore, we will strive to develop industry-pioneering eco-friendly products and conduct environment preservation activities, which include GHG emissions reduction, resource-cycling workplace set-up and energy conservation. Based on basics and principles, we will stress safety and quality management and promote compliance management and shared growth to meet the expectations of our stakeholders.

Samsung Heavy Industries will contribute to establishing an affluent future society with its best products and technologies and will fulfill its responsibility as a global leader to achieve a peaceful harmonization with nature. I ask for your unwavering trust and support for us. Thank you.

Samsung Heavy Industries President & CEO Dae Young Park Overview SHI pursues to be the best in all business divisions ranging from shipbuilding & offshore, E&I, power&control systems, wind energy. Operating facilities across the globe, the company seeks customer satisfaction and spurs the development >>> STENA ICEMAX of various eco-friendly technologies to realize SHI delivered the world’s first and most the best performance and quality. expensive arctic drillship ‘STENA ICEMAX’ to its ship owner in April 2012. Worth around USD1.2 billion, the drillship allows operation even at 30 degrees below zero Celsius. Overview Management Corporate Social Responsibility Appendix Samsung Heavy Industries 2012 Sustainability Report 10 11

Company Profile

Samsung Heavy Industries aims to be the world's best in Shipbuilding & Offshore, E&I, Wind energy and Power&Control systems.

Oslo Moscow

Hamburg London

Rongcheng Co., Ltd. Athens Shanghai Tokyo Houston Ningbo Co., Ltd.

Dubai

India

Head Office/E&I Division Lagos

Suwon Power & Control Systems Division Singapore

Daeduk Research Center Rio de janeiro

Geoje Shipyard , Wind energy Division

Company Name Samsung Heavy Industries Co., Ltd. Business Areas Shipbuilding&offshore, E&I, Power&Control systems, wind energy Date of Establishment August 5, 1974 Location of Headquarters Samsung Life Insurance Seocho Tower, 1321-15 Seocho2-Dong, Seocho-Gu, Seoul, Korea President and CEO Dae Young Park Domestic Operation Geoje Shipyard, E&I Division, Suwon Power & Control Business Division, Gross Asset Capital Stock Number of Employees wind energy Division, Daeduk Research Center Overseas Operation Ningbo/Rongcheng Co., Ltd., Houston, RioDe Janeiro, Athens, Oslo, London, KRW 16,635 billion KRW 1,154.9 billion 13,504 persons Moscow, Dubai, Singapore, Tokyo, Shanghai, India, Hamburg, Lagos Overview Management Corporate Social Responsibility Appendix Samsung Heavy Industries 2012 Sustainability Report 12 13

Business Introduction

Shipbuilding & Offshore E&I Since the launch of business, SHI has received The E&I(Energy & Infra solution) business seeks orders for about 1,030 ships from the world’s customer satisfaction based on its best-quality renowned shippers and successfully delivered manpower, equipment and system. Establish- 890 among them (as of late December 2012). In ment of the nation’s first waterproofing academy particular, the company boasts the largest global and introduction of quality assurance system market share in LNG carriers, leading high tech- complying with the international standards and nology and value-added vessel market, while se- lifetime quality assurance system for building curing the competitive edge in the new concept framework are part of our competitive quality & eco-friendly vessel area with the development and safety management which puts safety be- of the world’s first arctic shuttle tanker and LNG- fore profits. The company is currently working SRV. Our technological prowess in the shipbuild- on business restructuring which focuses on new ing business has led to high performance of businesses that can create synergy with other the offshore business which includes drillship, divisions such as offshore wind farm. LNG-FPSO and floating offshore structure. Hav- ing the largest global market share in drillships and winning a turn-key order for the world’s largest floating offshore production facility are all representative of our customers’ trust in us. Furthermore, SHI is leading the exploration into new product markets with the development of the world’s first LNG-FPSO and delivery of wind turbine installation vessel.

Power & Control systems Wind energy The Power & Control systems business of SHI Based on the advanced technologies in existing applies digital technologies to various industry businesses, SHI has successfully entered the fields. Our representative products include bal- wind power facility market. The company’s wind last water treatment system ‘PURIMAR’, fuel power facilities have 10 percent higher generat- supply system for LNG-propulsion ship ‘FuGaS’, ing efficiency and 5 year longer durability than navigation controlling system ‘SSAS-Master’ and those of their counterparts. Participating in the integrated ship network system ‘XailorStar’. SHI Scottish offshore wind development project and aims to provide a Total Electric Power Solution winning an order for 7MW-class offshore wind for existing businesses, such as navigation & generators from Daejeong Offshore Wind Power communication and automation system, as well are part of our efforts to provide a total solution as for vessels and onshore fields. for offshore wind power generation including production, installation to operation. Overview Management Corporate Social Responsibility Appendix Samsung Heavy Industries 2012 Sustainability Report 14 15

Eco-friendly Technologies Research & Development SHI conducts R&D activities on highly profitable businesses that offer high quality products

Development of Eco-friendly Products and services by applying digital technologies specialized for value-added vessels and offshore facilities. Based on proactive development of next generation products and core technolo- Branding of gies, we focus on developing industry-leading products, differentiating the performance and High Oil Prices • Technology Development Status Eco-friendly quality of existing products from the competition, and enhancing R&D competitiveness to – Develop ships that exceed EEDI develop cost-cutting technologies, while making continuous efforts to secure technological requirements Products – Increase fuel efficiency by 10~22% competitiveness. • Find ways to differentiate CO2 Emissions Regulations – Apply to various ships including commercial ships and special-purpose our green technologies from the 2012 R&D Performance vessels competition • Promote sales in new markets •Improvement of hull and structure 1 Development of 2 Energy harvest/ 3 Development 4 Commercialization which emphasize fuel efficiency floatation control Commercialization offshore floating of TCS(Track •Development of energy saving devices Demands for Fuel-efficient Vessels •Apply existing technologies to system to enhance of recycling dock management Control System) offshore products the propulsion system system performance of navy vessels Technology System Technology development development development More new orders In 2010, SHI declared its commitment to green management for the first time in the industry expected and pledged the development of eco-friendly vessels and the establishment of green workplaces as well as green network. In order to fulfill its responsibility as a green company, it has set up and implemented a mid- and long-term strategy for developing eco-friendly technolo- * EEDI Ship Fuel Efficiency Improvement In an attempt to curb GHG emis- gies, 'Green Future 7090(to reduce CO2 by 70% and NOx/SOx/dust by 90%)'. Such efforts laid sions from ships under opera- Besides developing technologies to mitigate GHG emissions, SHI strives to improve ship fuel the foundation for the company to preemptively respond to more rigorous sets of regulations tion, IMO has developed the EEDI efficiency through energy-saving equipment development, hull form optimization and propel- for various vessels/ offshore facilities by the IMO. SHI’s eco-friendly technologies boast excel- (Energy Efficiency Design Index) ler performance improvement. The key to fuel efficiency improvement lies in hull form opti- which indicates the amount of CO2 lence in reducing GHG emissions from oil tankers by 27~33% and container ships by 35~46% emissions from ships considering mization, and our continuous development of fuel-saving equipment has allowed more im- compared to the IMO’s EEDI*. Moreover, SHI-developed GF drillship has achieved fuel saving the technologies applied to ship provement of fuel efficiency. This is a result of our element technology and design experience up to 45% under operation, thanks to the improvement of hull form and application of new design. The EEDI applies to all new from the water tank model experiment at research institute, as well as design know-how ships built from 1 January 2013. thruster. Recently, ship owners have shown an increasing demand for eco-friendly vessels which reflects the feedback from testing operation. Our eco-friendly vessels are equipped that reduce GHG emissions by more than 20% compared to the EEDI owing to energy-efficient with a variety of technologies: upgrading hull forms, enhancing propulsion efficiency, install- hulls and appendages. As a result of their growing interest in high efficiency fuel, SHI has so ing energy-saving appendages as well as air & water pollution prevention equipment, intro- far received orders for 67 eco-friendly vessels in total: 31 including a containership of Ever ducing ballaster water treatment system, calculating optimal routes and managing operation Green in 2010, 26 including a LNG carrier of Golar LNG in 2011 and 10 including a GF drillship system. of ENSCO in 2012, respectively. Special Case Performance of SHI’s Eco-friendly Containership EEDI certificate A simulation of the technologies (compared to IMO’s EEDI)/ SHI Efforts to Construct Eco-friendly Smartships IMO Guide Line under development at a 13,000TEU 25 Samsung Heavy Industries and Hanjin Shipping concluded on December 27 a ‘Joint Research Agreement on Ship Energy As of 2025(-30%) container ship resulted in a total of Efficiency & Fleet Management’. The system will optimize sailing route and trim, integrate functions of monitoring and 30% reduction of greenhouse gas 20 analyzing energy efficiency operation indicator (EEDI), and provide Vessel Portal Service (VPS). The sailing route optimization emissions. The amount of green- program can find optimal routes to destinations based on ship performance data and weather information, saving fuel by up

/ton mile) /ton house gas reduction is tantamount 2 15 to 6%. The trim optimization program can also predict optimal trims according to ship speed and cargo weight and adjust to what one thousand three hun- the positioning of ballast water so that ships can maximize propulsion efficiency under any circumstance and save fuel cost dred of thirty year old pine trees 10 8000TEU by up to 5%. In addition, the system will include energy efficiency management program that monitors the EEDI in real time can absorb for a year. and also vessel performance evaluation and analysis program that optimizes ship’s speed and revolution per minute (RPM). [-35.1%] 13,000TEU 16,000TEU 5 [-46.1%] [-46.0%] Moreover, SHI will help shipping companies manage the energy efficiency of fleets from the ground by introducing its VPS

EEDI_COT(g-CO that can monitor and check the operational status of vessels from the ground. 0 20000 50000 80000 110000 140000 170000 200000 DWT Overview Management Corporate Social Responsibility Appendix Samsung Heavy Industries 2012 Sustainability Report 16 17

Development of Eco-friendly LNG-related Technologies Eco-friendly Technology Differentiation ‘EcoNuri’, the Asia’s first LNG-fueled ship equipped with the SHI-developed FuGaS (Fuel Gas Furthermore, SHI strives to lead the future market based on the development of differentiated Supply & Storage System), was granted the award of “Green Technology of the Year” at the green technologies. The company plans to develop Vai-Fi and air lubrication system by 2014

<4th National Green Tech Award> in December 2012. The award is organized by Presidential and secure and commercialize technologies such as CO2 transport and fuel cell system in the Committee on Green Growth and is intended to recognize green technologies with outstanding mid and long term. technological performance and economic effect. Our FuGaS has enabled EcoNuri to reduce

NOx and SOx by more than 95%, dust by 100% and CO2 by 23%. Besides, we have developed Vai-Fi(Vibration Free Air Injector) System Vai-Fi(Vibration Free Air Injector) System The Vai- the technology that maintains the BOR(Boil Off Rate) of LNG cargo containment at 0.1% per Fi System refers to a technology that significantly reduces hull vibration caused by propeller day. Our current focus is on the development of relevant technologies including LNG-fueled cavitation. We expect to reduce hull vibration by more than 80% and fuel consumption by 1% tugboat as well as system, storage and design for 30k class LNG bunkering ship. with less than 10 percent of existing power supply injecting air into the top of propeller. This system will be first applied to Ro-Pax of STENA delivered by SHI in 2011.

Air Lubrication System The Air Lubrication System increases fuel efficiency by decreasing frictional resistance which takes up around 70% of ship resistance. The system creates an air layer that covers the surface of hull by injecting air into the bottom area, which saves low-speed vessels fuel by more than 5%. Currently, we are working on system design and performance optimization with the target of reducing fuel consumption by 5% for containerships and 10% for low-speed vessels. Green Technologies Applied to Offshore Facilities The 2010 Gulf of Mexico oil spill has caused increasing demand for eco-friendly technologies Participation in National Project SHI engages in a national project led by the Ministry of

in offshore oil field development as well as a possibility the introduction of new environmental Trade, Industry and Energy to research and develop CO2 transport and fuel cell system. The

regulations for offshore facilities sooner or later. We have reduced ship fuel consumption (by company aims at receiving an order for CO2 transport after 2016 by securing relevant key

40% under operation and 10% on average during the entire operation period) with hull form technologies including CO2 tank & cargo management system and CO2 boil-off gas control optimization and new thruster development. Also, we developed eco-friendly GF drillships system. In addition, design technology of fuel cell system for ship application will be secured using the technology to reduce water pollution and exhaust emissions, and received an order through the partnership with fuel cell developers, and a demonstration project for LNG fueled for two 78k class GF drillships from ENSCO as a result. ships will be implemented in the near future.

Eco-friendly Technologies Applied to GF Drillship

1) Apply operability-maximizing specifications> Reduce operational cost ㆍForklifts have easier access to the total deck area ㆍMMC(Multi Machine Control) function to control risers

2) Apply eco-friendly specifications > Promote green management and prepare for future environment ㆍFacilities to treat wastewater from drilling ㆍFacilities to reduce SCR NOx

3) Load in-hold risers > Enhance drilling efficiency 2 Special Case ㆍService deck area increased 3 ㆍEquipment to control dual-risers

4) Improve efficiency of thruster maintenance> Reduce operational cost Vessels to Enjoy Higher Fuel Efficiency through Satellite-controlled Navigation System ㆍMaintenance of the ship 2 Drillships, in which SHI holds the largest global market share, refer to floating offshore structures. They must maintain their ㆍReduce fuel consumption during a port call position against heavy seas. Even a few centimeters of error on the surface of the water can lead to increase in geometric progression thousands meters below sea level, and thus cutting-edge IT technologies, such as Dynamic Positioning System 5) Optimize hull form > Minimize fuel consumption and Computer Controlled Propulsion System, are applied to drillships. ㆍV-shaped stern ㆍBulb-shaped stem 4 ㆍMoon pool/headbox optimized 5 >>> MARS-B OLYMPUS TLP Hull The semi-submersible platform ‘MARS-B OLYMPUS TLP Hull’ was delivered to Shell in November 2012. The platform with the total weight of 32,800 tons was applied with a 50 year design life for the first time in the world.

Management

SHI pursues new future growth engine business based on its core competence in the shipbuilding & offshore industry. The company will strive to realize the vision ‘To Become a Global Leader in offshore industry by 2020’ with stakeholders based on its strict compliance management. Overview Management Corporate Social Responsibility Appendix Samsung Heavy Industries 2012 Sustainability Report 20 21

Vision & Strategy

Business Structure and Growth Strategy for 2020 SHI aspires to be the best in the world at implementing a variety of projects. The world’s first arctic shuttle tanker and LNG- FPSO are on our development list, which also includes LNG-FSRU and arctic containership. The Power & Control Systems KRW 3.1 trillion in sales Division has been recognized for its digital technology combined with the company’s expertise in shipbuilding & offshore business. More recently, we have expanded our business into wind power generation and made a splendid achievement of making 50% 30% 20% the nation's first export in wind power generation. Offshore business Shipbuilding business Heavy electrical equipment business • Enhance competence in offshore •Focus on special- •Power converter engineering purpose vessels with •Automated robot Vision & Strategy •Diversify offshore business including high added-value by for special subsea system using eco-friendly and purposes innovative technologies •Offshore wind •Establish optimal power generation production system

Global Leader of Ocean & Power in 2020

Business Growth Strategy Contribute to enhancing customer satisfaction and quality Based on its firm grip on the global shipbuilding & offshore market, SHI secured world-class Vision of life by providing safe and eco-friendly ships and facilities with high economic value and convenience. core competence in ship & offshore facility construction, electronics system and automated production system. We will strive for business sustainability and develop new businesses to solidify our status as a global leader. Mission

Talent-first Best in Lead Ethics Shared SHI Core Competency and Business Opportunity policy heavy change manage- growth industry ment Core value

Shipbuilding Design/ & offshore Sales Purchase Production process R&D

Core •Network with major •Offshore facilities, topside design • Large offshore facility Business structure Goal competency petroleum companies •Outfitting, electro-mechanical construction Sales •Network with global device design •High-voltage substation KRW 3.1trillion shipping companies •Structure/frequency/fluid analysis construction Shipbuilding Offshore Heavy electrical equipment •Brand power in ship •Production system automation(robot) •W elding, painting tech- •LNG-fueled ship •Floating production •Offshore wind power & offshore facility nology • •Electric system generation Operating profit margin Offshore facility interface design construction •Power distribution propulsion ship •Subsea business •Power generator & motor •Power system design(Ship power % board, wind energy con- • • 10 system, power distribution board) •Foundation Core growth Future growth engine verter construction business business business •Robot control device development

Foundation for Shipbuilding value chain Offshore value Equipment based machinery & new business expansion chain expansion electricity business expansion Overview Management Corporate Social Responsibility Appendix Samsung Heavy Industries 2012 Sustainability Report 22 23

Board of Directors

Shareholder Structure BoD Committee Structure As of the end-2012, the total number of SHI outstanding shares was 230,990,231(230,875,386 SHI operates a sub-committee of the BoD to raise the efficiency of decision-making on busi- common stocks and 114,845 preferred stocks), with the largest shareholder being Samsung ness management and strengthen the expertise of the BoD. Electronics which held 17.61% (40,675,641 stocks) of the total. At the annual shareholders meeting, the CEO reports the company’s business performance and current status to the shareholders, and exchanges opinions on major business issues. Opinions presented in the Executive Committee Committee on Internal Transaction meetings are reflected on SHI management policy after thorough review by the management and the BoD. The executive committee consists of The committee on internal transaction two full-time directors appointed by consists of three directors appointed by Shareholder Structure Status As of December 31, 2012 the BoD, and the CEO of SHI holds the BoD, including more than two out- the position of committee chairman. side directors. The committee mainly Samsung Its major tasks include deliberation of conducts pre-deliberation of major in- Electronics 17.6% and decision on issues commissioned ternal transactions to enhance trans- National 4.8% by the BoD and other general issues, parency and strengthen the trust of Pension Service excluding resolutions of the BoD, as shareholders. Mirae Asset 4.7% stipulated by corporate regulations. Management Korea Investment Management 3.6% Samsung Life Insurance Co., Ltd 3.5%

BoD Structure and Operation BoD Expertise SHI board of directors consists of two inside directors and four outside directors to make a SHI carries out company-wide expertise training programs to enhance economic, environ- total of six directors. As a professional manager, the CEO holds the position of BoD Chairman mental, social and global capacity of its executives. SHI appoints outside directors through to ensure responsible management, while the outside directors also actively take part as the outside director candidate nomination committee, in order to examine the expertise and independent entities, thereby maintaining operational balance. integrity of candidates. Current outside directors are experts from a variety of fields, including In 2012, SHI BoD held a total of ten meetings with about 100% attendance of outside direc- civil engineering, law, politics and accounting. They are appointed after a transparent process tors. Major agendas derived from the meetings were managerial issues, including approval of approval. Each outside director engages in offering advice on corporate management and for transactions with affiliates and internal accounting management system operation. Along policy making process of the BoD. with the issues regarding corporate organization and management, the company plans to discuss social responsibility issues in future BoD meetings. BoD Performance Assessment Director compensation is decided at the general meeting of shareholders and paid out based

BoD Structure Status As of June 15, 2013 on each director’s business performance within the approved limit. Executives conduct performance assessments on each business and strategy execution, and the results decide the Director Status Name of Member Position Role amount of compensations. Criteria for performance assessment are applied not only to fi- Full-time Dae-Young Park President and CEO President nance, but to risk management, such as safety, environment, labor-management relation- Won-Tae Jeong Executive director Chief of Management Support Team ship, anti-corruption and security. Part-time Hang-Shoon Choi Outside director Auditor Chan-Soon Nam Outside director Auditor Dong-Hyo Kwak Outside director - In-Man Song Outside director Auditor Overview Management Corporate Social Responsibility Appendix Samsung Heavy Industries 2012 Sustainability Report 24 25

Compliance Management Raising Employee Awareness of Compliance Management Since the introduction of Compliance Program in 2010, SHI has provided employees with regular compliance training programs for each position and division. These training programs Operational Structure are carried out based on the annual CP training plan, which is renewed at the beginning Compliance Management Organization Increasing demands for corporate social responsibility, fre- of each year. The programs are composed of General CP Course on general concepts and quent legal disputes and more rigorous sets of regulations guidelines; Compliance Performer Course for performers to improve their CP operation ca- are being witnessed around the globe. Hence, SHI has in- CEO pacity; and In-depth CP Course for divisions with possible risk factors regarding regulations troduced the Compliance Program (CP) to protect itself and on competition and anti-corruption. CCO Committee its employees from legal risks, and seek sustainable growth 2012 CP Training Program Overview as the leader in the shipbuilding & offshore industry. Our Compliance team CP activity follows a cycle of CP standards/process setup Course 2011 2012 →training & execution → examination & monitoring → as- Number of Training hour Number of Training hour course-takers per person course-takers per person sessment & reporting, which is reflected throughout the Shipbuilding E&I Power&Control Wind Overseas &offshore systems energy General New employee 344 1.6 574 1.3 management process. The Compliance Support Team sup- CP course Assistant manager 552 1.1 690 1 ports daily compliance of employees by preparing CP prin- Compliance performer (newly promoted) CL : Compliance leader/CM : Compliance manager ciples & guidelines, codes of conduct and manuals, and also Regular employee 327 1.3 297 1 offering regular training sessions. In addition, an exclusive Compliance CL 68 1 137 0.3 Sustainable management through compliance management system is operated to respond to employees on their inqui- performer course CM 847 1.6 479 1 ries, complaints, and compliance concerns. In-depth Cartel Prevention 73 4 519 1.5 CP course Contract with Subcontractors 268 3.3 424 1.5 2012 Compliance Activity Corruption Prevention 55 1.4 188 1.3 item Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Internal transaction 401 1 Organizational alignment Appoint compliance supporters and carry out a reshuffle Customs and clearance 107 2.5 Send information or proposal on and compliance standards SHI compliance management to: setup according to com- Labor relationship 34 2.5 Establish compliance control standards Compliance team 23th FL, mercial law amendments Personnel and labor relations 107 2 Samsung Life Insurance Seocho Tower, 1321-15 Seocho-Dong, Compliance training General training Response to investigation 136 0.7 Seocho-Gu, Seoul, Korea and PR activity Contract management 80 1.1 Intensive training E-mail [email protected] Online course on fair trade International finance 40 2.0 Tel +82-2-3458-6385 Produce and distribute regular PR materials Examination Special examination on fair trade 2013 Compliance Control Activity Plan Special examination on personal information Regular examination in the first half Raise compliance awareness and Regular examination in the second half Improve compliance capability Identify and deal with legal risks tighten compliance control Monitoring and Execute employee protection program CP process setup to prevent collusion Strengthen compliance-related teams Examine CP status Raise employee awareness of Establish internal transaction process •Establish Biz Compliance Team •Regular examination (quarterly) and compliance (operating a compliance center within non-regular examination •Declare the CEO’s commitment to Add anti-corruption provision to employee contracts shipyard) (at the occurrence of issues) compliance management (through an- SHI CP on major projects nual letters and company-wide events) Form and manage a consortium Enhance the performance of compliance Respond to issues and trends •Offer customized compliance training performers (CL: executives and team •Follow up and respond to issues Introduce ‘Compliance Sheriff’ system sessions (general, intensive, special leaders, CM: department heads) related to competitive authorities and and online) The management’s com- Make announcements on compliance management and •Regular training program concerned bodies mitment to compliance hold compliance committee meetings (CL: quarterly, CM: half-yearly) Report compliance control activities •Reflect CP performance to the •Hold compliance committee meetings CP performance Establish CP assessment standards for CLs assessment of executives and team (half-yearly) and report to the BoD assessment Achieve level “A” for CP assessment from Fair leaders and others Trade Commission Overview Management Corporate Social Responsibility Appendix Samsung Heavy Industries 2012 Sustainability Report 26 27

Risk Management Non-financial Risk Prevention SHI carries out preventive measures in the fields of safety, environment and compliance to effectively respond to unanticipated non-financial risks. Recently, the company has established a series of preventive measures in diverse fields such as raising Financial Risk Management employee safety awareness, preventing accidents and environmental pollution, and complying with regulations and social Our financial risk management is focused on minimizing the risks of market, credit and li- norms. quidity deriving from sales activities, and conducted by the central finance department according to the policies approved by the BoD. The finance team of SHI closely works with sales Pirate Control Program In January 2011, SHI developed the industry's first 'Integrated PirateC ontrol System' to enable ships departments to identify, evaluate and avoid financial risks, while the BoD provides document- to manage all processes, ranging from identification, tracking to control of pirates in the wheel house.W e expect this system ed policies of overall risk management as well as of specific risk management on exchange to effectively protect vessels and crew members from pirates, and significantly contribute to enhancing our competitiveness. risk, interest rate risk, credit risk, investment in financial and non-financial derivatives, and investment with excess liquidity. Risk Assessment System SHI established its own risk assessment system to constantly identify risk factors of the Geoje Shipyard’s shipbuilding process, assess risk levels, develop countermeasures, and eliminate or minimize such risk factors. Principles to minimize earnings volatility Through this effective and practical safety management, the company can reduce accident rates and minimize potential damage. Shipbuilding Hedge, order Execute, deliver process Emergency Response Manual The Geoje Shipyard categorizes emergency situation into four types: environmental accident, safety-related accident, natural disaster and ocean pollution. The shipyard has developed emergency response manuals for Steel Keel Contract Launching cutting laying Delivery each of the four situations and conducts regular training and drills. According to the organizational structure, head of shipyard, head of environment & safety team, and heads of each team have separate roles, and the situation room is on 24/7 alert for potential accidents. SHI is paying special attention to preventing ocean pollution. The Geoje Shipyard aims at preventing Interval(month) 12 5 3 10 any ocean pollution by operating a 24/7 monitoring system with ocean control ship, which is fully equipped with various disaster prevention facilities and emergency response measures. Exchange rate change

type of mergency case

Incomings Environmental accident •Oil leakage at fueling ships •Accident due to malfunction of prevention facility •Severe leakage of toxic substances

Outgoings Safety-related accident •Safety-related accident (injuries of employees) •Blocks on the dock : fall accident from top of blocks •Dock, roads : accident when moving large tools or driving •Fire/explosion accident (property damage) •Engine room of ship : fire accident •Airtight tank : fire/explosion accident when using paint or thinner •Foreign exchange risks are com- •Paint shop, shot shop, woodshop : fire/explosion accident pletely hedged through forward Raw •Welfare facilities : Gas leakage and explosion accident during repair work materials exchange contract at the time of •Utility center : explosion accident contract conclusion Engine •Common duct : fire and explosion accident •Main engine and key materials and equipment shall be ordered Natural disaster •Area with potential of collapse: retaining wall for falling stones near 3Dock area, and behind passenger within 1-2 months after contract Key materials ship plant inception to hedge against price and equipment •Area with potential of being affected by typhoons: plant building, moving shelter roof change risks •Area with potential of being affected by flood: underground power substation, underground common duct •The possibility of price hike shall •Area with potential of fall accident: moving shelter, crane be thoroughly considered at cost Plate •Environmental accident: environmental risk due to natural disaster assessment since there is no Ocean pollution •Leakage of oil/paint from ships moored alongside pier and through drainage system, scattering dust pol- hedge against steel price change lution from painting/grinding process risks Others Overview Management Corporate Social Responsibility Appendix Samsung Heavy Industries 2012 Sustainability Report 28 29

Page for Material Issues Reflection on management policy SHI Stakeholder Engagement reference Stakeholders SHI shares the quarterly performance Manage •Appoint compliance supporters and P.24~27 and Financial reports with global shareholders and incompliance risks conduct a reshuffle Institutions stitutional investors through active com- •Establish compliance control standards Stakeholder Engagement munication with them, while holding a •Form internal transaction committe series of offline meetings separately on and establish operation regulations Sustainability report works as a communication channel for internal/external stakeholders to share vital information. Thus, the company’s CSR policies and activity SHI defined its employees, clients (ship owners), partners, shareholders, local communities, NGOs, financial institutions, gov- results. Major agendas include compli- Make continuous •Promote new business policies P.12~13 ance risk management. profits •Develop exclusive new technologies P.14~17 ernmental bodies and media as its major stakeholders who affect the company’s business directly or indirectly. The company reflects stakeholder opinions and requirements in this report, as an effort to analyze their level of interest and concerns over Clients SHI holds regular monthly meetings be- Strengthen •Introduce A/S service to realize 3S & 3A P.41 the issue of sustainability. tween clients and employees. Moreover, customer •Develop shipbuilding & offshore A/S annual customer satisfaction surveys are support services application ‘M-Focus’ conducted for ship owners at the Geoje Shipyard and also for owners of ships Make efforts for •Introduce LPM (Lifetime Preventive P.41 built by SHI to identify their perspectives quality Maintenance) service and requests regarding the quality and enhancement •Establish 3D ship model inquiry system The Process of Defining Report Content services of our products. ‘SEVAS’

Partners We have a variety of communicatio chan- Support ecosystem •Introduce performance sharing system P.44~45 nels through which we listen to the opin- promotion •Hold consultations with partners Stakeholder Inclusiveness ions of our partners. Their difficulties are managed in a systematic way from reg- Reinforce partner •Support technology development and P.44~45 competence protection Identification Sustainability Context istration to follow-up monitoring, while •Support education/training and •Media review their opinions are continuously collected workforce -Review of all reports from domestic or international media through training sessions and seminars. by Communication Team Executives SHI operates ‘SORISAEM’, a system for encouraging open communication among employees, through which they can freely •Peer review and exchange opinions on major issues and the management writes replies to those postings. ‘SORISAEM’ helps the management -Review of major sustainability issues of competitors in the industry and collect employee opinions and reflect them on the company’s policies or decisions. Review Employees global leading companies

•Sustainability trend analysis Governmental SHI declared the commitment to fair Promote •Establish management policies for P.52~57 - Analysis of mega trend in sustainability management bodies trade as part of the efforts for shared environmental environment, health and safety - Analysis of global guidelines and initiatives (GRI G3.1, ISO26000, CDP) growth and development and also an- safety •Tighten the control of areas surrounding nounced R&D support plans to reinforce workplaces and toxic chemicals •Internal sustainability management strategies and KPI analysis the competence of its partners. -Analysis of goals and targets reported through the previous report Spread the culture •Make reasonable adjustments to unit price P.42~45 -Interviews with responsible TFT members of shared growth •Purchase raw or subsidiary materials for based on fair trade partner companies •Promote a culture of written contracts Prioritization Materiality Local We are growing together with local com- Strengthen the •Develop a profit model for Dadae Village in P.48 •Social concern community munities by giving back some of our prof- competitiveness of Geoje through talent donation -Collecting concerns and needs through periodical its. local communities communication with external stakeholders -Exposure to the media Give some of •Introduce a policy on purchasing ‘Geoje Love P.49~51 -Perception of benchmark companies profits back to Gift Card’ local communities •Provide local schools with development fund •Business impact -Evaluation by the sustainability TFT and employees NGO A large number of global NGOs are turn- Strengthen •Promote green partnerships P.43, 56 about connectivity with corporate strategies ing their focus from public announce- environmental between large companies and SMEs ments and press releases to on-site preservation •Organize an event marking visits and employee interviews for infor- efforts ‘World Water Day’ mation collection. SHI has faithfully and Sustainability Reduce energy •Improve vessel testing process– shorten P.62~63 Validation Completeness actively responded to the issues raised by Report NGOs and will continue to have interac- consumption the testing period by 8 days to significantly •Determining material issues based on stakeholders’ concern tive communication with them. reduce fuel consumption and business impact •Substitute obsolete equipment and •Disclosing material issues introduce high-efficiency facilities

Media SHI conducts media research on a regular basis, through which it proactively responds to the public demand and reflects on corporate policies. >>> PACIFIC ORCA SHI successfully delivered ‘Pacific Orca’, Corporate Social the world’s largest wind turbine installation vessel, to SPO of Singapore in July 2012. This vessel allows simultaneous transportation and installation of 12 units of 3.6MW-class Responsibility wind farms to a depth of 60m underwater. SHI provides employees with a variety of talent-nurturing programs and welfare system to enhance each individual’s competency and quality of life. Based on active communication with external/internal stakeholders, the company strives for shared growth with partner companies and local communities. Overview Management Corporate Social Responsibility Appendix Samsung Heavy Industries 2012 Sustainability Report 32 33

Employee Labor Council SHI closely works with Labor Council to promote win-win labor-management culture. We believe the company and employees must enjoy shared growth, and corporate competitive- Employee Status ness can be enhanced only through communication, trust and harmony between labor and SHI contributes to the improvement of local communities, the national economy and youth management. The labor council is composed of employee representatives, and the two sides employment. The total number of SHI employees stands at 13,504 as of late 2012. have the same number of members. When the council is held, labor conditions and labor- management issues are discussed. Category Unit 2010 2011 2012 Total Person 13,393 13,350 13,504 Regular Business Briefing Session Type of Regular Person 12,821 12,776 12,933 SHI holds quarterly business briefing sessions to share information on business status such employment Non-regular Person 572 574 571 as orders received, profit and loss, performance, and also our new businesses such as wind Turnover % 3.7 3.6 3.8 power and sub-sea. Prior to sessions, we collect employee opinions through interviews so as to effectively communicate with employees at a Q&A session.

Employee Communication Contract Briefing Session SHI strives to build a flexible and dynamic organizational culture. Contract briefing sessions are held to share the project details, when the company receives orders for new types of ships, such as LNG-FPSO, and for large-scale offshore projects. 3 Steps for 2012 Creative Organizational Culture

Website Disclosure We disclose major business operational changes according to the Securities Exchange Act. 01 02 03 Business information on finance, investment and project progress are disclosed through our website in a transparent manner. Think creatively, Trans- Healthy Loyalty work smart, parency mind and be warm- Complaint Resolution for Employees hearted SHI has its intranet and portal systems open to all employees to share difficulties and feedback. In order to deal with such difficulties, relevant departments such as general affairs and human resources set up and run adequate sets of measures. As a result, the number of complaints resolved in 2012 alone reached 543, way up from 137 in 2011.

Current Status of Complaint Resolution through Sorisaem Unit: Number of cases (ratio)

Special Case NO. Description 2011 2012 1 Automoblie 35(26%) 147(27%) In-house Reporters 2 Restaurant/Dormitory/Restroom 18(13%) 99(18%) We have maintained a group of in-house report- 3 Security/Parking 17(12%) 37(7%) ers since 2010. Employees who are appointed 4 Transportation safety 16(12%) 39(7%) as in-house reporters engage in planning, reporting and producing news to be delivered 5 Sports facility/Lighting 6(4%) 34(6%) through various media channels such as com- 6 Lighting/Heating/Plumbing/ 6(4%) 43(8%) pany newsletter, in-house broadcasting and 7 Database system, SW 6(4%) 54(10%) blog. The reporters contribute to stimulating internal communication and enhancing em- 8 Village fund, services for employees 5(4%) 32(6%) ployee loyalty and pride. 9 Social contribution, community service 3(2%) 10(2%) 10 Miscellaneous (i.e.in-house broadcasting and landscaping) 25(18%) 48(9%) Overview Management Corporate Social Responsibility Appendix Samsung Heavy Industries 2012 Sustainability Report 34 35

Talent Training System Number of Trainees, Training Expenses The talents we seek for are those who challenge the future with passion, change the world with creativ- Item Unit 2010 2011 2012 ity, and communicate and cooperate with others with open mind. Our talent training system is designed All employees Hour/Number of 84.3 68.4 28.9 to nurture the best job performers with global competence and leadership; to foster high performance Executives trainees 18.0 17.3 16.0 technicians with creativity and innovative mind; and to establish organizational culture where employees Managers 74.1 82.0 72.1 can communicate through learning. We are working hard to grow our talents into the world’s best ex- Office workers 119.4 137.8 71.1 perts with job proficiency, global competence, leadership ability and general capacity. Technicians 27.5 18.2 5.5 Number of internal training courses Number of courses 711 594 526 Employee Competence Enhancement Gross expenses KRW million 331 314 352 on external training support We encourage our employees to fully exhibit their competence through a variety of customized training programs. Localization Strategy Program Objective Course description For overseas operation, we employee locals rather than dispatched workers as part of the efforts to con- Top Talent Nurture top talents Regional expert course, Techno-MBA course, tribute to the local economy and gain support from the local community. The annual local employment Training who will lead the 21C leader course, and 21C CEO course Program future of Samsung of over 98 percent clearly shows our extensive efforts for localization.

Globalization Cultivate global CEOs • Globalization training: Program with international courses for overseas business managers, for employees Overseas Local Employees Unit: person(ratio) mindset returning from or assigned to overseas branch offices, as well as on regional studies 2010 9,690 (98.6%) • Foreign language training: 8 courses on foreign languages including English, 2011 11,041(98.9%) Chinese and Japanese 2012 Leadership Foster a sense of mis- • Basic training: 11,289(99.3%) Program sion as 21C leaders For newly hired employees and newly promoted and build employee managers & executives responsibility, initiative • C apacity training: and expertise For employees to build capacity for the upper position Welfare

Professional Nurture talents to Offer various programs on new business management In order to ensure employee welfare, SHI has been subsidizing monthly payment of their pension pro- Job Training create an innovative and organizational culture through benchmarking of grams by financing identical amount that they pay every month. The volume thus far is reaching approxi- Program organizational culture advanced companies at home and abroad, and exchange mately 3% (as of 2012) of the entire gross income and this calculates into KRW 146,700 per month (the through professional with universities and other educational institutions job training average in 2012). In addition, the retirement pension program has been gradually introduced since 2008 and all employees are now entitled to the benefit. Both DB type and DC type are currently managed. In Cyber Foster talents for Provide more than 40 cyber education programs on Education our company, for our e-business success strategy, global management, addition to subsidizing for pension programs, various other perks are offered as part of the company’s Program country, and ultimately business manners, current affairs & economy and welfare program, including provision of medical fees, housing fees and medical check-ups; subsidy for the global human presentation English. society of school expenses; and operation of child care programs. In this way, SHI strives to provide care-free working environment for all employees and earn trust from their family members. In particular, in order Overseas Cultivate global Assign around 15 qualified employees to overseas regions Regional talents for localization, to grow them into overseas regional experts. Those to be to help employees deal with childcare and child birth related issues, the company has built its in-house Expert Pro- informatization and assigned are selected among recommendees for each childcare facility.SHI has been running after-school programs to resolve issues of private education ex- gram specialization region through interviews and spend 12-21months in the penses. The company ensures resting time for on-site staff, for instance, by guaranteeing longer hours region free from work of lunch break during summer time (120 days) to relieve their fatigue and prevent accidents (Extension Corporate Allow employees to ac- Our Corporate University signed a comprehensive of lunch hours: 30 minutes when the temperature goes above 28.5 degrees Celsius at 11:50 AM, and one University quire Associate/Bach- agreement on business and academic cooperation with elor/Master degrees Pusan University in 2007, and gained official approval hour when the temperature goes above 32.5 degrees Celsius). In addition, healthy foods, salts and iced from the Ministry of Education, Science and Technology, water are provided to ensure the wellness of employees during summer time. providing applicable knowledge to actual business tasks. Overview Management Corporate Social Responsibility Appendix Samsung Heavy Industries 2012 Sustainability Report 36 37

Support for Sustainable Post-retirement Life Client Considering that most of SHI employees are willing to work until retirement age and put the most emphasis on job security, the company has established the Career Development Center to provide services and programs that help retiring employees find new jobs or start their own Communication with Clients businesses. Consultants are hired to advise them for various purposes including job place- In order to build flawless ships to maximize customer satisfaction, SHI organizes monthly ment, self-examination and aptitude test, and job training. The company is partnering with job meetings between its clients and employees. The process where shipowners themselves can placement agencies as well to help employees open their new chapter of life. check how their ships are being built is currently under discussion. After implementation of improvements requested by shipowners, progress report is shared with them, and best efforts Key Programs and Outcomes are made to respond to their requests for safety, quality and environment management.

Education program for the soon-to-be-retired Job placement for retiring employees Customer Satisfaction Survey among Clientele

• C ounseling and consulting services SHI conducts annual survey among shipowners at the Geoje Shipyard as well as owners of 2010 44 • Job matching and job search SHI-built ships to identify their perspectives and requests concerning the quality and services • Resume writing, consulting service 2011 44 of its products. The average scored 77.9 among twenty one shipowners as of 2012. Based on for job interviews the results of the survey, the company analyzes major unsatisfactory issues to find improve- 2012 • Follow-up activities after employment 48 ments for each business unit. The customer satisfaction survey has been improved through PI tasks as part of the efforts to make improvements in survey method and thus ensure accuracy in survey.

Support for female employees Special Case SHI strives to create a working environment favorable to female employees by introducing various programs including infant child care center, nursery school, after-school learning Fun Communication with Foreign Ship Owners and Employees class and adjustment of commuting time. SHI provides shipowners and classification societies as well as foreign employees at the Geoje Shipyard with an opportunity to build unforgettable memories and grow close with SHI executives and employees through various events. At this year’s event, around 100 employ- Item 2010 2011 2012 ees participated to show unity while dancing in group to the music ‘Gangnam Style’ by the Number of females (ratio) 923(7.0%) 919(7.0%) 928(6.9%) Korean singer PSY during lunch time. They had a great moment while dancing in souvenir On child-care leave 42 63 81 T-shirt together with a number of spectators.

Special Case

The 1st Korean Speaking Contest for Foreign Employees ‘The 1st Korean Speaking Contest for Foreign Employees’ was held in the Geoje Shipyard on September 19. The contenders showed all different levels of Korean proficiency but with love and affection for Korea as well as SHI. Overview Management Corporate Social Responsibility Appendix Samsung Heavy Industries 2012 Sustainability Report 38 39

Customer Satisfaction Activities Fortifying Safety and Environment Protection Standards For employees who stay at the Geoje Shipyard for at least 4-5 years, we provide support to Customers consider safety as the most important factor in ship contract and delivery, and help them overcome their homesickness. We also encourage them to enjoy leisure activities safety is directly related to the reputation of the business. SHI maintains its safety standards and have better understanding of Korean culture through a variety of activities. In addition, more rigorously than the industry average. As environmental impacts on ship operation di- our customized services allow them to select sports and voluntary activities to be offered by rectly affect operation costs, the company fully abides by environmental standards that its shipowner and country. customers present before contracts. For customer safety, an exclusive taskforce was established to hold monthly HSE Alliance Meeting, manage Alliance Focus Group (AFG), and orga- Sports Festival nize safety workshops/forums for each project. •Friendly bowling match(3.8) / Evergreen, Euronav •Friendly foot volleyball match(3.23) / QGOG •Friendly softball match(5.24) / SPO “Stop for Safety” Program •Friendly table tennis match(5.14) / CSCL •Friendly bowling match(7.13) / GASLOG SHI has established twelve safety regulations for all employees, including those of its con- •Friendly softball match(5.24) / OCR, ABS •Friendly softball match(7.16) / OCR tractors. In case of emergency, the so-called “stop for safety” program will be executed. In case immediate response is not available, managers will inspect the site to analyze causes and take safety measures to later resume work process. Leaflets in Korean have been distrib- VG(Volunteering Geoje) Activity Under the slogan ‘Volunteer activities with shipowners and uted and English, Russian and Chinese versions are to be provided later. classification societies’, our voluntary group ‘VG (Volunteering Geoje)’ has been working with shipowners, classification societies and foreign engineers since 2006. VG engages in commu- Stop for Safety Program Map nity services including after-school English camp and voluntary activities for rural communi-

ties, and also builds bridges for better understanding between different cultures. Stage1 Case of Immediate Measures Available

Shell FLNG S/C Commemorative Event SHI held a large-scale S/C commemorative event Identification of Identification of incompliance with twelve major Emergency Situation safety rules and of emergency situation organized by the head of the Geoje Shipyard with the participation of VVIPs from Shell and Technip who visited the shipyard for Super Sponsor meeting on October 8. Special Case

Measures Stop for Safety ‘Be Safe, Geoje Honorary Citizenship Conferment A ceremony was held to confer Geoje Honorary Citi- Taken Securing safety of workers as the top priority (stopping for safety to conduct communication) Employees’ zenship to Mr. Alex, the supervisor of Stena Drill shipowner, on November 3. Campaign Process Explanation of the reason for stopping for safety The last page of our Resumed Communication among and request for safety measures monthly newsletter Hat Knitting Campaign SHI joined with shipowners and supervisors of classification societ- Personnel(Using BBS+) (using BBS+) introduces a feature ies to participate in Save the Children's Knit Newborn's Hat campaign, which was initiated to Program - Issues of safety/condition of individual workers article titled ‘Be Safe, Terminated - Safety measures Employees’, which prevent newborn babies from dying of hyperthermia. (resume the process after communication) yes Agreement upon Safety Measures contributes to enhanc- no ing employee safety awareness with one Stage2 Case of Immediate specific theme for the FLNG Event VG(Volunteering Geoje) Activity Measures Unavailable Difficulty in on-site decision making, issues month. concerning facilities management, disagreement Communication with Managers among personnel (Detector: handing over point (or HSE) of contact, mission accomplished)

Sight Inspection by Managers Identification of incompliance with twelve major (or HSE) safety rules and decision upon stopping for safety

Modification of operation standard/ Cause Analysis/ Safety Measures development of jigs safety education/ Feedback upon safety measures (work resumed after assessment of relevance of Process Resumption safety measures) Overview Management Corporate Social Responsibility Appendix Samsung Heavy Industries 2012 Sustainability Report 40 41

BBS+ Quality Assurance BBS+ refers to voluntary safety measures for employees to take safety responsibility for not In order to secure competitive advantage based on unparalleled quality, SHI encourages all only themselves but also their co-workers. Behavior observation centric BBS(Behavior Based employees to pursue system improvement and innovations, and thus to create a solid cor- Safety) has been added with sincere camaraderie to encourage employees to take safety is- porate culture and enhance technological competence. Furthermore, to ensure sustainable sues in sincere manners and secure safety for co-workers as well as themselves. BBS+ is a business growth and customer satisfaction, the company has implemented ISO Quality Man- process for tangible improvement in safety which involves trained workers monitoring unsafe agement System. As part of such efficient management, SHI aspires to achieve the goal of activities and registering the results of measures taken to make substantial improvements "3-Free Shipyard": flaw-free quality, supervisor-free building vessels and stop-free delivery. through reviews, operation committee and leadership meetings. In order to realize this goal, SHI has set up the "Three Major Quality Assurance Policies" *3S, 3A Service? SHI provides Speedy, Satisfactory which includes customer satisfaction in quality, first-class technical skills and executive and Steady services to meet the re- + BBS Map quality, and optimal quality management system in every corner of its business. In addition, quests of shipowners at Anywhere, systematic and well-structured preemptive measures are rooting out potentials of quality Anytime and for Anything through a web-based system. We enjoy high issues to achieve perfection in quality and customer satisfaction. SHI puts its aspiration into reputation for our customer sat- action as follows. isfaction management by offering After Service Policy As part of the efforts for shared growth with shipowners, SHI promotes such prompt and customized ser- BBS+ vices based on three-way commu- 3S and 3A services* based on interactive communication by operating a web-based FOCUS nication among itself, shipowners Activities

S System, through which it deals with the requests of shipowners made after ship delivery and partners. upp ort ing fo t r within 24 hours. or ac p ti re vi f tie o s n o su i k c s ac h is b d a ‘M-Focus’ Application For the first time in the industry, SHI developed ‘M-Focus’, a smartphone application to provide after- m e s b e e u F Training for Workers s S ta b sales services to ships and offshore plants. M-Focus allows users to register, inquire and manage problems with ships and li (Annual, BBS+ Lecturer) s h m e offshore facilities under operation at anytime and anywhere by using their smarthphones. M-Focus has realized the real-time n t

Training for Supervisors o f communication between shipyard and customers to enhance customer satisfaction and improve our non-price competitive- p r (Annual, BBS+ Lecturer) o m

o ness. The application will be provided gradually to all shipowners in time. t i o

BBS+ Training n s SEVAS System SHI established the industry’s first 3D system to inquire ship models for production site use, SEVAS (SHI En- terprise 3D Visualization and Stimulation).The SEVAS system allows users to check 3D images of products at site in advance Sharing progress of Feedback BBS+ BBS+ BBS+ Leadership Team-led activities by using PC and mobile devices. We expect the 3D design drawing, upgraded from the existing 2D, to shorten the read time Operation Leadership Review Sharing progress and prevent malfunction. Committee Observation and sharing Team in supervisory major safety-related issues activities

Weekly, Hosted by Biweekly, Hosted Monthly, Quality Incentive Awards Ceremony in 2012 The Quality Incentive Awards Ceremony is designed to make a comprehensive team leader by team leader Hosted by leader of manufacturing team evaluation on quality performance, quality assistance and thank-you letters from shipowners in order to spread the culture of quality assurance.

Special Case Special Case LPM Service LPM Service (Lifetime Preventive Maintenance Service) is designed to prevent claims in advance. BG Group Holds Gold Safety Cap Awards Ceremony Technicians from SHI and its equipment suppliers make a visit to ships delivered to clients and On October 15, our key client BG Group held ‘Gold Safety Gap Awards Ceremony’ check if there is any problem with key equipment or ship operation. They prevent any potential at the Geoje Shipyard. Gold Safety Gap is awarded for an outstanding contribution defects in those ships, contributing to reducing the number of claims and enhancing the safety of to workplace safety among employees of BG Group’s partners across the world. ship operation. Moon Seok Gang, Leader of Outfitting Team 1 of Doeun Corporation, received the first Gold Safety Cap among SHI employees, and his case will be introduced to BG Quality Song Contest workplaces all over the world. Our Quality Management Team organizes a variety of events for customer satisfaction and quality assurance. For this year, they selected 10 pieces of ‘Quality Song’ through employee contest. Overview Management Corporate Social Responsibility Appendix Samsung Heavy Industries 2012 Sustainability Report 42 43

Partner Companies Fortifying Grounds for Sustainable Growth The company has formed a consultative body with its partner companies to help them with networking, provide support for secondary subcontractors and promote win-win growth cul- System of Fair Trade and Shared Growth ture to thereby establish “win-win growth system.” Fair trade and shared growth are essential in securing sustainable business competency, and now being more emphasized for their importance. In order to maintain fair business practices Encouraging Agreements with Secondary Subcontractors Based upon our recommenda- and enhance the competitiveness of partner companies, we are reinforcing the partnership tion, 171 of our primary suppliers made a voluntary agreement on shared growth with 340 with our partners, mainly led by the Win-Win Growth Office. secondary suppliers. SHI strives to ensure the delivery of support to secondary subcontractors through continuous education/training and PR activities.

Promotion 01 Reasonable Adjustment of Unit Cost For the stable management of partner companies, SHI Providing Financial Support for Secondary Subcontractors Some parts of the funds raised of Fair actively considers their opinions in adjusting unit price. In case raw materials significantly with Woori Bank(totaling KRW 12 billion) were designated to secondary subcontractors, re- Trade affect unit price, the company reflects their increase/decrease on unit price to lessen the sulting in management stability of four companies which used funds worth KRW 4.5 billion burden of partner companies. in 2012.

02 Purchase of Raw (Subsidiary) Materials When it comes to raw (subsidiary) materials with Encouraging Support for Secondary Subcontractors SHI has carried out a PR campaign to scarcity or low bargaining power of suppliers, SHI purchases and provides those materials ensure the delivery of support and benefits, regarding technology, training and workforce, to partner companies with charge or for free to support their stable production. from primary suppliers to secondary ones. The result was that 20 of our primary subcontractors provided a variety of support activities for about 50 secondary subcontractors. In addition, 03 Promotion of Written Contracts We are promoting the culture of written contracts through- we selected the best primary subcontractors for ‘Fair Trade and Shared Growth’ to confer out the shipbuilding industry by eradicating oral contracts with primary suppliers and also the ‘Best Partner Award’ at the regular general meeting of Seong Jo Hoi(consultative body of recommending written contracts to secondary suppliers. major SHI partners) and ‘Achievement Award’ at the SHI Foundation Day Ceremony.

04 Establishment of Fair and Transparent Trade SHI conducts a campaign to root out unfair Communication with CEOs of Secondary Subcontractors The CEOs of secondary subcon- trade practices through partner meetings and outsourced information system, and also tractors were invited to the Geoje Shipyard to check the status of their supplies and ships operates a system through which employees can voluntarily report activities against fair under construction, and the event deepened their understanding of SHI while boosting their trade. confidence in their own products. Furthermore, SHI had an in-depth communication session with them, listening and responding to their management status and difficulties regarding contract culture and technological environment.

Special Case SpecialSpecial Case Case Promoting Green Partnership between Large Corporations and SMEs 2012 Best Partner Awards Ceremony SHI made a ‘Voluntary Agreement to Ensure Shared Growth between Large Cor- porations and SMEs’ with the Ministry of Trade, Industry and Energy at the ‘Large- SHI selects the best partner companies based on the evaluation of their safety, Medium-Small Enterprise Green Partnership Launch Briefing 2012’ on December quality, production and business performance of the previous year. In 2012, a 7. Green partnership refers to a shared growth strategy: providing partner compa- total of 5 companies, including Gyeahrin Industry of Production Team 1, were nies with the parent company’s techniques and know-how of green management granted the Best Partner Award after going through the evaluation of process and production. In this agreement, SHI pledged to establish an energy and resource compliance, per capita productivity, quality and safety. The awardees are entitled circulation network by sharing its energy saving technology as well as know-how of to receive plaques and send more of their employees to overseas infrastructure harmful substance management and greenhouse gas reduction with 40 shipbuild- training. ing partners for the coming two years. Overview Management Corporate Social Responsibility Appendix Samsung Heavy Industries 2012 Sustainability Report 44 45

Local Unit: billion Support for Welfare Programs (136 companies) Unit: million in KRW Activities for Shared Growth Procurement in KRW Financial Support SHI makes payments entirely in cash while introducing 'Shared Growth Item Cost Fund' worth KRW 296.4 billion by depositing KRW 79 billion. Thanks to the fund, partnering Incentives 104,193 companies can take out loans with interest rates lower than the standard interest rate as the 856.9 Cash gifts for family events 113 Subsidies for school expenses 6331 total interests of the deposit are used to slash the interest rate of their loans. In addition, the 840 company has contributed to improving the management conditions of its partners by making Subsidies for housing loans 398 payment to them three times a month. Subsidies for safety outfitting 13,927 Dormitory for foreign employees 6,046 2011 2012 Support for Technology Development and Protection To enhance the competency of our Miscellaneous 40,964 partnering companies, a series of technical support programs are run to expand the scope Total 171,971 of partnership in the development of technologies and core components, and also to support for their patent application. In addition, the company shares its technologies by dispatching Partner Consultative Body (Seong Jo Hoi) | “Seong Jo Hoi” is a consultative body of major SHI its relevant personnel to partner companies and facilitates technology protection measures partners, and most of its 69 members are located in Busan and Gyeongnam Province. Busi- through Technology Escrow. ness volume with these member companies is increasing every year. SHI is fostering win-win partnership with the consultative body by giving it priority for winning orders with the condi- Support for Training and Human Resource Samsung Heavy Industries is offering a variety of tion that price, quality and supply schedule are all in similarity. training programs to partnering companies and helping trainees land a job at those companies after completion of the programs in SHI Technology Institute. The company has provided Support for Sales Increase of Partners | Due to the recent paradigm shift in the shipbuilding the employees of its partners with educational programs on business innovation and labor- industry, SHI provides a variety of support activities for its partner companies to increase their management culture for four months. Various other programs are also provided to help them sales, such as support for entry into overseas markets. become licensed in tower wagon operation and painting quality assurance. SHI also supplies its partners with safety training programs participated by more than 43,000 employees every year to enhance their safety awareness. Partner Sales Status Unit: billion in KRW

Performance in Training and Support Activities

Number of participants(person) Expenses(million won) 2011 1,515.3 Increase Competitiveness Reinforcement 5,558 576.8 2012 1,780.8 17.5% Productivity Enhancement Attendee 516 846.5 Completion 473 Employment 427 Early Payment to Subcontractors for Holidays | SHI makes early payments to subcontractors Quality Competitiveness 176 (137 Companies) 1.9 Improvement before major holidays so that its primary subcontractors ensure management stability and secondary subcontractors enjoy the subsequent benefits. Support for Recruitment SHI organized a series of job fairs for its partner companies strug- gling with labor shortage, and dispatched its employees to those companies for quality and Outsourcing Quality Assurance Testing | The company outsourced quality assurance testing process improvement through various innovative activities. to its partners to cut down their expenses on quality test.

Other Support Activities for Partner Companies Outsourcing of Quality Assurance Testing to Partners Profit Sharing System | SHI runs its own deliberation committee to assess improvement in Total Number of Number of Ratio of Partner Expense Testing Outsourcing Outsourcing Reduction specification and technology proposed by partner companies. Once proposals are passed, 12,469 1,596 12.8% 63.8 million won the company holds its policy of paying back fifty percent of revenue increase incurred by the implementation. Overview Management Corporate Social Responsibility Appendix Samsung Heavy Industries 2012 Sustainability Report 46 47

Local Community

Basic Policy of Social Contribution Activities Modeling of Major Social Contribution Projects SHI launched its firstC ommunity Service Group in 1995, and since then has been at the fore- front in embracing the underprivileged, based on its principle of “win-win and sharing”. As of 2013 the Community Service Group includes two hundred fifty six in-house service groups comprised of employees from across the organization. The group is leading the establish- Leading Changes ment of sustainable community by offering services to local communities, environment sec- and Innovations tor, welfare facilities, households with the vulnerable, youth facilities and schools in the form of scholarship. In addition, we have a variety of service programs tailored for each community and beneficiary group as follows: opening and maintaining halls for senior citizens and children’s playgrounds, cleaning up the environment, guiding juvenile delinquents in the right direction, helping the disabled with rehabilitation exercise, granting scholarship to underprivileged children, supporting food banks, sending books to child headed families, providing Resolving Issues of Sustainable Business Strategic Forward-looking voluntary services to remote areas, participating in blood donation, making kimchi for the Local Communities Activities Business Business needy and offering helping hands to rural communities. SHI provides these service programs Revitalization of Eco-friendly & Green Developing Specialties Activities to Support to not only the local communities close to its workplaces but to further areas for disaster Rural Areas Business Activities of Local Communities Youths recovery activities. The company will strive to fulfill its social responsibility through various • Generating profits via • Establishment of • Business customized • Scholarship programs social contribution activities, and make the world a happier place to live. community enterprises “RE-BORN” for local communities for outstanding students, subsidies for • Revitalizing relation- • Promoting recycling (marine tourist attrac- school lunch programs ship and support in and eco-friendly vol- tion): Painting on the human resources and unteering activities: wall at tourist villages • After-school programs Sustainable and Shared Growth materials Reuse of bicycles, • Activities to help the for middle school students in remote rural with Local Community for Innovations and Changes collection of used cel- underprivileged: Home lular phones and riding coming programs for areas bicycles multi-cultural families, • Mentoring programs invitational events to for middle school stu- work sites for the un- dents in rural areas derprivileged

Establish Partnership Special Case

SHI with Expo 2012 Yeosu Korea OCBPA(Ocean & Coast Best Practice Area) was opened at Expo Local Corporation Employees 2012 Yeosu Korea held under the theme ‘The Living Ocean and Community Coast’. OCBPA mainly presented human efforts for the future of ocean, and also the world’s best policies, technologies, know-how and products in the ocean and coast area, according to four categories of ocean observation, ocean technology, • Resolve Local Issues • Establish the Foundation for • Fun & Price ocean biodiversity and ocean conservancy. SHI displayed the • Promote Local Specialties Sustainable Management • Internal Communication nation’s first LNG-FPSO model developed in 2008 to introduce • Integrate and • Secure Corporate • Spread the Culture the world-class technologies. Communicate with Locals Competitiveness of Sharing • Form a Consensus with Local Community Overview Management Corporate Social Responsibility Appendix Samsung Heavy Industries 2012 Sustainability Report 48 49

Reviving Fishery Tourism – Dadae Village in Geoje Supporting Schools in India A poor fishing village Dadae has been reborn as a ‘strong medium enterprise’ with annual net SHI supports IT and science education for public school students in Delhi, India. The com- profit of KRW 200 million. Such change was possible due to talent donation, through which pany had a groundbreaking ceremony on September 13, for education facilities improvement the small village achieved Samsung’s business know-how and turned itself into a luxurious at Sarvodaya Public School located in Dwarka, Delhi, including IT center establishment and tourist attraction. Under the sisterhood relationship established in 2008, SHI has provided science lab renovation. Sarvodaya Public School is currently not capable of providing its 6,000 a variety of support to Dadae Village, including talent donation by four affiliates. With the students with proper computer education facilities or science labs. Thus, SHI decided to do- business know-how of Samsung, the village residents began to develop business models by nate a variety of experimental instruments after establishing an IT center with 50 PCs and themselves and even purchased a cruise ship worth KRW 1 billion by adding their own fund internet equipment and renovating science labs. This project will be implemented together to the government subsidy. As a result, the village saw 100 percent of increase in its annual with Plan Korea, an international child support organization, and the fund is expected to reach sales and expects its net income to reach KRW 200 million this year. KRW 150 million by combining the employee collection of KRW 75 million with the matching grant. With the opening of IT center, IT training courses will be offered to 11th to 12th students as a regular curriculum. Furthermore, 30 SHI employees including those from SHI India De- CAP Agreement to Prevent Child Assault sign Center visited this school to draw paintings on the wall, distribute school supplies, have SHI made a CAP (Child Assault Prevention) agreement to promote child rights and prevent a field day and make miniature ship models with students. Those activities were joined by child assault with ChildFund Korea and the Geoje Office of Education on May 2. Through the employees of Shell India, which is located close to the school and ordered the world’s largest CAP programs at ChildFund Korea, SHI has provided training programs for a total of 3,120 LNG-FPSO to SHI, and considered all the more meaningful given that they were a joint vol- parents, teachers and students at eight elementary schools in Geoje City during the year unteer work between shipbuilder and shipyard employees in a third country. As a member of 2012, and also participated in nurturing CAP experts among employees’ family members. global Samsung, SHI will make all-out efforts to help the needy across the world.

In-house Service Group to Participate in the 7th Geoje Social Welfare Regional Conference About 50 SHI employees belonging to in-house service groups participated at the 7th Geoje Social Welfare Regional Conference on August 25. The conference was organized to share welfare information under the private-government cooperation and to upgrade the welfare services of local communities.

Special Case

Supporting Multi-Cultural Families Considering Local Characteristics Contributing to Local Economy Revitalization Multidimensional programs have been introduced to resolve social conflicts caused by in- with Bulk Purchase of Gift Cards creasing number of marriage-based immigrants and their cultural and linguistic differences. SHI purchased a massive amount of Geoje Love Gift Card worth KRW The programs will be expanded to the children of such marriage-based immigrants in the 6.5 billion as part of the efforts to revitalize the local economy suf- fering from the industry recession and lower number of tourists. Our near future. purchase amount exceeds 13 percent of the total sales of the gift card worth KRW 43 billion from the launch in 2006 to late June in 2012. We expect the purchase to boost the domestic economic recovery from a Drawing Paintings on the Wall prolonged recession. In order to promote the sales of the gift card, SHI at Parangpo Village opened an exclusive sales counter in the Geoje Shipyard, resulting in On June 12, a total of 20 SHI employees together with Wall Art sales of KRW 385 million in 2010 and KRW 825 million in 2011 including KRW 400 million for donation. Such high sales could be achieved by Voluntary Group turned a grey-colored long wall at Parangpo replacing the company’s incentives and subsidies in cash or kind with Village into a beautifully colored piece of work. Geoje Love Gift Card. Overview Management Corporate Social Responsibility Appendix Samsung Heavy Industries 2012 Sustainability Report 50 51

Eco-friendly Green Business SHI to Publish Textbooks to Cover Entire Subjects of Shipbuilding and As part of SHI’s strategic community service activities, eco-friendly programs are run to pro- Provide Development Fund for Specialty High Schools mote sustainable management. The most notable examples include support for starting a (Meister High Schools) flea market for employees “REBRON,” and a bicycle recycling business “ECO Bicycle”. SHI is making the headline as it is introducing a set of textbooks covering all the subjects under the category of shipbuilding, thereby targeting specialty high schools, the so-called Launching the 6th Samsung Youth Volunteer Group Meister high schools in shipbuilding, which are under academic-industrial partnership with Samsung Youth Volunteer Group was launched in 2007 to help the youth in Geoje build sound the company. SHI has been in academic-industrial partnership with Geoje Technical High characters and spread the culture of volunteering. In 2012, a total of 40 middle school stu- School since 2008 and come up with detailed plans for publication of textbooks to cover sev- dents participated in voluntary activities including visit to welfare facilities and environmental enteen subjects. Sixty field experts from the Geoje Shipyard with master or doctorate degrees clean-up aligned with other environmental organizations. and more than five years of experience have participated and so have thirty school faculties. As a result, six textbooks in 2009, five in 2010 and six in 2011 have been published after the approval from the education authority of Gyungnam Province and have been used in classrooms Holding ‘Welcome Mentee Day’ since. The authors of the textbooks gave their support for aspiring engineers by donating fund In 2012, Samsung Group conducted a mentoring program for college students, ‘Gift for You: to school authority. In 2009 and 2010, the authors raised a fund worth of KRW 30 million and Samsung Mentoring Service Season 2’, and as a part of the program, SHI invited the attend- in 2011, the authors donated all of their copy money, which is worth KRW 90 million. SHI has ees to the Geoje Shipyard to hold ‘Welcome Mentee Day’ event. The event saw around 320 been providing Geoje Technical High school with textbooks as well as lecture programs since participants including 70 employee mentors and 250 college student mentees from across before the school was designated to be a Meister high school. the nation. The students enhanced their understanding of shipbuilding industry through on- site visits and executive lectures, and had quality time with mentors who gave them tips on job preparation and worklife.

After-school Program In order to resolve the education gap between urban areas Talent Donation for the Youth and rural areas, SHI has offered its after-school programs During the period of ‘Samsung Global Volunteering Festival 2012’, employees at the Geoje for one hundred and eighty students in three middle schools Shipyard provided after-school programs for local students: magic show and Yut game at since 2006. The company’s researchers are volunteering to the Geoje Shipyard on October 17, quiz contest at Dongbu middle school on 19 and facility help students with their school work in subjects such as improvement at Doondeok Study Room on 20. English and Mathematics. As a result, the program is receiving warm welcome from the community members, with the result of receiving the grand prize at the 1st Korea Donation for Education and the Prize of the Minister of Education, Sci- ence and Technology at the 4th After-school Contents Fair. Overview Management Corporate Social Responsibility Appendix Samsung Heavy Industries 2012 Sustainability Report 52 53

Health, Safety and Environment The World’s Healthiest Shipyard – The Best Health and Environment Facilities for Workers

HSE Management Policy In-house Clinic Physical Therapy Department Health Care Center Under the management philosophy of human respect, SHI maintains Health, Safety, Envi- Services including medical Rehabilitation treatment is The center provides employ- ronment and Green Management as its core values and strives to make its business free checkup, consultation and provided for workers suf- ees with a variety of health from diseases, accidents and pollution. The company saves resources and energy, minimizes treatment as well as health fering from backache and improvement programs in- emissions of GHGs and fulfills its social and ethical responsibilities. improvement activities are muscular skeletal diseases cluding yoga and Chi prac- provided so that workers can to relieve pain and improve tice along with medical fa- Diagram of HSE Management prevent general or work-re- functions. cilities. In addition, regular lated diseases. Emergency lectures on major diseases medical services are also such as muscular skeletal The safest and cleanest shipyard in the world offered in the event of ac- disease and cardiovascu- Disease- Accident- Pollution- cident. lar disease are provided at World-class Shipyard free free free health lecture room.

Health Management Environment Management •Improvement of working environment •Maintaining and improvement of ISO 14001 •Examination of working environment •Development of eco-friendly technologies •Management of component duality and products •Management of MSDS •Zero environmental risk •Operation of Committee for Improvement of •Improvement of environmental infrastructure Working Environment •Preservation of local community environment

Safety Management •Maintaining and implementation of OHSAS 18001 •Well-organized activities to enhance safety and prevent accidents Health Improvement Programs •Rapid response to accidents and accident prevention Happy Well-being Center SHI opened its Happy Well-being Center in November 2008 with its •Preemptive assessment of risk factors throughout working process •Continuous education and promotion own set of goals: enhancing each employee’s mental health and capability in stress management and thus increasing work efficiency by sharing difficulties at home and work and giving tips to overcome them. Visits to Happy Well-being Center help employees find answers to problems that they cannot handle by themselves, as clinical counselors and psychiatrists give For efficient HSE management, SHI does as follows: out helping hands with their expertise. The program offers not only helps to resolve issues of 1 All SHI employees, partner companies and customers understand the principle and goal of HSE management and volun- interpersonal relationship, work-related stress, marital conflicts and child-raising but also tarily participate in relevant activities based on effective communication. various forms of psychological exams such as personality test, stress test and interpersonal 2 Identify potential risks throughout the entire process from order-receiving, design, purchase, production and delivery of skill test. In 2012, medication programs were newly introduced to offer medication classes ships and offshore plants, establish measures for improvement and reduce the adverse effects on workers and environ- during lunch break and Wednesday Medication Class after work. Moreover, various other ments. programs are offered for psychological wellness of employees including family counseling 3 Analyze major risk factors and effects and provide financial and technical support to keep the risk at acceptable level. programs, stress level measurement and psychological relaxation using five sense therapy 4 Comply with domestic and foreign regulations on HSE management and accept the standards and demands presented by treatments. the group, company and stakeholders. 5 Provide continuous education and training for all employees and partner companies to establish self-control safety & Mobile Well-being Clinic SHI provided employees with mobile well-being clinic services dur- management system as well as safety culture. ing lunch break for consultation on smoking, drinking and diet at cafeterias in the shipyard on 6 Promote sustainable use of resources and energy and reduce discharge of pollutants throughout production process. every Wednesday from March 14 to April 18. This event was organized by Geoje Public Health 7 Enhance HSE and green management system through regular examination and improvement. Center and hosted by Organizational Culture Department for employee health promotion. 8 Share the principle and goal of HSE and green management with stakeholders and make regular examinations. Overview Management Corporate Social Responsibility Appendix Samsung Heavy Industries 2012 Sustainability Report 54 55

Shipyard with Lowest Accident Rate Waste Generation and Management SHI is equipped with the system that prioritizes safety throughout the work process and SHI complies with the government’s environmental policy by implementing waste reduc- spares all effort to make the workplace the safest in the world by making massive invest- tion initiatives such as legitimate disposal of general/designated waste, promoting in-house ment in safety and health management. In 2001, the company acquired OHSAS18001 for the waste treatment, maintaining recycling rate at over 80% and reducing the volume of gener- first time in the shipbuilding industry and since then has maintained the lowest accident rate. ated waste. The company built facilities for waste incineration and food waste treatment in In addition, as part of employee safety education, introductory programs are offered to new, 1996. The results are in-house waste incineration of 7,000 tons and food waste treatment of three-month, first-year and temporary employees. 200 tons per year, abiding by the government policy and preventing ocean and soil pollution caused by liquid wastes. Issues Discussed concerning Safety and Health

2012 Waste Treatment Unit: ton Provision of safety items for individuals Establishment of principles in education training Rate (Amount) of Wastes Recycled •Provision of safety equipment Safety education in general certified by Korea Occupational • A variety of programs are provided to meet the needs of each class/department 92.2% (174,046) 92.1% (170,987) Safety and Health Agency to - Introductory level: new, three-month and first-year employees, as well as online 88.7% (147,083) ensure health and safety of education employees - Awareness: six classes including team leaders, managers and department heads Waste Disposal •Safety caps, safety glasses, - Special class: in-house instructors, security guards, female workers, foreign work- 188,740 165,729 185,631 masks, safety belts and safety ers and employees at overseas workplaces Designated Waste Designated Waste Designated Waste shoes are included • Job criteria: fifty two including scaffolding, painting and toxic gas treatment 6,065 5,472 5,363 •For the first time in the ship- • License in heavy equipment: flagger, tower wagon, electric forklift, remote control General Waste General Waste General Waste building industry, swing-type crane, gondola and skid steer loader 182,675 160,257 180,267 safety belts are provided across the company Training for new employees • Since new employees are relatively less aware of risk factors, training programs are 2010 2011 2012 offered as part of preventive measures. - Introductory program (8 hours), programs for three-month employees (2 hours) / first-year employees (2 hours) - SME(Safety Management Experience) is offered to raise the safety awareness of Recycling Used Packaging Materials SHI is systematically carrying out its activities to reduce Volume of Packaging 2 new employees before sending them to worksites. A total of 15,299 employees waste of resources and costs by setting up its own target of recycling packaging materials and Materials Recycled unit : m completed the program as of 2012. managing relevant outcomes. In the past, the activities mostly dwelt on tailoring covers for large-sized equipment such as propellers and discarding the remaining, but since 2011, all covers have been cut by standards and then stored and reused to minimize waste generation 5,475 Accident and severity rate Unit: % and maximize the effect of cost reduction. In 2012, out of the entire volume of the packaging Item 2010 2011 2012 4,684 materials of 1,562,484m2, 5,475 m2 or 3.5% has been reused. 3,582 Shipbuilding Accident rate 0.24 0.20 0.24 and Offshore Severity rate 0.04 0.03 0.05 Reuse of Welding Drum In case of shipbuilding and offshore business, welding is frequently 2010 2011 2012 conducted but the remains after the process are 100 percent reused. Operation of Facility to Encourage Employees to Experience Safety-Related Circumstances Amount of Welding Drum Reused Unit : ton For the first time in the industry, SHI established a facility to encourage employees to experience safety-related circumstances in 2003. The facility has an exact reproduction of worksites at the shipyard where employees can experience possible safety-related accidents. Employ- ees are given a series of lectures on safety, environment and firefighting as well as human Recycling Rate engineering, such as right working posture, before going to practice rooms where they learn 314 376 399 100% how to carry materials, how to handle electricity and gas and how to work at blocks and scaf- folds, which are most vulnerable to safety-related accidents. 2010 2011 2012 Overview Management Corporate Social Responsibility Appendix Samsung Heavy Industries 2012 Sustainability Report 56 57

Waste Water and Sewage Treatment Environmental Standards at the Shipyard Under the goal of discharging wasterwater without harm to the ecosystem, SHI conducts a To further carry out the action plans for green management, SHI conducts a regular inspec- regular analysis of water quality once a day and maximizes the reduction of wastewater vol- tion on the quality of air, water and soil of areas surrounding the Geoje Shipyard. The atmo- ume and recycling. The wastewater from incineration facilities is recycled into process water spheric conditions including concentrations of PM10 (minute particulates), SO2 and NO2 have thanks to zero discharge system, and pollutants in wastewater from laundries(such as cod been checked at two points in the shipyard and three points outside of it, and the seawater and ss) are subject to strict internal regulations(10% compared to laws) to prevent secondary conditions including COD and DO levels have been monitored at six points around Jukdo area. environmental pollution. In order to fulfill the responsibility for local community, an exclusive Concentrations of soil pollutants such as BTEX and TPH have been also measured.SHI pledg- task force is operated to manage wastewater in day and night shifts. es for clean work sites and community by constantly monitoring the environment of areas surrounding shipyard. Current Status of Water Treatment Unit : ton Item 2010 2011 2012 Status of Pollutants around the Shipyard COD 0.053 0.063 0.066 Item Regulatory Criteria Regulatory Criteria 2010 2011 2012 SS 0.028 0.033 0.037 PM10 100 μg/m3 46 46.5 42.1

SO2 0.05 0.004 0.005 0.005 mg/m3 NO2 0.06 0.015 0.015 0.015 COD Below 2.0 1.7 1.7 2.1 Treatment of Air Pollutants mg/l DO Above 5 9.2 7.9 8.4 The discharge concentration of air pollutants is thoroughly managed to meet the internal standards which are more rigorous than legal ones. Our efforts to prevent air pollution include a regular checkup of facilities more than once a day, replacement of filter and activated Management of Toxic Substances carbon on time, and measurement of air pollutants on a regular basis. In addition, refriger- SHI is aware that even a small amount of toxic substance poses harm to humanity and the ants for packaged air conditioning system at workplace are being replaced from R-22(CFC) to environment, and thus makes utmost efforts for flawless management and control. The in- R-401A(HFC) and for vehicle air conditioning system from R-22(CFC) to R-134A(HFC) as part ternational society is becoming growing more interested in production, use and disposal of of the efforts to minimize the discharge of ozone layer-depleting substances. chemical products and is witnessing the establishment of more rigorous sets of regulations. Accordingly, the Geoje Shipyard has established its own process on use and management Current Status of Air Pollutants Unit : ton of chemical substances in line with environmental policy and targets. The process not only Item 2010 2011 2012 fulfills legal compliance but also prevents environmental pollution and manages toxic sub- dust 112 97.9 66.2 stances to prevent fatal accidents. So far caustic soda is the only substance used by SHI for SO 0.0008 0.0004 0.03 x water treatment and incineration, and thanks to its rigorous management policy, no case of leakage has been reported during reporting period.

Special Case Use of Toxic Substances Unit : ton Item 2010 2011 2012 Caustic soda 44 77 65 The World Water Day Event "Volunteering to Clean up Yeoncho Dam" SHI organized a volunteer activity to clean up Yeoncho Dam in Geoje as part of the events to celebrate the World Water Day with Korea Water Resources Corporation.

Special Case

Shipbuilding VOC Reduction Agreement Signing Ceremony A signing ceremony for ‘The Second Voluntary Environmental Agreement on VOC Reduction in Shipbuilding Industry’ was held at Hotel Samsung, Geoje, on September 21. The agreement, which will be effective until 2016, was signed by six companies including SHI and HHI, and the worksite will be granted a budget of over KRW 230 billion for VOC emissions reduction. Moreover, the Ministry of Environment plans to offer incentives to worksites under the agreement, including technical support, tax reduction and official commendation. Overview Management Corporate Social Responsibility Appendix Samsung Heavy Industries 2012 Sustainability Report 58 59

Green Management SHI has set up its plans with three stages for each year to conduct company-wide green business activities and thus emerge as a leading global company by 2015.

Introduction of Green Management Green Management Roadmap Since the declaration of its commitment to green management in 1996, SHI has established and implemented a management system corresponding to the international standards for Green Future environment preservation and pollution-free worksite. In particular, through the maintenance and improvement of ISO 14001 certification, the company focuses on worksite environment World Leader •Realization of 2015 vision management, local environment clean-up as well as new technology development to mini- •Systemization of green Green Master mize environmental pollution. In addition, SHI applies its own management standards, which management/ Period •Sharing performance of of Stabilization are more rigorous than legal standards set for ISO 14001 environmental management system green management certification, to all environmental sectors including wastewater, dust and air pollutants, so • Acquisition of green Challenger certificate/Period of that the company can solidify its position as the cleanest shipyard in the world. •Establishment of green Growth management strategy •Establishment of green Vision and Strategy for Green Management management infrastruc- SHI aspires to be a leading company in green business by making contributions to humanity ture/Period of Endeavor and protection of environment based on its business activities with respect for humanity and

environment. 2010 ~ 2011 2012 ~ 2013 2014 ~ 2015

Vision and Strategy for Green Management

SHI operates CEO-led Green Management Office and Green Management Organization comprised of three subdivisions: manufacturing, product and heavy construction to enhance green management efficiency and business performance. Green Future Vision Transform into green company

by practicing green management Structure of Green Management Acquisition of International Certifications

2012 •ISO 50001(Energy Management) Chairperson (CEO) Goal 2015 Global leader in green business •ISO/TS 29001(Petrochemical, 2011 Chemical, Natural Gas) •ISO 27001(Information Security)

•OHSAS 18001 Establishment of green Establishment of green Development of eco- 2001 workplace network friendly product (Safety and Health Management) Strategy •Reduce GHG emissions •Share performance in green •Enhance fuel efficiency • management • Save energy consumption Develop energy-saving •ISO 14001 Subdivision •Manage pollutants •Implement comprehensive technology Subdivision of Subdivision 1996 (Environment Management) of Green •Use renewable energy data system • Establish product LCA Green Product of E&I •Execute green campaign •Offer training on green • Manage toxic substances Manufacturing management 1993 •ISO 9001(Quality Management) •Establish green partnership •Operate green management organization Overview Management Corporate Social Responsibility Appendix Samsung Heavy Industries 2012 Sustainability Report 60 61

Performance of Green Management Establishment of Green Workplace SHI saw its green management activities bear fruits in 2012. The company acquired ISO 50001 SHI is making all-out efforts to minimize GHG emissions at workplaces through a variety of for the first time in the shipbuilding industry, and was selected as ‘Climate Change Competi- energy saving activities such as using waste heat, introducing highly efficient lighting and tiveness Outstanding Company' by the Korea Chamber of Commerce & Industry. Moreover, installing LED lighting. SHI established an image of green workplace through various green management activities,

and offered online training programs to promote the company’s commitment to green man- Shipbuilding Business E&I Business agement across the organization. Energy Conservation Electricity •Improve the operation of cafeterias on •Install automatic lighting system at underground parking lot non-business days •Introduce highly efficient electrical goods SHI has been added to DJSI(Dow Jones Sustainability Indexes) Asia Pacific and awarded • Save the power of electricity facilities • Establish plans to minimize electricity use the best company in industrial engineering by DJSI Korea for two consecutive years. at yard (turning off outdoor lamps and •Apply to the relevant sites first lighting tower on non-business days/ unnecessary lighting after sunset) Construction Equipment Acquiring ISO 50001(Energy Management Standard) •Install LED lighting •Make it compulsory to submit plans for equipment introduction •C omplying with the government’s GHG and energy target management policy •Use new and renewable energy such as •Deter the introduction of unnecessary equipment •Establishing an integrated IT system for energy management wind power •Ban idling vehicles during standby time •Building mid- and long-term measurement equipment and integrated management system •Make it compulsory to train equipment operators in advance Energy Efficiency •C hange the heat source at heating, Heating/Vehicle Selected as ‘Climate Change Competitiveness Outstanding Company' ventilation and air conditioning system •Establish standards for temporary eco-friendly office • Assessing the company’s capability to cope with GHG emissions regulations and from LPG to electricity •Keep the temperature of temporary office at 26℃ in summer and 18℃ in winter market changes • Improve the pressure of air supply •C onduct ‘Green Drive Campaign’ (to prevent sudden acceleration syndrome, • Winning “The Best Shipbuilding Company of the Year’ award from the Korea •Use waste heat rapid acceleration and idling) Chamber of Commerce & Industry •Install highly efficient lighting •Reduce GHG emissions through boiler associated control Establishing an image of green workplace through various green management activities • Acquiring ISO 50001 for the first time in the global shipbuilding industry • Cooperating with 56 energy-related departments

Establishment of Green Network Designated as ‘Green Technology of the Year’ at the 4th National Green Tech Award SHI will share the principle and vision of green management with all employees and contribute to the establishment of sustainable society by making company-wide efforts for environ- Added to 2012 Korea CSR 30 ment conservation and improvement.

•Support for green manage- •Disclosure of green ment of partner companies performance f D t o G is •Support for green tech- en ion ree cl •Participation in CDP m at n o e r P s nology development c e e u • Online Education Program on Green Management r op r r Environmental report o o fo e f C r o •Expansion of green n m f & Sustainability Green Management Office is overseeing online education programs to help employees iden- i n e e a purchase/ R e n report r c e tify changes in the business environment due to global warming and climate change and raise G logistics company-wide awareness of green management to thereby reach consensus on transform- GREEN ing SHI into a global leading company in green business. The online programs are designed Network

G • O • to enable effective learning by balancing theory and case studies. In order to keep learners Launching Green r m Operation of inte- e p e e e d t Management Office n r te s grated information motivated, so called self-directed learning is encouraged. Pop quizzes and a section called O a a y ti r S •Fostering green rg o g n system for green man- a n te o “Check Tip” to share tips are added to give a humorous twist on the program. Carbon emis- n of In ti agement linked with experts iza a tio orm sion calculators, learning map and other additional applications are provided to enhance •Providing employees with n Inf existing ERP system environmental education learning efficiency. Overview Management Corporate Social Responsibility Appendix Samsung Heavy Industries 2012 Sustainability Report 62 63

Management of Water Consumption GHG emissions have enormous impact on climate change. Because of the very nature of its In the Geoje Shipyard, industrial water is used across all manufacturing process, and the total business, SHI sees limited amount of GHG emissions. The company, nevertheless, makes its consumption in 2012 reached 2,391kton. utmost efforts to minimize GHGs at workplace through various activities including introduction of high efficiency facilities and improvement of testing process. Amount of Water Consumption and Reuse unit : ton

Item 2010 2011 2012 Amount of GHG Emissions unit : tCo2e Amount of use 2,154,427 2,221,274 2,391,364 Item 2010 2011 2012 Amount of reuse 102,118 102,259 102,012 Direct GHG 202,935 268,194 225,909 Rate of reuse 4.74 4.60 4.27 Indirect GHG 223,036 239,853 228,659 total 425,971 508,047 454,568 Activities for Reduction of Energy Consumption In response to climate change and regulations both at home and abroad, SHI is proactively 2012 Performance of Tasks for GHG Reduction managing activities on energy saving and efficiency, and also improving facilities and equipment for energy conservation. We also maintain per unit consumption at certain levels by Item 2012 goal Amount of Amount of Reduction estment making continuous efforts to reduce energy consumption. Particularly, the shipbuilding & (unit : CO2 ton) (unit : billion in KRW) offshore business engages in energy conservation through substitution of equipment and Modification in testing method and reduction of testing period for eco-friendly vessels 30,623 0 improvement of facilities at paint shop, procurement of high efficiency products and enhance- – delivered ship: HN1878~1883 containership of UASC

ment of power efficiency. Fuel reduction through diversification of gas terminals of LNG vessels 685 0 Substitution – delivered ship: HN1813 LNG vessels of Teekay of obsolete Energy Consumption unit : TJ Management of lighting at docks and ships (electricity) 474.4 0 facilities and enhancement Replacement of lighting at ships under construction (electricity) 601 0.138 Direct Energy Indirect Energy Total of operation Management and allocation of heavy equipment(diesel) 93.7 0 2,673 4,536 efficiency 2010 7,209 Improvement of LPG supply pressure 2079.8 0

3,188 4,630 Improvement of ethylene supply pressure 327.5 0 2011 7,794 Efficient operation of motor bikes for business use 32.1 0 2,590 4,708 total 34,917 0.138 2012 7,298

Volume of Energy Saved in Shipbuilding & Offshore unit : TJ 2013 Plan for Tasks for GHG Reduction Item 2011 2012 The major tasks include substitution of obsolete facilities and enhancement of operation ef- Process Redesign 10 426 ficiency. SHI plans to reduce GHG emissions amounting to 15,868 tons by investing KRW 2.16 Substitution and Remodeling of Equipment 23 47 billion in tasks as follows: replacing obsolete heating, ventilation and air conditioning system Procurement of High Efficiency Product 0.5 12 at office and lighting as well as skylights at plant, introducing air economizer for painting- drying, minimizing the number of power generators at docks of drillships and containerships, and optimizing the schedule for testing drillships and LNG carriers. Special Case

Energy Saving Idea Contest Special Case The contest was designed to proactively respond to increasing energy costs and more rigorous regulations, and has contributed to promoting energy savings such as electricity, gas and oil, improving process Introduction of Highly Efficient Facilities and facilities, and reducing energy waste at workplaces. Installing highly efficient lighting at workplaces can contribute to reducing GHG emissions. Thus, SHI will invest a total of KRW 32.4 billion by 2015 in replacing and upgrading its old facilities. Overview Management Corporate Social Responsibility Appendix Samsung Heavy Industries 2012 Sustainability Report 64 65

Relevant Data on Sustainability Management

Volume of Raw Materials Used Current Employment Status Unit : person item unit 2010 2011 2012 item 2010 2011 2012 Shipbuilding Steel ton 1,415,000 1,720,000 1,560,000 Total 13,204 13,185 13,504 & Offshore Male 12,281 12,266 12,576 Gender Construction Rebar ton 21,273 30,250 25,429 Female 923 919 928 3 RMC m 580,134 295,040 384,229 Regular 12,735 12,689 12,933 Type of Employment Cement ton 13,659 9,156 7,562 Non-regular 469 496 571 Ready Mixed Dry Mortar ton 1,774 710 2,012 Sand m3 2 3,727 21,182 Aggregate m3 62,175 128 65,633 Number of Retirees unit : person Turnover unit : person Asphalt Concrete ton 20,241 25,711 136,192 Male Female Total 291 56 517 2010 347 Per Unit Conversion Data 492 489 * Annual Production Volume 312 59 item unit 2010 2011 2012 2011 371 (unit : ton) COD kg/thousand ton 0.037 0.042 0.043 Amount of Water 2010 : 1,419,500 453 64 Pollutants SS kg/thousand ton 0.020 0.023 0.023 2011 : 1,667,367 2012 517 2010 2011 2012 2012 : 1,543,959 Emission of Air Dust ton/thousand ton 0.079 0.059 0.046 Pollutants SOx g/thousand ton 0.56 0.24 19.43 Number of Employees Subject to Collective Bargaining (As of December 2011) unit : person Use of Toxic Caustic ton/thousand ton 0.040 0.026 0.044 Substances Soda item 2010 2011 2012 Water Consumption ton/ton 1.518 1.399 1.548 Number of Employees Subject 6,091 5,982 5,819 to Collective Bargaining Energy Consumption TJ/ton 0.005 0.004 0.005

GHG Emissions tCO2e/ ton 0.29 0.30 0.29

Number of Employees Subject to Performance Performance of Social Contribution Activities unit : thousands in KRW Assessment and Career Development unit : person item 2011 2012 item 2010 2011 2012 Expenditure on Social Contribution Activities 1,410,000 238,098 Total Number of Employees (regular workers) 12,735 12,689 12,933 Matching Grant 160,200 75,512 Number of Employees Subject to Performance 12,735 12,689 12,933 Subsidies for Local Schools 225,000 380,000 Assessment Expenditure on Community Service 178,920 214,539 Contribution by Employees 732,000 831,755 Education Programs on Ethics/Human Rights Incentives for Shipowners 130,00 10,000 Number of Employees Completed (person) 12,250 19,963 23,668 Average Hours of Training per Person 1.07 1.37 1.82

Number of Education Programs 9 8 10 on Human Rights

2010 2011 2012 Appendix

Awards and Membership Third Party Assurance statement GRI G3.1 Guideline Index Report of Independent Auditors Financial Statement Overview Management Corporate Social Responsibility Appendix Samsung Heavy Industries 2012 Sustainability Report 68 69

Awards and Membership

01 Received the IR52 Jang Young Sil Award for Integrated 05 Achieved ISO 50001 for the first time in the global ship- Minister’s Commendation, and Director Mahn Woo Lee and nized by Korea Industrial Technology Association, the NET Pirate Control System | SHI was granted the 66th IR52 Jang building industry | For the first in the industry, SHI achieved Head Seong Ihn Jo received a Commendation from the Min- certification is designed to discover new technologies devel- Young Sil Award, which was co-organized by Korea Industrial the International Standard for Energy Management Systems, ister of Employment and Labor. The company also received oped by domestic companies and research institutes and to Technology Association and Maeil Business Newspaper, for ISO 50001 from Lloyd's Register Quality Assurance (LRQA). the Prime Minister’s Citation for its producing outstanding promote their commercialization and trade. its Integrated Pirate Control System developed by the Power The achievement of ISO 50001 has recognized the company’s employees of merit. & Control Systems division. Named after Jang Young Sil, the efforts of establishing an energy management T/F and con- 10 Received Industrial Service Medal at the 9th Shipbuild- | | greatest scientist of the Joseon Dynasty, the award is conducting research on energy conservation since the declara- 07 Ranked high in climate change index SHI was selected ing Korea The 9th Shipbuilding & Offshore Korea ceremony ferred to those who contribute to industrial technology in- tion of its commitment to green management. as ‘Climate Change Competitiveness Outstanding Company' saw Hyo Seop Kim, Executive Director of Outfitting Team 1, novation through new technology development. in the shipbuilding industry by the Korea Chamber of Com- receiving Industrial Service Medal for his contribution to the merce and Industry.The certification is granted based on a development of shipbuilding & offshore industry. Jeong Chil company’s response to GHG emissions regulations and mar- Nah, Head of Offshore Construction Team 2, and Gahp Joon 02 Achieved New Excellent Technology (NET) certification ket changes. Ahn, Head of Offshore Outfitting Team 1, received medals for design technology of LNG cargo containment | At the New from the Minister of Trade, Industry and Energy, while Ihn Excellent Technology Awards 2011, SHI received the NET cer- Tae Lee, Head of Shipping Division, received Special Contri- tification for its ‘Design Technology of Floating Structure to 08 Wang Geun Lee, Change Soo Sohn and Soon Gi Hong, bution Award. Prevent Sloshing in LNG Cargo Containment’. The NET certi- the company’s team leaders to be selected as the Korean fication is granted by the Korean Agency for Technology and Master of 2012 | Announced by Human Resources Develop- Standards to technologies that create a significant economic ment Service of Korea, the Korean Master of 2012 selected 11 Selected as Excellent Technician of 2012 | Co-hosted by ripple effect and contribute to national competitiveness. Wang Geun Lee, the head of Industrial Research Institute as Ministry of Employment and Labor and Human Resources the master of production automation in machinery; Chang Development Service of Korea, the Excellent Technician 03 Jin Hyeong Park, the company’s division head to be se- 06 Medals and prizes of merit in the 41st International Vo- Soo Sohn, the leader of production technology team as the Awards 2012 selected Gyeong Hyeon Lee, Section Chief of lected as a man of merit for industrial technology promo- cational Training Competition | Hyun Woo Kim of Offshore master of sheet metal and boiler making in materials; and Technology Institute, as an excellent welding technician. tion | The Korea Technology Awards 2011 selected Jin Hyeong Production Team and Hee Jae Yoo of Pilot Operation Group Soon Gi Hong, the leader of quality management team as the The award highly recognized our efforts to nurture excellent Park, the head of System Software R&D Division at Industrial received Bronze Tower Order of Industrial Service Merit for master of quality management in industrial application. technicians including the winners of International Vocational Research Institute, as the man of merit for industrial tech- their winning gold medals in the International Vocational Training Competition. nology and granted him the prize of the Minister of Trade, Training Competition, while Sun Jeong Hwang and Min Ki Industry and Energy. The award recognized Mr. Park’s con- Jang were awarded Tin Tower Order of Industrial Service 12 Received excellence award at the After-school Contents tribution to enhancing the competitiveness of shipbuilding Merit for their winning bronze medals. Meanwhile, Section Fair | At the 4th After-school Contents Fair hosted by the Min- industry through the development of a state-of-the-art au- Chief Gyeong Hyeon Lee and employee Seon Chak Yoo from istry of Education, Science and Technology, Choong Young tomated system. the company’s Technology Institute were awarded Prime Choi, Senior Researcher of Core Technology Research Cen- ter, won excellence award in the category of guest lecturer 04 Received Ministerial Citation | Director of Outfitting De- (volunteer). Senior Research Choi was credited for helping sign Team 1, Jeong Geun Kim, and Head of Industrial Re- students develop an adventurous spirit and positive thinking search Institute, Seong Gil Nam, received ministerial citation attitude as after-school teacher since 2009. from the Minister of Education, Science and Technology at the ‘11th Technician’s Day’ ceremony. The award ceremony 09 Achieved the NET certification for new technologies | is organized by Korea Professional Engineer Association Our new developments ‘Slip stream generator for fuel reduc- (KPEA) to support the government’s science and technology tion’ and ‘Stainless steel pipe narrow gap orbital TIG weld- policy and discover technicians who contribute to the devel- ing technique by using pulse-controlling rotating torch’ were opment and application of new technologies. certified at the 2nd New Excellent Technology Awards. Orga- Overview Management Corporate Social Responsibility Appendix Samsung Heavy Industries 2012 Sustainability Report 70 71

Third Party Assurance Statement

Assurance Statement related to Samsung Heavy Industries’ Sustainability Report 2012, Level of Assurance and Materiality for the calendar year ending 31st December 2012 The opinion expressed in this Assurance Statement has been formed on the basis of a moderate level of assurance and at the Terms of Engagement materiality of the ‘professional judgement of the Verifier’. This Assurance Statement has been prepared for Samsung Heavy Industries. LRQA’s Opinion Lloyd’s Register Quality Assurance Ltd. (LRQA) was commissioned by Samsung Heavy Industries to assure its Sustainability Based on LRQA’s approach nothing has come to our attention that would cause us to believe that the Report has not been Report 2012 for the calendar year ending 31st December 2012 (“the Report”). The Report relates to the sustainability per- produced based on AA1000AS’s Principles. It should be noted that for the Principle of: formance data and information for Samsung Heavy Industries’ activities in Korea. The geographical scope includes the head •Inclusivity - Samsung Heavy Industries has processes in place for identifying and engaging with its stakeholders across its office, Shipbuilding and Offshore, Energy and Infra solution division, Power and Control systems division, Wind Energy division various operations and we are not aware of any key stakeholder groups that have been excluded from this process. Sam- in Korea. sung Heavy Industries also demonstrated that they have incorporated these stakeholder concerns into their management Management Responsibility approach and decision-making processes in order to develop a structured engagement approach and response to sustain- Samsung Heavy Industries’ management was responsible for preparing the Report and for maintaining effective internal con- ability issues. trols over the data and information disclosed. LRQA’s responsibility was to carry out an assurance engagement on the Report •Materiality - Samsung Heavy Industries has a process in place for identifying and evaluating material issues in the materi- in accordance with our contract with Samsung Heavy Industries. ality assessment. The Report provides a balanced reflection of Samsung Heavy Industries’ material issues and we are not Ultimately, the Report has been approved by, and remains the responsibility of Samsung Heavy Industries. aware of any material issues that have been excluded. •Responsiveness - Samsung Heavy Industries has processes in place to respond to government authorities, employees, LRQA’s Approach communities and the public, partners and suppliers, shareholders and investors, etc. Our verification has been conducted against: •AA1000 Assurance Standard 2008 (AA1000AS), where the scope was a Type II engagement It is also our opinion that nothing has come to our attention that would cause us to believe that the specified performance data •Global Reporting Initiative Sustainability Reporting Guidelines (GRI G3.1, 2011) and information is not reliable. Based on LRQA’s approach nothing has come to our attention that would cause us to believe that the Report does not meet The objectives of the assurance engagement were to: GRI’s application level A+ as we found nothing that would cause us to contradict this conclusion. •Review adherence to the AA1000AS Accountability Principles of Inclusivity, Materiality and Responsiveness and evaluate the reliability of specified sustainability performance data and information LRQA’s Recommendations •Confirm that the Report meets the requirements of GRI G3.1’s application level A Samsung Heavy Industries should consider: •Validate Samsung Heavy Industries’ self-declaration for GRI’s application level A+ •Establishing sustainability targets and periodically monitor progress against those •Establishing an internal data and information verification process to ensure the accuracy and completeness of data and To form our conclusions the assurance was undertaken as a sampling exercise and covered the following activities: information disclosed in the Report. • Reviewing the stakeholder engagement process and related information • Benchmarking Samsung Heavy Industries’ material issues against our own independent analysis of stakeholder issues by 5th July 2013 reviewing other sustainability reports written by Samsung Heavy Industries’ peers in comparable industries Hee-Jeong Yim LRQA Lead Verifier •Understanding how Samsung Heavy Industries determine, respond and report on their material issues •Interviewing management of Samsung Heavy Industries to understand Samsung Heavy Industries’ reporting processes and use of sustainability performance data within their business decision-making processes •Interviewing key personnel to understand processes of Samsung Heavy Industries for setting performance indicators and On behalf of Lloyd’s Register Quality Assurance 17th Floor, for monitoring progress made during the reporting period Sinsong Building, 67 Yeouinaru-ro, Yeongdeungpo-gu, Seoul, Korea LRQA Reference: SEO6017930 •Verifying Samsung Heavy Industries’ data and information management processes and reviewing supporting evidence made available by Samsung Heavy Industries at their head office in Samsung Life Insurance Seocho Tower 1321-15, - LRQA's Competence and Independence Seocho-Dong, Seocho-Gu, Seoul, Korea and at their Geoje Shipyard in 530, Jangpyeong-Dong, Geoje-Si, Geongsang- - LRQA ensures the selection of appropriately qualified individuals based on a rigorous appraisal of their training, qualifications and experience. The team nam-Do, Korea in accordance with our contract for the verification of data and information disclosed in the Report. conducting the assurance of the Report was multi-disciplinary and has been involved in numerous assurance engagements. LRQA's internal systems have Note 1: No source data was sampled for its accuracy and completeness. been designed to manage and review verification and certification assessments. This involves independent review by senior management of the outcome derived from the process applied to the assurance of sustainability reports. Note 2: Economic performance data was taken direct from the audited financial accounts. - Independence of LRQA from Samsung Heavy Industries •Checking that the GRI index allows stakeholders to access sustainability performance indicators. Overview Management Corporate Social Responsibility Appendix Samsung Heavy Industries 2012 Sustainability Report 72 73

G3.1 Indicators Reporting Page Remarks GRI G3.1 Guideline Index status Governance, 4.8 Internally developed statements of mission or values, codes of conduct, and ● 6,7 Commitments principles relevant to economic, environmental, and social performance and the ●Reported ◐ Partially reported N/A Not applicable and status of their implementation. Engagement 4.9 Procedures of the highest governance body for overseeing the organization's ● 22,23 G3.1 Indicators Reporting Page Remarks identification and management of economic, environmental, and social status performance, including relevant risks and opportunities, and adherence or Official Notice on Profiles compliance with internationally agreed standards, codes of conduct, and principles. ● Strategy and 1.1 Statement from the most senior decision-maker of the organization. ● 6,7 4.10 Processes for evaluating the highest governance body's own performance, 22,23 particularly with respect to economic, environmental, and social performance. Analysis 1.2 Description of key impacts, risks, and opportunities. ● 6,7 4.11 Explanation of whether and how the precautionary approach or principle is ● 22,23 Organizational 2.1 Name of the organization. ● 10,11 addressed by the organization. Profile 2.2 Primary brands, products, and/or services. ● 10,11 4.12 Externally developed economic, environmental, and social charters, principles, or ● 68,69 2.3 Operational structure of the organization, includingmain divisions, ● 10,11 other initiatives to which the organization subscribes or endorses. operating companies, subsidiaries, and joint ventures. 4.13 Memberships in associations (such as industry associations) and/or national/ ● 68,69 2.4 Location of organization's headquarters. ● 10,11 international advocacy organizations in which the organization: *Has positions in governance bodies; * Participates in projects or committees; *Provides substantive ● 2.5 Number of countrieswhere the organization operates, and names of countries with 10,11 funding beyond routine membership dues; or *Viewsmembership as strategic. eithermajor operations or that are specifically relevant to the sustainability issues covered in the report. 4.14 List of stakeholder groups engaged by the organization. ● 28,29 2.6 Nature of ownership and legal form. ● 10,11 4.15 Basis for identification and selection of stakeholders with whom to engage. ● 28,29 2.7 Markets served (including geographic breakdown, sectors served, and types of ● 10,11 4.16 Approaches to stakeholder engagement, including frequency of engagement by type ● 28,29 customers/beneficiaries). and by stakeholder group. 2.8 Scale of the reporting organization. ● 10,11 4.17 Key topics and concerns that have been raised through stakeholder engagement, ● 28,29 and how the organization has responded to those key topics and concerns, including ● 2.9 Significant changes during the reporting period regarding size, structure, 10,11 through its reporting. or ownership. Economic 20-21 2.10 Awards received in the reporting period. ● 68,69 Economic EC1 Direct economic value generated and distributed, including revenues, operating ● 77-81 ● Report 3.1 Reporting period (e.g., fiscal/calendar year) for information provided. 2 Performance costs, employee compensation, donations and other community investments, Parameters 3.2 Date ofmost recent previous report (if any). ● 2 retained earnings, and payments to capital providers and governments. 3.3 Reporting cycle (annual, biennial, etc.) ● 2 EC2 Financial implications and other risks and opportunities for the organization's ● 14,15 activities due to climate change. 3.4 Contact point for questions regarding the report or its contents. ● 2 EC3 Coverage of the organization's defined benefit plan obligations. ● 36 3.5 Process for defining report content. ● 2 EC4 Significant financial assistance received fromgovernment. ● - zero 3.6 Boundary of the report (e.g., countries, divisions, subsidiaries, leased facilities, joint ● 2 ventures, suppliers). See GRI Boundary Protocol for urther guidance. Market EC5 Range of ratios of standard entry level wage by gender compared to local N/A - We do not report on by Presence minimum wage at significant locations of operation. region yet as we have 3.7 State any specific limitations on the scope or boundary of the report ● 2 thus far been unable to (see completeness principle for explanation of scope). gather the data about 3.8 Basis for reporting on joint ventures, subsidiaries, leased facilities, outsourced ● 2 minimum wage operations, and other entities that can significantly affect comparability fromperiod EC6 Policy, practices, and proportion of spending on locally-based suppliers ● 44-45 to period and/or between organizations. at significant locations of operation. 3.9 Data measurement techniques and the bases of calculations, including ◐ 2,64,65 EC7 Procedures for local hiring and proportion of senior management hired from the ◐ 35 assumptions and techniques underlying estimations applied to the compilation local community at significant locations of operation.* of the Indicators and other information in the report. Explain any decisions not to ● apply, or to substantially diverge from, the GRI Indicator Protocols. Indirect EC8 Development and impact of infrastructure investments and services provided 46-51 Economic primarily for public benefit through commercial, in-kind, or pro bono engagement. 3.10 Explanation of the effect of any re-statements of information provided in earlier ● 2 Impacts ● reports, and the reasons for such re-statement (e.g.,mergers/acquisitions, change EC9 Understanding and describing significant indirect economic impacts, including the 46-51 of base years/periods, nature of business,measure mentmethods). extent of impacts. Environmental 3.11 Significant changes fromprevious reporting periods in the scope, boundary, ● 2 58-60 or measurement methods applied in the report. Materials EN1 Materials used byweight or volume. ● 64 3.12 Table identifying the location of the Standard Disclosures in the report. ● 72-75 EN2 Percentage of materials used that are recycled inputmaterials. ● 64 3.13 Policy and current practicewith regard to seeking external assurance for the report. ● 70,71 Energy EN3 Direct energy consumption by primary energy source. ● 62 Governance, 4.1 Governance structure of the organization, including committees under the highest ● 22,23 EN4 Indirect energy consumption by primary source. ● 62 Commitments governance body responsible for specific tasks, such as setting strategy or EN5 Energy saved due to conservation and efficiency improvements. ● 60,61 and organizational oversight. EN6 Initiatives to provide energy-efficient or renewable energy based products and ser- ● 60,61 Engagement 4.2 Indicatewhether the Chair of the highest governance body is also an executive ● 22,23 vices, and reductions in energy requirements as a result of these initiatives. officer. EN7 Initiatives to reduce indirect energy consumption and reductions achieved. ● 60,61 4.3 For organizations that have a unitary board structure, state the number and gender ● 22,23 of members of the highest governance body that are independent and/or Water EN8 Total water withdrawal by source. ● 62 non-executivemembers. EN9 Water sources significantly affected bywithdrawal ofwater. ◐ 56 ● 4.4 Mechanisms for shareholders and employees to provide recommendations or 22,23 EN10 Percentage and total volume ofwater recycled and reused. ● 56 direction to the highest governance body. Biodiversity EN11 Location and size of land owned, leased,managed in, or adjacent to, protected areas ● 56 ● 4.5 Linkage between compensation for members of the highest governance body, senior 22,23 and areas of high biodiversity value outside protected areas. managers, and executives (including departure arrangements), and the organization's performance (including social and environmental performance). EN12 Description of significant impacts of activities, products, and services on biodiversity ● 56 in protected areas and areas of high biodiversity value outside protected areas. 4.6 Processes in place for the highest governance body to ensure conflicts of interest ● 22,23 are avoided. EN13 Habitats protected or restored. ● 56 4.7 Process for determining the composition, qualifications, and expertise of ● 22,23 EN14 Strategies, current actions, and future plans formanaging impacts on biodiversity. ● 47 the members of the highest governance body and its committees, including any EN15 Number of IUCN Red List species and national conservation list species with N/A - operations where are no consideration of gender and other indicators of diversity. habitats in areas affected by operations, by level of extinction risk. conservation list species Overview Management Corporate Social Responsibility Appendix Samsung Heavy Industries 2012 Sustainability Report 74 75

G3.1 Indicators Reporting Page Remarks G3.1 Indicators Reporting Page Remarks status status Emissions, EN16 Total direct and indirect greenhouse gas emissions by weight. ● 63-64 Freedom of HR5 Operations and significant suppliers identified in which the right to exercise ● 33 effluents EN17 Other relevant indirect greenhouse gas emissions by weight. ● 63-64 association freedom of association and collective bargaining may be violated or at significant and waste and collective risk, and actions taken to support these rights. EN18 Initiatives to reduce greenhouse gas emissions and reductions achieved. ● 60-63 bargaining EN19 Emissions of ozone-depleting substances by weight.* ◐ - no emissions Child labor HR6 Operations and significant suppliers identified as having significant risk for ● - No child labor or forced labor in compliance with EN20 NOx, SOx, and other significant air emissions by type and weight. ● 56 incidents of child labor, andmeasures taken to contribute to the effective abolition of child labor. labor laws EN21 Total water discharge by quality and destination. ● 56 Prevention of HR7 Operations and significant suppliers identified as having significant risk for ● - EN22 Total weight of waste by type and disposal method. ● 55 forced and incidents of forced or compulsory labor, andmeasures to contribute to the elimina- EN23 Total number and volume of significant spills. ● - zero compulsory tion of all forms of forced or compulsory labor. labor EN24 Weight of transported, imported, exported, or treated waste deemed hazardous N/A - We do not report on this under the terms of the Basel Convention Annex I, II, III, and VIII, and percentage of issue as the disclosure of Security HR8 Percentage of security personnel trained in the organization's policies or proce- ● - All security managers transported waste shipped internationally. impact is not material to practices dures concerning aspects of human rights that are relevant to operations. completed HR8 our business Indigenous HR9 Total number of incidents of violations involving rights of indigenous people and ● - zero EN25 Identity, size, protected status, and biodiversity value of water bodies and related N/A - We do not report on this rights actions taken. habitats significantly affected by the reporting organization's discharges of water issue as the disclosure of Assessment HR10 Percentage and total number of operations that have been subject to human rights N/A - We do not have related and runoff. impact is not material to our business reviews and/or impact assessments. evaluation Products and EN26 Initiatives to mitigate environmental impacts of products and services, and extent ● 14,15 Remediation HR11 Number of grievances related to human rights filed, addressed and resolved ● - zero service of impact mitigation. through formal grievancemechanisms. EN27 Percentage of products sold and their packaging materials that are reclaimed by ● 55 Society 46-47 category. Local SO1 Percentage of operations with implemented local community engagement, impact ● 46-51 Compliance EN28 Monetary value of significant fines and total number of non-monetary sanctions for ● - zero communities assessments, and development programs. noncompliance with environmental laws and regulations. SO9 Operationswith significant potential or actual negative impacts ● - zero Transport EN29 Significant environmental impacts of transporting products and other goods and ◐ 58-61 on local communities. materials used for the organization's operations, and transporting members of the SO10 Prevention and mitigation measures implemented in operations with significant ● 46-51 workforce. potential or actual negative impacts on local communities. Overall EN30 Total environmental protection expenditures and investments by type. ● 63 Corruption SO2 Percentage and total number of business units analyzed for risks related to ● - zero Labor Practices and Decent Work 32-35 corruption. Employment LA1 Total workforce by employment type, employment contract, and region, broken ● 35-36,65 SO3 Percentage of employees trained in organization's anti-corruption policies and ● 24,25 down by gender. procedures. LA2 Total number and rate of new employee hires and employee turnover by age group, ● 25,65 SO4 Actions taken in response to incidents of corruption. ● - zero gender, and region. Public policy SO5 Public policy positions and participation in public policy development and lobbying. ● - zero LA3 Benefits provided to full-time employees that are not provided to temporary or ● 35 SO6 Total value of financial and in-kind contributions to political parties, politicians, ● - zero part-time employees, bymajor operations. and related institutions by country. ◐ LA15 Return towork and retention rates after parental leave, by gender.* 36 Anti-competi- SO7 Total number of legal actions for anti-competitive behavior, anti-trust, andmonopoly ● - zero Labor/ LA4 Percentage of employees covered by collective bargaining agreements. ● 65 tive behavior practices and their outcomes. management Compliance Monetary value of significant fines and total number of non-monetary sanctions for ● - zero LA5 Minimumnotice period(s) regarding significant operational changes, ● 32,33 SO8 relations including whether it is specified in collective agreements. non-compliance with laws and regulations. Occupational LA6 Percentage of total workforce represented in formal joint management-worker ● 65 Product responsibility 14-15 health and health and safety committees that help monitor and advise on occupational health Customer PR1 Life cycle stages in which health and safety impacts of products and services are ● 27 safety and safety programs. health and assessed for improvement, and percentage of significant products and services LA7 Rates of injury, occupational diseases, lost days, and absenteeism, ● 52-54 safety categories subject to such procedures. and number of work-related fatalities by region and by gender. PR2 Total number of incidents of non-compliancewith regulations and voluntary codes ● - zero LA8 Education, training, counseling, prevention, and risk-control programs in place to ● 52-54 concerning health and safety impacts of products and services during their life assist workforce members, their families, or community members regarding seri- cycle, by type of outcomes. ous diseases. Product and PR3 Type of product and service information required by procedures, and percentage of ● - 100% LA9 Health and safety topics covered in formal agreements with trade unions. ● 52-54 service significant products and services subject to such information requirements. labeling Training and LA10 Average hours of training per year per employee by gender, and by employee ● 65 PR4 Total number of incidents of non-compliance with regulations and voluntary codes ● - zero education category. concerning product and service information and labeling, by type of outcomes. LA11 Programs for skills management and lifelong learning that support the continued ● 35,36 PR5 Practices related to customer satisfaction, including results of surveysmeasuring ● 37-39 employability of employees and assist them inmanaging career endings. customer satisfaction. LA12 Percentage of employees receiving regular performance and career development ● 65 Marketing PR6 Programs for adherence to laws, standards, and voluntary codes related tomarket- ● - zero reviews, by gender. communica- ing communications, including advertising, promotion, and sponsorship. Programs tions for adherence to laws, standards, and voluntary codes related tomarketing com- ● Diversity and LA13 Composition of governance bodies and breakdown of employees per employee 22,23 munications, including advertising, promotion, and sponsorship. equal category according to gender, age group,minority group membership, and other opportunity indicators of diversity. PR7 Total number of incidents of non-compliancewith regulations and voluntary codes ● - zero concerningmarketing communications, including advertising, promotion, and spon- ● Equal remuneration for LA14 Ratio of basic salary and remuneration of women to men by employee category, by - sorship by type of outcomes. significant locations of operation. women and men Customer PR8 Total number of substantiated complaints regarding breaches of customer privacy ● - no case of relevant Human Rights privacy and losses of customer data. complaints ● Investment and HR1 Percentage and total number of significant investment agreements and contracts - zero Compliance PR9 Monetary value of significant fines for non-compliancewith laws and regulations ● - no case of relevant procurement that include clauses incorporating human rights concerns, or that have undergone concerning the provision and use of products and services. complaints practices human rights screening. HR2 Percentage of significant suppliers, contractors and other business partners that ● 42-45 have undergone human rights screening, and actions taken. * Reasons for partially reporting HR3 Total hours of employee training on policies and procedures concerning aspects of ● 65 - 3.9 : data measurement and calculation methods will be specified only if deemed necessary. human rights that are relevant to operations, including the percentage of employees - EC7, LA15 : Not material issues for SHI. trained. - EN19 : SHI creates minuscule ozone layer-depleting substance. Non- HR4 Total number of incidents of discrimination and corrective actions taken. ● - zero discrimination Overview Management Corporate Social Responsibility Appendix Samsung Heavy Industries 2012 Sustainability Report 76 77

Report of Independent Auditors Financial Statement

Samsung Heavy Industries Co., Ltd. and Subsidiaries Consolidated Statements of Financial Position To the Board of Directors and Shareholders of December 31, 2012 and 2011 unit : thousands in KRW Samsung Heavy Industries Co., Ltd. 2012 2011 Assets We have audited the accompanying consolidated statements of financial position of Samsung Current assets 10,275,893,574,371 9,424,201,877,074 Heavy Industries Co., Ltd. and its subsidiaries (collectively the “Group”) as of December 31, Cash and cash equivalents 928,919,869,752 805,572,644,011 2012 and 2011, and the related consolidated statements of income, comprehensive income, Short-term financial instruments 235,015,126,124 483,461,589,473 changes in equity and cash flows for the years then ended, expressed in Korean won. These Trade accounts and notes receivable 536,333,681,485 534,508,035,506 financial statements are the responsibility of the Group's management. Our responsibility is Due from customers for contract work 4,412,295,493,362 3,351,284,206,914 to express an opinion on these financial statements based on our audits. Other accounts receivable 71,883,036,809 53,909,186,460 We conducted our audits in accordance with auditing standards generally accepted in the Re- Advance payments 1,500,473,767,424 1,674,530,475,398 public of Korea. Those standards require that we plan and perform the audit to obtain reason- Prepaid expenses 83,021,196,234 62,212,187,959 able assurance about whether the financial statements are free of material misstatement. An Current derivative financial instruments 695,153,959,673 379,806,110,123 audit includes examining, on a test basis, evidence supporting the amounts and disclosures in Current firm commitment assets 914,150,821,358 1,290,817,823,584 the financial statements. An audit also includes assessing the accounting principles used and Inventories 699,224,302,870 540,402,632,739 significant estimates made by management, as well as evaluating the overall financial state- Other current financial assets 70,686,474,774 128,112,214,248 ment presentation. We believe that our audits provide a reasonable basis for our opinion. Other current assets 128,735,844,506 119,584,770,659 In our opinion, the consolidated financial statements, referred to above, present fairly, in all Non-current assets 6,359,073,001,166 6,989,737,126,115 material respects, the financial position of Samsung Heavy Industries Co., Ltd. and its sub- Long-term available-for-sale financial assets 144,905,326,115 169,605,818,462 sidiaries as of December 31, 2012 and 2011, and their financial performance and cash flows Investments in associates and joint ventures 5,784,826,171 291,959,991 for the years then ended, in accordance with International Financial Reporting Standards as Property, plant and equipment 5,277,951,297,276 5,408,259,478,617 adopted by the Republic of Korea (“Korean IFRS”). Investment properties 108,941,577,642 88,477,741,163 Auditing standards and their application in practice vary among countries. The procedures Intangible assets 37,953,560,896 86,303,388,432 and practices used in the Republic of Korea to audit such financial statements may differ from Long-term prepaid expenses 66,468,251,150 67,007,181,266 those generally accepted and applied in other countries. Accordingly, this report is for use by Derivative financial instruments 338,635,829,053 260,881,309,959 those who are informed about Korean auditing standards and their application in practice. Firm commitment assets 116,279,257,295 660,403,451,778 Non-current accounts receivable 142,131,901,844 192,360,756,828 Seoul, Korea Other financial assets 119,888,468,897 56,146,039,619 March 7, 2013 Deferred income tax assets 132,704,827 0 Total assets 16,634,966,575,537 16,413,939,003,189

This report is effective as of March 7, 2013, the audit report date. Certain subsequent events or circumstances, which may occur between the audit report date and the time of reading this report, could have a material impact on the accompanying consolidated financial statements and notes thereto. Accordingly, the readers of the audit report should understand that there is a possibility that the above audit report may have to be revised to reflect the impact of such subsequent events or circumstances, if any. Overview Management Corporate Social Responsibility Appendix Samsung Heavy Industries 2012 Sustainability Report 78 79

Samsung Heavy Industries Co., Ltd. and Subsidiaries Consolidated Statements of Income Years Ended December 31, 2012 and 2011 unit: thousand in KRW, except per share amounts

2012 2011 2012 2011 Liabilities Revenue 14,489,473,629,478 13,391,764,073,457 Current liabilities 8,918,667,483,656 10,538,969,962,586 Cost of sales 12,554,345,285,475 11,628,385,019,054 Trade accounts and notes payable 1,436,067,207,979 829,668,790,435 Gross profit 1,935,128,344,003 1,763,379,054,403 Short-term borrowings 1,246,910,609,025 584,833,913,020 Selling and administrative expenses 729,471,513,511 680,769,013,988 Other accounts payable 125,166,887,807 111,286,447,044 Operating profit 1,205,656,830,492 1,082,610,040,415 Advance receipts 1,237,302,397,514 2,117,994,148,150 Other income 4,221,835,849,295 4,188,451,852,859 Due to customers for contract work 2,729,780,614,735 3,483,768,926,133 Other expenses 4,418,558,382,292 4,111,082,822,674 Accrued expenses 575,214,149,394 556,797,933,547 Financial income 312,148,482,270 204,812,915,680 Income tax payable 113,195,286,805 91,439,276,589 Financial costs 275,692,989,567 182,027,896,449 Current derivative financial instruments 407,645,606,706 835,558,558,406 Share of losses of associates and joint ventures 348,611,702 32,449,704,960 Current firm commitment liabilities 595,777,530,690 711,837,833,458 Profit before income tax 1,045,041,178,496 1,150,314,384,871 Current portion of long-term debts 205,737,033,336 1,099,433,009,780 Income tax expense 248,652,840,345 299,199,290,553 Provisions 134,106,278,942 10,849,777,057 Profit for the year 796,388,338,151 851,115,094,318 Other current liabilities 111,763,880,723 105,501,348,967 Profit attributable to: Equity holders of the Company 796,396,684,256 851,241,109,153 Non-current liabilities 2,433,350,028,307 1,230,980,306,282 Non-controlling interest (8,346,105) (126,014,835) Debentures 1,196,289,548,087 0 Earnings per share for profit attributable to the equity - - Long-term debts 544,293,746,697 99,650,991,883 holders of the company during the year Retirement benefit obligations 97,649,798,678 139,305,601,855 Basic earnings per share 3,673 3,930 Other provisions 44,043,300,000 31,521,357,000 Diluted earnings per share 3,670 3,923 Derivative financial instruments 117,592,176,691 639,098,872,059 Firm commitment liabilities 336,939,070,472 265,197,264,546 Other financial liabilities 19,839,010,455 26,846,253,207 Deferred income tax liabilities 76,703,377,227 29,359,965,732 Total liabilities 11,352,017,511,963 11,769,950,268,868 Samsung Heavy Industries Co., Ltd. and Subsidiaries Equity attributable to owners of the Parent Consolidated Statements of Comprehensive Income Unit : thousand in KRW Capital stock 5,282,602,141,651 4,643,619,759,092 Years Ended December 31, 2012 and 2011 Common stock 1,154,951,155,000 1,154,951,155,000 2012 2011 Common stock 1,154,376,930,000 1,154,376,930,000 Profit for the year 796,388,338,151 851,115,094,318 Preferred stock 574,225,000 574,225,000 Other comprehensive income (50,866,446,836) (234,890,423,158) Capital surplus 417,172,244,393 417,172,244,393 Change in value of available-for-sale financial assets (23,745,786,912) (137,492,543,859) Accumulated other comprehensive income 62,847,747,664 114,473,488,931 Gains and losses from derivative valuation 5,540,641,173 1,202,901,685 Other components of equity (650,927,722,273) (652,732,153,460) Actuarial gain and loss on post employment benefit bliga- 1,019,791,072 (133,757,697,483) Retained earnings 4,298,558,716,867 3,609,755,024,228 tions Non-controlling interest 346,921,923 368,975,229 Currency translation differences (38,894,412,274) 15,442,560,132 Total equity 5,282,949,063,574 4,643,988,734,321 Tax effects of other comprehensive Income(loss) 5,213,320,105 19,714,356,367 Total liabilities and equity 16,634,966,575,537 16,413,939,003,189 Other comprehensive income(loss) for the year, net of tax (50,866,447) (234,890,423) Total comprehensive income for the year 745,521,891,315 616,224,671,160 Attributable to: Equity holders of the Company 745,543,944,621 616,370,171,645 Non-controlling interest (22,053,306) (145,500,485) Total comprehensive income for the year 745,521,891 616,224,671 Overview Management Corporate Social Responsibility Appendix Samsung Heavy Industries 2012 Sustainability Report 80 81

Samsung Heavy Industries Co., Ltd. and Subsidiaries Samsung Heavy Industries Co., Ltd. and Subsidiaries Consolidated Statements of Changes in Equity Consolidated Statements of Cash Flows Years Ended December 31, 2012 and 2011 unit : thousand in KRW Years Ended December 31, 2012 and 2011 unit : thousand in KRW

Attributable to equity holders of the company Non- Total equity 2012 2011 controlling Capital stock Capital surplus Accumulated Other Retained Total interest Cash flows from operating activities Other Components earnings Comprehensive of Equity Cash generated from(used in) operations (1,003,641,615,223 ) 1,880,259,527,725 income Interest received 69,222,695,636 214,675,861,370 Balance at January 1, 2011 1,154,951,155,000 417,172,244,393 208,911,777,799 (656,270,563,969) 3,007,188,606,965 4,131,953,220,188 502,175,714 4,132,455,395,902 Interest paid (87,168,544,480) (108,856,302,636) Comprehensive income Dividends received 1,216,364,340 1,395,712,600 Profit for the year - - - - 851,241,109,153 851,241,109,153 (126,014,83 5) 851,115,094,31 8 Income tax paid (173,068,001,038) (547,711,004,644) Change in value of vailable- - - (110,960,492,070) - - (110,960,492,070 ) - (110,960,492,07 0) for-sale financial assets Net cash generated from (used in) operating activities (1,193,439,100,765 ) 1,439,763,794,415 Gains and losses from - - 1,060,157,420 - - 1,060,157,420 - 1,060,157,420 Cash flows from investing activities derivative valuation Disposal of short-term financial instruments 248,445,705,241 324,879,319,558 Currency translation dif- - - 15,462,045,782 - - 15,462,045,782 (19,485,650 ) 15,442,560,132 ferences Acquisition of long-term available- (364,777,443) (4,907,422,642) for-sale financial assets Actuarial loss on post em- - - - - (140,432,648,64 0) (140,432,648,640 ) - (140,432,648,64 0) ployment benefit bligations Disposal of long-term available- 610,500,000 49,988,005,033

Transactions with equity for-sale financial assets holders of the Company Acquisition of associates and joint ventures (39,710,459,709) (5,645,696,879) Dividends relating to 2010 - - - - (108,242,043,25 0) (108,242,043,250 ) - (108,242,043,25 0) Disposal of associates and joint ventures 59,763,598,555 - Gain on of disposal - - - 328,504,943 - 328,504,943 - 328,504,943 treasury stock Acquisition of property, plant and equipment (245,019,098,921) (305,914,973,708) Disposal of property, plant and equipment 14,999,210,038 64,186,073,965 Treasury stock - - - 3,367,697,766 - 3,367,697,766 - 3,367,697,766 Disposal of investment properties 29,169,790,398 53,782,168,447 Stock purchase options - - - (157,792,200) - (157,792,200) - (157,792,200) Acquisition of intangible assets (1,981,077,673) (4,656,719,526) Proceeds from shares - - - - - 12,300,000 12,300,000 issued Disposal of intangible assets 3,772,727,273 3,818,417,223 Balance at December 31, 1,154,951,155,000 417,172,244,393 114,473,488,931 (652,732,153,460) 3,609,755,024,228 4,643,619,759,092 368,975,229 4,643,988,734,321 Disposal of other current financial assets 22,655,308,357 5,712,406,550 2011 Acquisition of other current financial assets (4,611,333,705) (43,647,885,270) Balance at January 1, 2012 1,154,951,155,000 417,172,244,393 114,473,488,931 (652,732,153,460) 3,609,755,024,228 4,643,619,759,092 368,975,229 4,643,988,734,3 21 Disposal of other non-current financial assets 283,499,076 7,676,635,516 Comprehensive income Acquisition of other non-current financial assets (96,516,207,736) (31,019,738,597) Profit for the year - - - - 796,396,684,256 796,396,684,256 (8,346,105) 796,388,338,15 1 Disposal of other non-current assets - 933,917,406 Change in value of - - (16,944,842,204) - - (16,944,842,204) - (16,944,842,204 ) available-for-sale financial Net cash provided by (used in) investing activities (8,502,616,249) 115,184,507,076 assets Cash flows from financing activities Gains and losses from - - 4,199,806,010 - - 4,199,806,010 - 4,199,806,010 derivative valuation Proceeds(Repayments) of short-term borrowings 683,767,170,888 (989,695,128,801) Repayments of current portion of long-term debts (1,095,058,734,295 ) (166,136,229,150) Currency translation dif- - - (38,880,705,073) - (38,880,705,073) (13,707,201 ) (38,894,412,274 ) ferences Proceeds from long-term borrowings 658,282,493,881 74,402,466,422 Actuarial gain on post - - - - 773,001,633 773,001,633 - 773,001,633 Issue of bonds 1,195,585,000,000 - employment benefit obligations Disposal of treasury stock 637,340,000 1,268,140,000

Transactions with equity Dividends paid (108,365,993,250) (108,242,043,250) holders of the Company Net cash provided by (used in) financing activities 1,334,847,277,224 (1,188,402,794,779 ) Dividends relating to 2011 - - - - (108,365,993,25 0) (108,365,993,250 ) - (108,365,993,25 0) Exchange losses on cash and cash equivalents (9,558,334,469) (7,716,929,799) Gain on disposal of treasury - - - 140,683,358 - 140,683,358 - 140,683,358 stock Net increase in cash and cash equivalents 123,347,225,741 358,828,576,913 Cash and cash equivalents at beginning of year 805,572,644,011 446,744,067,098 Treasury stock - - - 1,726,641,329 - 1,726,641,329 - 1,726,641,329 Cash and cash equivalents at the end of year 928,919,869,752 805,572,644,011 Stock purchase options - - - (62,893,500) - (62,893,500) - (62,893,500)

Balance at December 31, 2012 1,154,951,155,00 417,172,244,393 62,847,747,664 (650,927,722,273) 4,298,558,716,8 5,282,602,141,65 346,921,92 5,282,949,063,5 Samsung Heavy Industries Sustainability Report 2012

This report can be downloaded in PDF format from our website: http://www.shi.samsung.co.kr communication team 33th FL, Samsung Life Insurance Seocho Tower, 1321-15 Seocho-Dong, Seocho-Gu, 137-955, Seoul, Korea Tel: +82-2-3458-6312 Fax: +82-2-3458-6298 C111531 This report is printed on FSCTM (Forest Stewardship Council) Certified paper with soy ink.