Sustainabilityreport 2017 e

CONTENTS
SHI’s VALUE CREATION

CEO Message 06
Samsung Company Profile

Business Results and Strategic Directions
Business Overview
08
10
12
Heavy Product Portfolio

Core Technologies
Value Creation Factors and Their Impacts
14
18
20
Industries Value Creation Results

Corporate Governance
Ethical Management
22
24
26
Stock Information 27
CORPORATE SOCIAL RESPONSIBILITY

Materiality Test 30
UN Sustainable Development Goals 32
Stakeholder Engagement 34
Efforts to Respond to Safety Incident 35
SHI Core Value
1. People [Safety Management · Talent Training ·
Respect for Employees] 36
2. Excellence [Quality Management · Customer ·
Satisfaction · R&D] 44
3. Change [Production Innovation · Risk ·
Management · Corporate Culture] 54
4. Integrity [Compliance Management ·
Information Management] 64
5. Co-prosperity [Mutual Growth · Environmental
Management · sharing Management] 72
APPENDIX
Financial Statements 82
Independent Auditor’s Report 89
GRI Index 92
GHG Emissions Assurance Statement 95
Third-Party Assurance Statement 96
Geoje Shipyard
Our Geoje Shipyard proudly obtained the three major international certifications of ISO 9001, ISO 14001,
and OHSAS 18001, and has moved beyond Korea to become the hub of the global shipbuilding/offshore
industry, leveraging its top-notch fabrication technology production efficiency. The shipyard is also
undertaking the Digital Transformation initiative to maximize its competitive edge in production cost while
developing and implementing a real-time ship monitoring and data collection/analysis system.
Major Production Facilities
Production Capacity
Shipbuilding 2.256 million CGRT/year
Offshore 79,000 ton/year
Facility
Total Area 4 million m²

8.3km in length(simultaneous berthing
Quay
capacity: 24 vessels)
Dry Dock
Scale
Dock Main Product
(length x width x depth)
Dock No.1 283m x 46m x 11m Oil tanker, drillship
Dock No.2 390m x 65m x 11m LNG carrier, drillship
Ultra Large Container
Dock No.3 640m x 98m x 12.7m
Ship, FLNG, VLCC
Floating Dock
Scale
Dock Main Product
(length x width)
Green Dock No.1 269.7m x 52m Oil tanker, drillship
Green Dock No.2 400m x 55m Oil tanker, LNG carrier
Container ship, VLCC,
Green Dock No.3 400m x 70m
FLNG
Container ship, VLCC,
Green Dock No.4 420m x 70m
FLNG
OFD* 157m x 150m Offshore facilities only
* Offshore Floating Dock

Sustainability Report 2017
Samsung Heavy Industries
CEO Message
SHI’s VALUE CREATION 06 07
Based on the strength we have gained by overcoming obstacles

and adversity over the past 44 years, we will make every effort to rise
to today’s challenges and move towards a new future.
Distinguished Customers, Shareholders, Investors and restructuring, and cost reduction, we will strengthen our
Stakeholders, competitiveness to achieve sustainable growth.
In 2017, in the face of a turbulent business environment, Together with these plans, we will go further to fulfill our
Samsung Heavy Industries (SHI) was fully committed to corporate social responsibility as a global corporate citizen.
securing competitive advantages that differentiate us from Following the unfortunate accident that occurred at the Geoje
other competitors by improving our production efficiency, Shipyard in May 2017, SHI developed a Safety Roadmap to
reducing costs, and developing special purpose vessels. ensure a safe workplace and has put it in place. Under the
This enabled us to win orders of US$ 6.9 billion amid fierce principle of ‘Safety is the No.1 value in management’, we have
competition, and to become the sole Korean shipbuilder that shifted our safety management paradigm to guarantee the
signed large-scale offshore projects such as BP MAD DOG2 safety of each and every member of SHI and subcontractors.
FPU and ENI Coral FLNG. These achievements indicated our Moreover, in order to respond to the demand for eco-
unbeatable competitiveness in the offshore market. Despite friendly ships around the world as the International Maritime
such considerable endeavors on our part, however, we Organization (IMO) will tighten environmental regulations on
experienced decline in revenue and posted operating loss; our vessels, we will exert concerted efforts on building eco-friendly
revenue dropped due to a rapid fall in the number of orders ships and developing relevant technology.
awarded, which is attributable to years of a severe downturn
It has been eight years since SHI published its first annual
in the shipbuilding industry, whereas fixed costs, including
Sustainability Report. The purpose of these reports is to
labor costs and depreciation still were a burden for us, which
transparently present our future direction and achievements
led to the operating loss.
on sustainability topics related to business operations in the
In 2018, the shipbuilding and offshore market is showing fields of economy, society, and environment, with a focus on
positive signs from increases in world seaborne trade
our five core values of People, Excellence, Change, Integrity,
and global oil prices by virtue of an upswing in the global
and Co-prosperity.
economy. Not being complacent with these external
improvements, we will continue to devote ourselves Distinguished stakeholders, based on the strength we have
wholeheartedly to overcoming current challenges and gained by overcoming obstacles and adversity over the
taking another leap forward. With the aim of winning past 44 years, we will make every effort to rise to today’s
contracts worth US$ 8.2 billion in 2018 and being back in challenges and move towards a new future. We look forward
the black in 2019, we will do our best to swiftly stabilize our to your unwavering and continued support and advice for our
current management. By obtaining orders for high value-
journey ahead.
added special purpose vessels such as LNG carriers and
shuttle tankers, we will enhance our profitability. Taking the Thank you.
growing demand for eco-friendly ships with more stringent
environment regulations as an opportunity, we will position
ourselves at the forefront of the eco-friendly ship sector. Joon Ou Nam
Furthermore, by implementing a self-rescue plan, including President & CEO
financial structure improvement through a rights issue, Samsung Heavy Industries
COMPANY PROFILE
Since its establishment in 1974, Samsung Heavy Industries

(SHI) has landed orders for 1,156 ships and offshore facilities
from global top-tier shipping companies and has successfully
delivered 1,085 of them as of 2017. SHI aspires to become the
world’s leading company in cutting-edge technology, production
efficiency and high value-added shipbuilding, and is setting itself
apart from the competition through its unparalleled business
competitiveness. SHI has built differentiated technology and
turnkey production capabilities in the shipbuilding and offshore
industry, and is capable of designing and constructing topsides,
one of the key components of any offshore development facilities.
HUSTON
SHI at a Glance
Company Name Samsung Heavy Industries Co., Ltd.

Year of Establishment 1974
CEO Joon Ou Nam
No. of Employees 10,753 (as of the end of 2017)
KRW 7,901,235 million
Sales (as of the end of 2017, on a consolidated basis)
KRW 13,818,113 million
Total Assets
(as of the end of 2017, on a consolidated basis)
23, Pangyo-ro 227beon-gil, Bundang-gu, Seongnam
Head Office
City, Gyeonggi Province
Telephone +82-31-5171-7000
Website www.samsungshi.com
Global Network
Domestic Worksite
Year of No. of Main Business and
Worksite
Establishment Employees Responsibility
Ship/offshore design
Pangyo R&D Center 2014 472
and research
Ship/offshore
Geoje Shipyard 1974 10,187
structure fabrication
Pangyo R&D Center Geoje Shipyard Daeduk R&D Center
Ship/offshore basic
Daeduk R&D Center 1993 94
research
OSLO
LONDON
PANGYO
TOKYO
ATHENS RONGCHENG
GEOJE
NINGBO
DUBAI INDIA
SINGAPORE
Domestic Worksite Overseas Subsidiary Overseas Office
Overseas Subsidiary Overseas Office

Year of No. of Main Business and Region Office
Subsidiary
Establishment Employees Responsibility
North America Houston Office
Ship component
SHI Ningbo Co., Ltd. 1996 2,000 Europe London Office, Oslo Office, Athens Office
processing
Ship component Europe Dubai Office
SHI Ningbo Co., Ltd. 2006 1,910
processing
Asia Dubai Office
SHI India Offshore facility
2007 141
Engineering Center detailed engineering
Overseas J/V: SHI-
2014 235 Shipbuilding
MCI FZE*
*In calculating the number of employees at SHI-MCI FZE, only directly-recruited
employees were included, and local subcontractor staff was excluded.
SHI Ningbo Co., Ltd. SHI Rongcheng Co., Ltd. SHI India Engineering Center SHI-MCI FZE
BUSINESS RESULTS and

Strategic Directions
2017 Business Performance
Shipbuilding Offshore
In 2017, orders increased across all ship As major oil companies are expanding their
types, including tankers, container ships, facility investment in line with increasing
LNG carriers and bulk carriers. Globally, oil price, new orders in the offshore plant
shipbuilders landed orders valued at sector rose by 159.8% from the previous
nearly 46.9 million tons, and this is up by year to reach US$ 5.6 billion in 2017.
2.4 times from 19.3 million tons in 2016. As Among these new orders in the sector, SHI
of the end of December in 2017, backlogs successfully won two orders worth a total
declined by 11% from 158.6 million tons of US$ 3.8 billion. However the size of the
in 2016 to 141.1 million tons, which is orders fell below its revenues, making its
attributable to increases in ship delivery. 2017 order backlog decline accordingly.
Consolidated Financial Information in Summary (Unit: KRW Million)
2015 2016 2017

Total assets 17,301,592 17,217,463 13,818,113
Current assets 10,110,481 9,950,790 6,779,933
Non-current assets 7,191,111 7,266,673 7,038,181
Total liabilities 13,035,846 10,942,152 8,020,660
Current liabilities 9,570,119 9,045,743 7,145,283
Non-current liabilities 3,465,727 1,896,409 875,378
Total equity 4,265,746 6,275,311 5,797,453
Capital stock 1,154,951 1,950,574 1,950,574
Retained earnings 3,593,524 3,519,571 3,198,433
Revenue 9,714,442 10,414,189 7,901,235
Operating profit -1,501,905 -147,200 -524,164
Pretax Income -1,461,811 -68,941 -463,899
Net income -1,212,110 -138,777 -340,748
2017 Orders and Order Backlogs

Ship No. of Ships Net Amount (US$ billion) Portion (%)
Container Ship 7 1 5
LNG Carrier 17 3.2 15
Tanker 35 2.5 12
Drillship 6 4.1 20
Offshore Facility 6 9.9 48
Total 71 20.7 100
2018 Market Outlook
While oil tanker orders remain unchanged Recently, the world oil price has remained
from the previous year, LNG carrier orders stable in the US$ 60 per barrel range, and
are expected to increase due to the growing it is expected to see less production output
demand spurred by newly-operated plants in the future due to the recent decrease in
as well as increasing freight rates. The oil companies’ investment This implies that
container ship market is also forecast to
the discussion on oil field development
experience increases primarily in large-
will be resumed, and there would be
size ship orders as fleet reorganization
more new orders from this year onwards.
requires efficiency gains in ship operation
and thus stimulates replacement demand. In addition, major oil companies have
Furthermore, seaborne trade traffic is reduced development costs through cost
growing thanks to the global economic savings and are increasing their investment
recovery, and this will help balance the in deepwater development and LNG sector
supply and demand curve. This means in response to growing oil demand.
that the market is expected to fully recover
from 2019 onwards.
2018 Strategic Directions
The business landscape is expected to improve in 2018 as macro-economic

conditions are gradually recovering with increases in the global economic
growth rate and seaborne trade volume while oil prices are stable in the
US$ 60/barrel range.
In the shipbuilding and offshore market, orders are forecast to grow twice
from 2016 and 2017 to reach US$ 27.6 billion, although this is still less than
what SHI experienced in the previous booming years.
There are prolonged delays in market recovery while competition is

intensifying among shipbuilders to secure orders. Still yet, SHI will focus
on products along the LNG value chain in response to the increasing LNG
demand and capitalize on its experience in undertaking offshore projects to
land orders in a stable and proactive manner.
SHI will be fully committed to strengthening its fundamentals to stay firm even
in the face of turbulent business conditions by improving its business stability
through stronger manufacturing competitiveness and reasonable production
system operation and by securing financial soundness through a rights issue.
BUSINESS OVERVIEW
Shipbuilding and Offshore Business

The shipbuilding and offshore industry requires abundant knowledge and complex engineering
capabilities, is closely aligned with other industries, and has massive technological impact. Furthermore,
this industry demands that intensive investment be made in technology, capital and labor, and thus
advanced technology, large-scale capital and exceptional human resources are the key to success in
building ships and offshore plants. This also represents a global single market and an order-driven
market where a client places an order for high-priced ships, and the shipbuilder initiates construction
accordingly. Since SHI is involved in constructing such high-ticket products, SHI endeavors in multiple
ways for sustainable growth by building competitiveness through technology development and
customer satisfaction and by proactively tapping into new markets.
Main Products
• LNG carrier • Container ship • FLNG • Drillship
• LNG Floating Storage • Very Large Ethane • FPSO • Jack-up Rig
Regasification Unit Carrier • Floating Offshore • Field Development
• Oil tanker • Passenger ship Structure Ship
• Artic shuttle tanker • Fixed Offshore • Wind Turbine
Platform Installation Vessel
Production Process
Common Process for Both Shipbuilding and Offshore
1 Design 2 Steel Cutting 3 Assembly 4 Outfitting Design 5 Painting
Design engineering Pile up and cut steel Weld the cut steel Install pipes, wires Paint blocks with eco-
blueprints for ships to be consumed for to produce ship and and other fitting friendly paints to prevent
and offshore plants building ships and offshore plant blocks components on blocks blocks and structures
offshore plants prior to dock loading from getting rusty
Shipbuilding Process
6 Loading 7 Launching 8 Quay Work 9 Commissioning 10 Naming Ceremony
Load finished blocks Set a ship afloat by Work on interiors and Conduct performance Host a ceremony to
onto dock filling the dock with install equipment checks on the ship name the ship
water inside the ship
Offshore Plant Process
Loading Equipment Launching Lower Loading & Connecting Trial Run &
6 Hinge Turnover 7 onto Dock 8 Substructures 9 Dock Modules 10 Delivery
Flip over the offshore Load and install Set afloat substructures Load and connect Conduct performance
plant deck to prepare equipment onto the that support the upper dock modules to the checks on the
for facility installation upper deck of an deck substructures offshore plant and
offshore plant deliver to a client
PRODUCT PORTFOLIO
SHIPBUILDING
LNG Carrier
LNG carriers were designed to transport liquefied natural gas (LNG) at minus 163°C.
SHI has demonstrated its advanced technology over the years by successfully
constructing ‘electric-propulsion LNG carriers’ with exceptional operation
capability and fuel efficiency in 2001, the world’s largest 266,200m3-capacity LNG
carriers in 2008 and 2009, and ‘eco-friendly and high-efficiency engine-equipped
LNG carriers' with innovative improvement in fuel efficiency in 2013.
Under construction: 14 vessels Delivered: 103 vessels
2017 Achievements in Winning LNG Carrier Orders

In 2017, SHI landed an order valued at KRW 210 billion by an overseas LNG carrier client to construct an 180,000m³-
capacity LNG carrier. This enabled SHI to exceed its annual order target of US$ 6.5 billion to reach US$ 6.9 billion in
2017. Driven by its technology and experience built over the years in constructing no fewer than 110 LNG carriers,
SHI is determined to lead the LNG carrier market to continuously secure 30 vessels in annual average order grant.
LNG FSRU (LNG Floating Storage Regasification Unit)

LNG Floating Storage Regasification Unit (FSRU) serves as an LNG terminal storing LNG
transferred from LNG carriers and regasifying the fuel to be supplied through pipelines
to onshore destinations. SHI has independently developed its own regasification
system, S-Regas, and succeeded in winning orders through this domestically-developed
technology. In so doing, SHI is taking the lead in the FSRU market through its R&D on a
range of regasification systems and relevant types of vessels.
Tanker
Tankers consist of crude oil tankers that transport crude oil, product tankers that
transport refined oil products, and shuttle tankers that transport crude oil produced
from FPSOs or other offshore facilities to onshore stations. Since SHI became the
world’s first to build an Aframax-class* dual-hull oil tanker in 1992, the company
has been spearheading the global tanker market, winning 46 out of the 106 global
tanker orders and thus accounting for 43.4% of the total market share.
* Aframax-class tanker: An Aframax weights generally 95,000 metric tons deadweight (DWT), but its DWT ranges between 80,000 and 120,000.
Artic Shuttle Tanker

Artic shuttle tankers are a new type of vessel that serves both as ice breaker and tanker to
significantly improve transportation efficiency. SHI’s artic shuttle tankers are designed to operate in
level ice up to 1.4m in thickness and sail at 3.5 knots/hour while withstanding extreme temperatures
of up to -45 °C. SHI was the world’s first to build a 70,000 ton-capacity double-acting ship capable of
running ahead as well as turning around and proceed astern in the polar environment. Since then,
SHI has successfully received orders to construct seven artic shuttle tankers.
Container Ship
Container ships are designed to carry container cargos in their holds or on their decks. Since
SHI became the world’s first to develop 6,200TEU container ships in 1999, the company has
led the way in increasing the size of container ships. In 2015, SHI landed a series of orders
– four 20,100TEU ships and six 21,100TEU ships – to set a new world record in the number
of container ships ordered for the year. In 2017, SHI received orders of six 23,000TEU ships,
opening a new chapter in the global container ship history.
2017 Achievements in Winning Container Ship Orders

In May 2017, SHI held a naming ceremony for ‘OOCL HONGKONG’, a 21,413TEU container ship, ordered by OOCL. This container
ship, 383m in length, 58.8m in breadth, and 32.5m in depth, is identical in size with ‘MOL TRIUMPH’, another containership delivered
by SHI, but sets a new record as the world’s largest containership as it was designed to stow another layer of container cargos on
board. This enabled SHI to build an advanced competitive edge in technology in the ultra-large-size container ship market.
Very Large Ethane Carrier (VLEC)

Very Large Ethane Carriers (VLEC) transport liquefied ethane after reducing the volume
of ethane in liquid formextracted from shale gas and other types of natural gas. SHI
became the world’s first to land an order for an 87,000m3-capacity ethane carrier, and
tapped this new market in so doing. In line with developments in the shale gas sector,
ethane carrier orders are forecast to grow, and SHI is reinforcing its ethane carrier
technology in response to this emerging trend.
Under construction: Zero Delivered: 6 vessels
Passenger Ship
Passenger ships are broadly categorized into ferries and cruisers; ferries provide
regular services as a means of transport for passengers while cruisers are equipped
with diverse facilities to serve tourists. SHI has paved the way to advance into the
passenger ship market, landing orders for a total of nine passenger ships over the
years. SHI also became Korea’s first to develop LNG-fueled passenger ships in 2009,
which are capable of reducing their NOx and SOx emissions by more than 90%.

PRODUCT PORTFOLIO
OFFSHORE
Floating LNG (FLNG)

Floating LNG refers to offshore plant operations to drill and refine natural gas on the sea and then
liquefy the fuel into LNG for storage and off-loading. SHI signed a long-term supply contract with
Royal Dutch Shell in 2009 while landing an order for the world’s largest FLNG, Prelude FLNG, for US$
2.8 billion and successfully delivering the facility in June 2017. SHI continued to win a Mozambique
Coral FLNG order from ENI in 2017, setting itself apart from the competition in the FLNG market.
2017 Achievements in Winning FLNG Orders

In June 2017, SHI landed a US$ 2.5 billion order from the ENI for the Coral FLNG project to build an ultra-large-size
offshore plant in Mozambique. With 432m in length, 66m in breadth, 38.5m in depth, and 210,000 tons in dead weight,
this mega-size facility is capable of producing approximately 3.3 million tons of LNG per annum. SHI was awarded three
out of the four FLNG orders globally in 2017, proving its unrivaled competitive edge in the FLNG market.
Floating, Production, Storage, and Off-loading (FPSO)

Floating, Production, Storage and Off-loading (FPSO) vessels represent an offshore facility used to
develop deep-sea oil fields, expedite the development of oil fields or develop small-to-medium sized
oil fields. FPSO requires greater reliability and stability because it can have impact on the entire oil
field development project. SHI is recognized for its unrivaled FPSO technology through its successful
track records in constructing a total of 16 FPSO vessels ordered by global major oil companies.
Under construction: Zero Delivered: 16 units
2017 Achievements in Winning FPSO Orders

In 2013, SHI landed an US $ 3 billion order for Egina FPSO. Following construction, the vessel departed for Nigeria
in October 2017. With 2.3 million barrels in oil storage capacity and 36,000 tons in topside capacity, the Egina FPSO
will be installed near the Egina offshore oil field in Nigeria. SHI, which has the vastest FPSO building experience (total
16 units) in the world, plans to continue building FPSOs based on its leading-edge technology.
Floating Offshore Structure (TLP/Semi-Submersible/SPAR)

Floating offshore structures are used for oil drilling and production at submarine oil fields. In July
2010, SHI became Korea’s first to succeed in the offshore assembly of the topside and the hull of
Gazflot’s semi-submersible drilling rig. In April 2017, SHI successfully delivered the ‘Ichthys Central
Processing Facility (CPF)’ project ordered by INPEX to build the world’s largest floating offshore
gas processing facility, demonstrating its top-notch capabilities in executing offshore projects.
Under construction: 2 units Delivered: 17 units

Fixed Offshore Platform

Fixed offshore platforms are installed in relatively shallow waters to help develop marine
resources. SHI succeeded in delivering the world’s two largest offshore platforms ordered by
Russian Sakhalin Energy Investment Company (SEIC) in 2006 and 2007 respectively. In 2015,
SHI also landed an order for the ‘North Sea Sverdrup Platform’ from Statoil.
Under construction: 3 vessels Delivered: 17 units
Drillship
Drillships are used for oil exploration or drilling in the deep sea or in the rough water. Since
it became Korea’s first to construct a drillship in 1998, SHI has advanced its shipbuilding
technology and experience to deliver the world’s first drillship designed for the polar
environment, Stena Icemax, to the Swedish company Stena in April 2012. As of the end of
2015, SHI had a market share of 42% in the large drillship market.
Jack-up Rig
A Jack-up Rig is a drilling facility used for oil and gas drilling in the continental shelf, and consists of
a buoyant hull fitted with metal jack-up legs, capable of raising its hull over the sea surface while the
legs are fastened to the seabed. In June 2013, SHI landed an order for the world’s largest CAT-J Jack-
up Rig project from the Norwegian company Statoil. Being the first jackup rig project order that SHI
has ever won, this will surely assist SHI in landing additional orders and building its own competitive
edge in the growing jackup rig market.
Under construction: Zero Delivered: 2 units
Field Development Ship (FDS)

Field Development Ships (FDS) serve multiple purposes at sea, including the installation of oil
pipelines. In November 2000, SHI became the first Korean shipbuilder to construct a FDS, SaiBOS
FDS, equiped with its exceptional Dynamic Positioning (DP) and noise and vibration levelsthat
demonstrate SHI’s accumulated technology. In June 2008, SHI also landed an order for Saipem FDS
capable of navigating at up to 13 knots and exploring and drilling at a maximum depth of 3,000m.
Wind Turbine Installation Vessel (WTIV)

Wind Turbine Installation Vessels (WTIV) are used to install offshore wind turbines after moving down
and fixing jack-up legs from a floating hull to the seabed. In July 2012, SHI delivered a WITV to Swire
Pacific Offshore. The vessel is designed to simultaneously transport and install twelve 3.6MW-capacity
wind turbines. SHI is building WTIVs capable of installing wind turbines in an accurate and swift manner.

CORE TECHNOLOGIES
S-Fugas S-Reli S-Regas

(LNG Fuel Supply System) (Self-Reliquefaction System) (Regasification System)
One emerging trend in the LNG While the boil-off gas generated from SHI has independently developed
carrier segment is the adoption LNG carriers was previously used to its own LNG regasification system
of two-stroke propulsion engines. fuel their engines, this fuel conversion (S-Regas) that re-gasifies LNG to use
While aME-GI engine requires is declining significantly with the stored and transported LNG in liquid
300 bar high-pressure FGSS, adoption of high-efficiency engines. form. This system consists of direct
an X-DF engine requires 16 bar This prompted SHI to develop the sea water regasification system and
low-pressure FGSS. SHI has Self-Reliquefaction system (S-Reli) indirect LNG gasification system
independently developed its own to reliquefy the boil-off gas that is using glycol and adopts control
LNG fuel supply system, S-Fugas, not used as engine fuel to be stored technology that minimizes downtime
to optimize the LNG FGSS for in a cargo hold. The S-Reli system is and considers operator convenience.
different types of engines. capable of re-liquefaction with nearly Independently developing this system
10 thousand tons of boil-off gas per allows SHI to efficiently control delivery
year, and when operating with engines schedule and quality in addition to
in parallel, the system ensures optimal saving costs and to ultimately elevate
operation without wasting boil-off gas. its competitiveness in the market.
SAVER-Stator-D Offshore Project Orbital Pipe

(Duct-type Fuel Saver) Materials Engineering Welding Machine
SAVER Stator-D was independently Materials engineering for offshore In the fabrication of offshore plants,
developed by SHI to ensure the plant constructions depended heavily welded piping joints have the greatest
consistent flow of sea water into ship on imported technology and thus impact on overall quality. In the past, the
propellers in order to increase their posed high risks in project execution. quality and productivity of pipe welding
propulsion and improve fuel efficiency. This alerted SHI to independently was dependent on the skills of individual
Adopting this fuel-saving technology develop processes to verify and select welders. In order to greatly improve the
for shipbuilding has enabled SHI to materials in order to mitigate project quality and productivity, SHI introduced
improve fuel efficiency by nearly 2%, execution risks, and this assisted SHI the first kind of piping automatic
and is expected to strengthen SHI’s in developing in-house technology and welding (orbital welding) methodology
competitive edge in landing new building competitiveness in offshore in the industry. This has dramatically
orders in the upcoming years. engineering design technology. reduced welding defects and resulted in
significant gains in welding productivity.
Membrane-Type Cargo Onboard Economical/Safe SAVER Air

Containment System (KC-S) Operation Solution (S.Vessel) (Air Lubrication System)
The construction of LNG cargos S.Vessel represents SHI’s smart SAVER Air is SHI’s eco-friendly
to store cr yogenic LNG mainly ship solution. Leveraging BIG, s y ste m t h at i m p r o v e s e n g i n e
depends on the technolog y of SHI’s independent IoT platform efficiency by spraying air at the
leading companies in the industry. installed onboard, S.Vessel collects base of a vessel to reduce friction
SHI became Korea’s first to navigation and energy data in real against sea water. Independently
independently develop its own time and uses such data as input developed by SHI, this system was
membrane-type cargo containment for navigational/organizational adopted for a 170,000m3-capacity
system, and this allowed SHI to solutions. S.Vessel, SHI’s smart LNG carrier and proved its benefits
reduce nearly KRW 10 billion in vessel solution, enables navigators in reducing fuel consumption by
royalty payment per LNG carrier. and engineers to access a range more than 5%. SHI intends to apply
This is even more significant since of information for economical and this system to a wider range of
SHI’s independent technology has safe operations. ships to strengthen its competitive
been used in improving membrane edge in the market.
shape and developing materials for
secondary barriers.
Drawingless Yard Digital Twin Engineering Data Change

(3D Drawing) (SEVAS, Mobile) Management
SHI decided to go paperless in its SHI is leading the way in Digital Twin SHI has developed a system to
drawing work; while two-dimensional technology in the 4th Industrial Revolution ensure the uniform management of
drawings were used for manufacturing, era. SHI adopted 3D lightweight modeling information generated throughout
SHI currently uses 3D modeling to to intuitively understand the progress the entire project execution
directly extract three-dimensional made in the shipbuilding process, and is process. This leads to improved
data on shape, production and using tablets to send up-to-date drawings data conformity and the efficient
processing and to send such data and 3D models to production units and management of data modifications.
to manufacturing units. When this allow for real-time input of production Furthermore, handover data used for
approach is extended from shop outcomes based on P-LTE, the ultra-high- project operation and management
drawings to installation drawings, speed industrial wireless communication i s a u to m at i ca l l y ge n e rate d to
this will transform SHI yards into network designed specifically for yard significantly reduce additional
drawingless yards. operations. handover-related work.
Value Creation Factors

and Their Impacts
Creating value is essential in becoming a brand of choice, and such value is created through
products or services that we deliver at Samsung Heavy Industries (SHI). At SHI, we take the
lead in creating sound values and fulfilling our social responsibility along the entire value
chain to meet customer expectations and to help resolve social issues.
Components of Value Creation
Marketing/
Value Chain R&D Contract Engineering
Procurement Fabrication Maintenance/
Award design Repair
Components
of Value Creation
Brand credibility 1, 6, 7
Market-dominating
1, 2, 4
technology
Process efficiency 4
Internal control
3, 8
procedures
Employee competency 13
Work ethics 11
Workplace safety 18
Subcontractor selection
19
and maintenance
Responsible supply chain 19
Diverse product line-ups 5
Reduced use of natural
4, 24, 25
resources
Respect for biodiversity 25
Green product
4, 25
development
Product quality
4, 6
improvement
Product safety
6
improvement
Customer relationship
7
promotion
Sustainable logistics 19
Revitalization of the
22
local economy
Recruitment of top talent 14
Employee satisfaction 15, 16
Cash generation capacity 1
Subcontractor
19
competency
Compliance
10
management
Each and every component of value creation that exists throughout the entire business process serves both as a growth opportunity
and a risk factor, and presents ways forward in managing respective business units across the board. SHI identified 25 topics to define
its management directions for sustainable value creation and uses these topics for its materiality test. Furthermore, SHI analyzes and
presents different types of capital that contributes to management outcomes of respective issues from the comprehensive viewpoint.
Management Directions Impacts of Value Creation
Major Types of Capital That

TBL* Sustainability Topic Generates Business Outcomes
1. Strengthening market dominance
2. Undertaking innovation initiatives

Financial
3. Operating an integrated risk management system Capital
Economy
4. Technology development
5. Discovering new business
6. Strengthening product and service responsibility Manufacturing

Capital
7. Reinforcing customer satisfaction
8. Sound governance
9. Information management
Intellectual
10. Compliance management Practice Capital
11. Strengthening ethics management
12. Respecting employee diversity/human rights
13. Nurturing talent

Human
14. Recruiting and retaining talent Capital
Society 15. Differentiated corporate culture
16. Maintaining work-life balance
17. Maintaining amicable labor relations Relational

Capital
18. Creating safe workplace
19. Mutual growth with subcontractors
20. Implementing strategic social contribution activities

Natural
21. Facilitating internal communication
Capital
22. Contributing to local community development
23. Responding to global CSR issues
24. Advancing environmental management

Environment ALL
25. Environmental protection and conservation
* Triple Bottom Line: The business principle which measures the performance of a company in
three criteria; corporate profit, environmental sustainability, and social responsibility.
Value Creation Results
Input Business Activity
• Listed on the Korea Stock Exchange on Management Philosophy and Company Mission
August 5th, 1974
• Total No. of shares issued (common stock):
390,000,000 shares
Manage-
Financial
• Financial capital procured through ment Contribute to humanity by producing and providing the best products
shareholders and investors and services through talent and technology
Capital Philosophy
• Business results disclosed through the General
Shareholders’ Meetings and other channels
Enhance customer satisfaction and the quality of life by providing
Company
reliable, environment-friendly, economical and convenient ships and
Mission
facilities
• Production Capacity
- Shipbuilding capacity: 2.256 million CGRT/year
- Offshore production capacity: 79,000 ton/year
• Tangible assets: KRW 6,162,905 million
Manufacturing Core Values
Capital - Buildings and structures: KRW 2,853,928 million
- Machinery equipment: KRW 895,564 million
CO-
PEOPLE EXCELLENCE CHANGE INTEGRITY PROSPERITY
SHI believes in SHI always aspires SHI is deeply SHI fully complies SHI strives
• Intangible assets: KRW 91,580 million the importance to become the aware of with laws and to bring co-
• R&D expenses: KRW 69,230 million of people since very best through potential crises ethics based on prosperity
Intellectual • R&D expenses against sales: 0.9% ‘people make us relentless passion and constantly commitment and to local
Capital what we are as a and unyielding pursues change proper manners communities,
company’ spirit of challenge and innovation countries and
humanity
Management Principles
• No. of employees: 10,753

1 2 3 4 5
SHI complies with SHI maintains a SHI respects SHI values the SHI fulfills its social
• Internal director: 3 directors
laws and ethics healthy corporate its customers, environment, responsibility as a
• External director: 4 directors
Human culture shareholders and human rights and global corporate
Capital • Average length of service: 14.7 years employees health citizen
Value Chain
• Present in 11 countries across the

globe
• Local community involvement and
Relational social contribution Marketing/ Fabrication/ Maintenance/
R&D Engineering Procurement
Capital • Fundraised by employees: 1.03 billion
Contract Delivery Repair
Award
• Research • Discover new • System design • Strategic sourcing • Product safety • After-sales
• Develop markets • Improve design • Supply chain • Quality service
• Development • Customer efficiency management management • Claim
management relationship • Receiving/ • Production handling
management shipping efficiency
management improvement
• ISO 50001/14001-certified
Natural • Energy consumption: 7,784TJ
1 3 2 7 6 1 5 2 4
Capital
Output/Outcome Mid/Long-term Directions
Business and • Revenue

Products - Shipbuilding and offshore:
Effectively apply manufacturing
Financial Capital
Financial Capital
KRW 8,852.2 billion
technology and capacity to production
- E&I: KRW 63.3 billion
processes in order to deliver high-
• Net income
quality products and responsibly
- Shipbuilding and offshore:
manage the supply chain
Shipbuilding - KRW 476.4 billion
- E&I: - KRW 7 billion
• LNG carrier
• LNG Floating Storage
Regasification Unit
• Oil tanker
Manufacturing Capital
Manufacturing Capital
• Artic shuttle tanker • Production volume (Geoje Shipyard) Effectively apply manufacturing
• Container ship - Shipbuilding: 2,228,000CGRT technology and capacity to
• Very Large Ethane Carrier - Offshore: 132MH/TON production processes in order to
• Passenger ship • Procurement from subcontractors: deliver high-quality products and
KRW 45.6 billion responsibly manage the supply chain
Offshore
• Strategic directions set and approved

Intellectual Capital
Intellectual Capital
• FLNG Employ innovative and sophisticated
by business unit
• FPSO technology in developing new
• 2018 business plans set and approved
• Floating Offshore products and services to meet
Structure • Mid/long-term strategies set and individual customers’ specific
• Fixed Offshore Platform approved
expectations
• Drillship • Patent registrations: 817 (2017)
• Jack-up rig
• Field Development Ship
• Wind Turbine Installation
Vessel
Respect equality and diversity in

• Ratio of qualified QM personnel recruitment and hire competent
2017 Achievements
Human Capital
Human Capital
(excluding ISO 9001): 56% talent, and then assist them with
and Activities (as measured against the total No. of capacity building as they wish and
quality personnel)
pursue both organizational and
• Employee incident rate: 0.22%
individual growth
High Material Topic
1_ Creating safe workplace
2_ Reinforcing customer
satisfaction
3_ Strengthening market Contribute to the development of
Relational Capital
Relational Capital
dominance customers and society through products

4_ Strengthening product and technology, and to the growth of the
and service responsibility • Corporate tax: KRW 123.1 billion national economy by paying taxes and
5_ Undertaking innovation procuring primary/secondary materials
initiatives as a way to help the government secure
6_ Compliance fiscal soundness
management practice
7_ Mutual growth with
subcontractors
Medium & Become a responsible corporate citizen

Natural Capital
Natural Capital
• GHG emissions: 482,349tCO2e who encourages even its customers who

Low Material Topic
• Reduction in energy consumption use its supply chain and products to fulfill
1_ Technology development - Reduction in power consumption: their environmental responsibility as
747TJ/year well as minimize its own environmental
2_ Discovering new business impact in the fabrication process
corporate governance
BOD Composition and Operation

As of the end of March in 2018, SHI’s Board of Directors consisted of seven directors – three internal
directors and four external directors. As the company’s top decision-making body, the BOD aims to
improve the accountability of the decision-making process and to enhance transparency in handling
agendas. The BOD operates five subcommittees including the Executive Committee, Internal Trade
Committee, and Remuneration Committee to promote managerial innovation and efficiency.
BOD Composition
Director Director Gender Position Date of Appointment Term
Joon Ou, Nam Male CEO, Chairman of the BOD Jan. 26th, 2018
Internal Director Jun Cheol, Kim Male Vice President Jan. 26th, 2018
Hae Kyu, Jeong Male Executive Director Jan. 26th, 2018
Jong Kye, Shin Male Mar. 24th, 2017 3 years
Jae Han, Ryu Male Mar. 22nd, 2018
External Director External Director
Bong Heum, Park Male Mar. 18th, 2016
Kang Shik, Choi Male Mar. 22nd, 2018
BOD Subcommittees
Composition
Committee Internal External Responsibility
Director Director
Deliberate and decide on general business operations except for
Executive Committee 3 - issues commissioned the BOD and the decisions made by the BOD
in accordance with regulations and the Article of Association
Perform preliminary reviews on major transactions to improve the

Internal Trade Committee - 3
transparency of internal transactions and stakeholders’ trust
Perform preliminary reviews on the remuneration of registered

Remuneration Committee 1 2 directors to improve the transparency of remuneration and the
legitimacy of the remuneration determined
External Director Recommend external director candidates in a fair and independent

2 3
Recommendation Committee manner
Supervise and support senior management through check and

Audit Committee - 3
balance to ultimately maximize corporate value
Subcommittee Members
External Director
Executive Internal Trade Remuneration Candidate Audit
Director Name
Committee Committee Committee Recommendation Committee
Committee
Joon Ou, Nam ● (Chairman) ● (Chairman)
Internal Director Jun Cheol, Kim ●
Hae Kyu, Jeong ● ● ●
Jong Kye, Shin ● (Chairman) ● ●
Jae Han, Ryu ● (Chairman) ● ● ● (Chairman)

External Director
Bong Heum, Park ● ● ●
Kang Shik, Choi ●

BOD Operation
The BOD met ten times in 2017 to make decisions on a total of 31 agenda items, including the approval of
financial statements and business reports, the appointment of the Chairman of the General Shareholder
Meetings and the BOD, and the approval of financial transactions with other group affiliates. In 2017, the
attendance of external directors amounted to 92.5%, and they proactively participated in making decisions.
Operational Status of the BOD

Category 2017 2016 2015
No. of meetings held 10 10 12
Board of Directors No. of agenda items approved 31 33 34
Attendance of external directors(%) 92.50 97.50 93.80
Executive Committee No. of agenda items approved 76 79 62
Attendance of external directors(%) 77.63 84.80 80.60
Internal Trade Committee No. of agenda items approved 6 21 20
Attendance of external directors(%) 100 94.30 100
Remuneration Committee No. of agenda items approved 2 1 1
Attendance of external directors(%) 100 100 100
External Director Candidate
Recommendation No. of agenda items approved 2 1 4
Committee
Attendance of external directors(%) 100 100 87.50
Audit Committee No. of agenda items approved 3 12 8
Attendance of external directors(%) 100 100 100
BOD Remuneration System

The 2017 General Shareholders’ Meeting approved the limit placed on annual director remuneration
(KRW 8 billion, including registered and external directors), and KRW 2.81 billion was paid as
compensation. Remuneration is determined by the BOD to improve the transparency and legitimacy
of director compensation, and relevant details were disclosed through SHI’s 2017 Business Report.
Director Remuneration in 2017
Remuneration Approved by the Average Remuneration

No. of Directors General Shareholders’ Meeting Total Remuneration per Person
7 Directors 8,000 KRW million 2,811KRW million 402 KRW million
ETHICAL management
Ethics Charter
SHI defined the Ethics Charter and the Employee Code of Ethics to abide by its management
philosophy of ‘Contributing to humanity by producing and providing the best products and services
through talent and technology’. Each and every SHI employee strives to establish healthy business
ethics and a corporate culture of integrity with the goal of evolving into the world’s leading company.
First SHI values customer satisfaction as its top priority, and pursues co-prosperity on the basis of mutual
trust and respect as a partner in creating new value along with employees, customers, subcontractors,
shareholders, local communities, nations and human society.
Second
SHI respects culture and customs in any regions or countries where it conducts business, complies
with regulations and ethics, and competes freely and fairly on the basis of competency.
Third
SHI values autonomy, accountability, creativity and the spirit of challenge, and cultivates humanity and morality
while maintaining the honor and dignity of all SHI employees by observing proper manners and etiquettes.
Fourth
SHI does its utmost in conducting business with honesty and sincerity and builds a healthy corporate
culture on the basis of mutual respect and care as well as labor-management cooperation.
Code of Ethics
Chapter 1 Integrity
Management Chapter 2 Respect for
Shareholders Chapter 3 Respect for
Customers Chapter 4 Coexistence with
Subcontractors
1. Creating leading products 1. Protection of shareholder 1. Respect for customers 1. Mutual respect
and services interest 2. Response to customers 2. Establishing trust with
2. Customer-oriented 2. Disclosure of management 3. Protection of customers business partners
3. Fair competition information 3. Fair business activities
4. Improving the quality of life 4. Selection & contract of
5. Advertising and Promotion business partners
Chapter 5 Environmental Protection

and Health & Safety Chapter 6 Ethics Standards of Employees
1. Environment-friendly 1. Maintaining SHI’s reputation and dignity 6. Data documentation and security
management 2. Autonomy, creativity and the spirit of 7. Healthy relationships among
2. Health & safety challenge colleagues
3. Maintaining organizational integrity 8. Sound corporate culture
4. Responsibility 9. Political involvement
5. Respect for intellectual property 10. Anti-corruption
Chapter 7 Responsibility
wards Employees
to-
Chapter 8 Responsibility toward
the Nation and Society Chapter 9 Compliance with
the Code of Ethics
1. Respect for humanity 1. Corporate obligations and rights

2. Fair HR operations 2. Contribution to social development
3. Training and protecting talent
Stock information
Korean Stock Market in 2017

In 2017, KOSPI Index set a record high (based on closing prices) at 2,557.97 in November, and closed
the year at 2,467.49, with a y-o-y growth rate of 21.76%. This is up by 441 points from the 2016 closing
point of 2,026.46. The KOSPI Index hit its bottom on January 2nd of 2017 when the stock market
opened for the year, and this implies that the index kept increasing continuously from the beginning
of the year. The KOSDAQ Index also rose by 26.44% from 2016 to close the year at 798.42.
Stock Price Trends

While orders in the shipbuilding and offshore market inched up slightly from the previous year, the
shipping industry continued to suffer depression, which resulted in repeated fluctuations in the stock
market. SHI’s stock price recorded its highest at KRW 12,178 in June and lowest at KRW 6,124 in
December and closed the year 2017 at KRW 7,330.
(Uint: KRW)
Category 2017 2016 2015

Face Value 5,000 5,000 5,000
Total Shares Issued
(Unit: No. of shares) 390,000,000 390,114,845 230,875,386
(common stock)
Highest price 12,178 12,950 20,650
Stock Price Lowest price 6,124 8,300 10,050
Closing price 7,330 9,250 10,850

Foreign Ownership (Unit: %) 17.39 17.24 14.65
Shareholder Composition
The total number of shares (include preferred stock) issued amounted to 390,114,845, and the number
of outstanding shares was 364,150,416. As of the end of 2017, the largest shareholder is Samsung
Electronics with 16.9% of the total, and Samsung Life Insurance and Samsung Electro-Mechanics own
3.2% and 2.3% respectively. There are 162,431 minority shareholders who hold 63.4% of the total.
Major Shareholders (as of the end of December 2017)
Samsung
Electronics
65,930,982 16.9%
3.2%
Samsung Life
Insurance 12,642,988
Samsung
Electro- 8,928,807 2.3%
Mechanics
CORPORATE SOCIAL 28 29
RESPONSIBILITY
Materiality Test _ 30
UN Sustainable Development Goals _ 32
Stakeholder Engagement _ 34
Efforts to Respond to Safety Incident _ 35
SHI Core Value

1_ People [Safety Management˙
Talent Training˙Respect for Employees] _ 36
2_ Excellence [Quality Management˙
Customer Satisfaction˙R&D] _ 44
3_ Change [Production Innovation˙
Risk Management˙Corporate Culture] _ 54
4_ Integrity [Compliance Management˙
Information Management] _ 64
5_ Co-prosperity [Mutual Growth˙Environmental
Management˙Sharig Management] _ 72
Materiality TEST
Materiality Analysis
SHI’s sustainability reports focus on those topics that interest its stakeholders and have a massive
impact on its business conduct, out of wide-ranging issues that arise inside and outside the company.
In 2017, SHI surveyed stakeholders on the impact of sustainability topics on the financial and non-
financial aspects of its business conduct as a way to further advance the materiality test process.
In addition, SHI identified the sustainability management practices adopted by industry peers and
endeavored to disclose data that it believed to be significant for stakeholders in order to improve
information disclosure. SHI aims to highlight topics that are considered material from the viewpoint of
stakeholders in publishing its sustainability reports, and use such reports to maximize communication
on its sustainability management.
Materiality Test Process
1
STEP
Sustainability Management Topics Collection 3
STEP
Topic Materiality Analysis through Internal Indicators
SHI gathered sustainability management topics 1. Analyze the agenda items handled at executive-
and reviewed external factors that affected the level meetings
shipbuilding and offshore industry in general as SHI studied how many of the agenda items reported
well as modifications made in 2017 on internal to and approved by regular meetings supervised by
policies and regulations related to sustainability the top management – BOD meetings, Management
management. This ultimately resulted in the creation Strategy Meetings, etc. – in 2017 corresponded to
of 25 topics. the 25 material topics chosen.
2. Identify employee awareness

2
STEP Topic Materiality Analysis through External Indicators SHI surveyed its employees to evaluate the impact
these material topics had on its business conduct.
1. Analyze the indicators of international organizations
SHI reviewed the reporting requirements of
relevant standards such as the GRI Standards that
were newly adopted as a sustainability reporting 4
guideline as well as ISO 26000 and the SDGs. STEP Prioritize issues
2. Analyze domestic media articles SHI determined the significance of respective topics
SHI chose 2,320 out of approximately 16,000 articles through Step 2 and Step 3 and prioritized those topics
that covered sustainability management in Korea and identified affected stakeholders in order to set
and abroad, and categorized them into positive and the reporting scope.
negative issues in the fields of economy, environment
and society to create a list of material topics.
3. Analyze the reports published by industry peers

SHI analyzed the sustainability reports published Reporting Framework & Information
by industry peers and the topics these companies 5
STEP Disclosure Scope Establishment
addressed from the sustainability perspective.
SHI adopted a narrative approach for topics that are
4. Survey expert groups (PwC Pool) most material to provide an in-depth description
SHI performed surveys on the basis of the PwC’s of such topics by disclosing its 2017 achievements,
network to integrate sustainability topics that mid/long-term directions and key relevant data on
interest external experts in preparing this report. respective topics.
RESPONSIBILITY
Materiality Test Outcomes

Following the materiality test, SHI classified 25 material topics into High Material, Medium Material
and Low Material based on their business impact and social interest to create the matrix below, and
ultimately identified seven key topics.
High Material
Business Impact
Strengthening market dominance

Reinforcing customer satisfaction
Strengthening product and service responsibility
Creating safe
Undertaking innovation initiatives workplace
Compliance management practice
Mutual growth with subcontractors

Technology development
Maintaining work-life balance
Recruiting and retaining talent

Maintaining amicable labor relations Strengthening ethics management
Nurturing talent
Sound governance
Risk management
Information management
(protection and disclosure) Advancing
Responding to global CSR issues environmental
Differentiated Discovering new business management
corporate culture
Facilitating internal communication
Respecting employee
Environmental protection and conservation diversity/human rights Medium Material
Implementing
Contributing to local community
strategic social
development
contribution activities
Low Material
Social Interest
Reporting Boundary of Material Topics

Internal External
Topic Shareholders Local Page
Employees Customers Customers Subcontractors
and Investors Communities
Creating safe workplace ● ● ● ●

36, 38~40
Reinforcing customer
44, 49~50
satisfaction
● ●
Strengthening market
44~53
dominance
● ●
Strengthening product
44, 46~48
and service responsibility
●
Undertaking innovation
54, 56~59
initiatives
● ● ● ●
Compliance
64~71
management practice
● ● ●
Mutual growth with

72, 74~75
subcontractors
●
UN SUSTAINABLE Development Goals
SHI is fully dedicated to meeting UN’s Sustainable Development Goals (SDGs) throughout its business
operations. Created through the consensus made among UN member states in September 2015,
SDGs set out 17 goals and 169 targets to be reached by 2030 to move towards sustainable society.
Alignment with SDGs*
Safety Management
People Talent Training ●
Respect for Employees ● ●
Quality Management
Excellence Customer Satisfaction
R&D ●
Production Innovation
Change Risk Management
Corporate Culture
Compliance Management
Integrity
Information Management
Mutual Growth
Co-
Environmental Management ● ●
prosperity
Sharing Management ● ● ●
* Out of 14 14 issues categorized into SHI’s five core values were aligned with corresponding SDGs for their direct contribution to meeting these goals
Key Initiatives in Relation to the SDGs
SHI Core Value

PEOPLE EXCELLENCE CHANGE
Relevant SDGs 3 4 5 7 8 9 8
• 11,774 employees completed training • Developed S-Fugas, a fuel supply • Received and handled 461 cases
• Samsung Daycare Center capacity: 262 system for LNG-fueled vessels of employee grievance
Main Achievements children • Introduced S-QMS, a computer-based
in 2017 quality system
• Appointed nine Technical Committee
members
RESPONSIBILITY
● ●
● ● ●
● ●
INTEGRITY CO-PROSPERITY
16 1 2 4 6 7 8 11 12 13 14
• Provided compliance training on 89 occasions • Operated the Safe School project for elementary schools in disaster-proneareas in
• Conducted planned inspections on anti-corruption and Indonesia
subcontracting and special inspections on overseas subsidiaries • Provided KRW 1.5 billion as lunch money for students from low-income families
• Hosted the 44th General Shareholder Meeting • Provided 150 students with the After School program in rural/fishing villages
• Constructed five LNG-fueled (eco-friendly) vessels
• Posted KRW 244.2 billion in balance of the Mutual Growth Funds
Stakeholder ENGAGEMENT
Topics of Interest and Communication Channels by Major Stakeholder Group

SHI strives to sincerely communicate with a range of stakeholders, including shareholders and investors,
customers, subcontractors and employees who interact with the company directly and indirectly. To this
end, SHI operates such communication channels as management disclosures, sustainability reports, and
General Shareholders’ Meetings to share any issues related to its business operations with stakeholders
and to reflect their feedback and suggestions into business conduct.
Stakeholder Topic of Interest Major Channel Description
• General Shareholders’ Periodically report

• Financial results Meetings news and issues related
Shareholders
• Management strategy • Website to business conduct
and Investors
• Technology development • Management through on/offline
disclosures, etc. channels
Identify customer
• Customer satisfaction
• Customer satisfaction requirements through
• Product/service quality surveys
Customers regular meetings, and
• Customer • VOC surveys, etc. proactively respond to
communication
necessary improvements
• Ethics/compliance Comply with

management • Government-led regulations, provide the
• Governance projects information requested
Governments
• Tax payment/ • Conferences by governments, and
involvement in public • Discussion meetings, etc. offer feedback on policy
policy-making directions
• In-house bulletin boards Share management
• Talent training
• Newsletters strategies and directions
• Work-life balance
• Briefings on with employees, and
Employees • Welfare and benefits,
management status ensure interactive
internal communication
• Labor-management communication through
• Corporate culture
meetings diverse channels
Listen to the feedback

• Partners Council and suggestions of
• Mutual growth • Year-round
Subcontractors subcontractors, and
• Fair trade communication
channels (on/offline) reflect them in business
operations
Provide business-related
• Overall management • Website
Media information swiftly and
ativities • Sustainability reports, etc.
accurately
• Facilitation of the local Undertake social

• Social Contribution contribution activities to
economy
Local Activities communicate with local
• Social Contribution
Communities • Sisterhood ties communities and use
• Environmental social media to facilitate
• Social media, etc.
conservation/protection real-time communication
RESPONSIBILITY
Efforts to respond to safety accidents
This report is prepared to share with stakeholders any information on all the activities for and achievements
in ensuring a safe workplace. Specifically, the details of the crane collision accident that occurred at the Geoje
Shipyard in May 2017 and the follow-up measures are described to show not only Samsung Heavy Industry (SHI)’s
firm commitment to responding to the accident, but also its preventative measures to avoid the recurrence of
such incidents in the future with a view to helping our stakeholders better understand our efforts and dedication.
Response to Safety Incident

Samsung Heavy Industries (SHI) has always put safety first as its top priority throughout the entire work
process and actively pursued safety management to the highest level possible. Unfortunately, however,
a crane collision occurred at the Geoje Shipyard. Immediately after the accident, all operations at
the site were halted, and a thorough investigation into the causes of the collision was conducted. In
addition, multi-faceted measures were taken to prevent any incidents from happening in the future
in collaboration with relevant authorities, employees, and external specialized agencies. As such, SHI
pledges that we will continue to utilize all the resources to ensure a healthier, safer workplace.
Details of the Accident

In May 2017, at Quay 7 in SHI’s Geoje shipyard, a Goliath crane collided with a Jib-type Tower crane, and the boom of
the tower crane fell down onto a platform’s well bay module. The investigation revealed that the collision was a result of
miscommunication between signalers and crane operators. Promptly after the collision, SHI formed an Accident Response
Team to address the aftermath of the accident, halted all operations at the site, and issued a safety alert while sincerely
cooperating with the investigation conducted by authorities, including the Ministry of Employment and Labor (MOEL).
Follow-up Measures
Right after the accident, with an aim to identify and eliminate potential risk factors across the shipyard, SHI hired
an external specialized agency to conduct more precise diagnoses of its safety culture as well as the Korea Safety
Technology Association, accredited by the MOEL, to carry out special safety checks for all the cranes at the yard.
Following this, SHI gradually resumed operations at all sections of its Geoje shipyard, starting with the sections
whose safety was verified by the Ministry. We also held a Safety Rally in the attendance of all employees at the
yard to solidify our commitment to creating a safer workplace. In June, additional special safety checks were
performed at the Geoje Shipyard and overseas subsdiaries, including ship block fabrication factories in China
while a newly established task force team was identifying additional risk factors and coming up with solutions
over a six-week period. In addition, SHI has taken various actions to prevent any accidents. For example, we
have attentively listened to the voices of major clients to receive feedback on the level of our safety culture and
benchmarked the safety and quality management practices of global leading companies.
Safety Roadmap
In order to prevent such an unfortunate event from happening ever again and to ensure a safer workplace, the ‘HSE
Strategy Meeting’ is hosted directly by the CEO, the Safety Roadmap was established to place safety as the top
priority in management practices, and stronger safety initiatives are put into place based on the Safety Roadmap.
Strengthening the Creating a New Preventing Removing

Safety Organization Safety Culture Crane Collisions Potential Risks
• Creating a new HSE • Benchmarking from • Building an anti- • Conducting safety
Management Division global companies collision system checks and audits
• Operating the Safety • Conducting safety • Strengthening • Enhancing safety
Management Committee awareness workshops monitoring systems during lifting & rigging
• Hiring global safety • Receiving consulting and training programs operations
control experts services and taking • Improving signals and • Fully implementing
follow-up measures communication systems KSSS
Corporate Social Responsibility

SHI Core Value
1.People Safety Management

Context of Safety Management
Building ships and offshore facilities involves the huge investment in equipment
and materials, and thus incidents may happen anytime. Industrial injuries lead
to serious human/property damages and they cause losses not only for SHI as a
company but also for individuals and families affected. As our society increasingly
becomes wary of safety incidents, safety incidents may have an immense impact on
our society and country and tarnish the reputation of the company concerned.
Approach of Safety Management

It is with the firm belief that perfect quality and high productivity are delivered
through workplace safety that we at SHI place safety as our top priority throughout the
entire work process. Safety represents an ‘absolute value’ whose importance cannot
be overemphasized. SHI sets forth unwavering safety principles and is undertaking a
range of programs to ensure the safety of all its employees on the shopfloor.
1. Safety Management
2. Talent Training Ways Forward for Safety Management
3. Respect for Employees SHI strives across the board to embed safety management into its corporate DNA.
Under the overarching guidelines that ‘safety is the No.1 value in management’,
detailed action plans are designed and regular training/exercise/evaluation are
conducted accordingly.
Safety Management Operational Guideline Talent Training

Safety is the No.1 value in management
Context of Talent Training
The rapidly-changing market landscape and economic slowdown are driving
companies to focus on strategy and technology development for their survival.
Setting successful strategies and developing differentiated technology require
Reduce serious capacity-building on the part of employees, and specifically, a massive amount of
incidents and
environmental
time and efforts are needed in nurturing talented employees in the shipbuilding
pollution to zero and offshore industry. This is why companies in Korea and abroad are realigning
their strategy and investing in talent training.
Approach to Talent Training

Under the core value of ‘people’, SHI is assisting its employees in developing a daring and
innovative mindset and contributing to business growth. Driven by its systematic talent
Shift to a Improve training strategy, SHI provides wide-ranging training programs to help employees become
new safety Create a green
management customer experts in their own field and choose from diverse and self-initiated training opportunities.
workplace
paradigm satisfaction
• Fully implement • Ensure the • Fully respond to Ways Forward for Talent Training
the safety proactive environmental/
roadmap management of energy SHI is dedicated to helping its employees build a stronger job expertise as a way
• Broaden offshore projects regulations to secure technological competitive edge in undertaking major ship building and
(Mad Dog2, ENI (HAPs, resource
management
Coral, etc.) recycling, GHG)
offshore projects, and thus is encouraging self-driven learning while developing
areas and
strengthen • Disseminate • Reduce
performance measurement tools. On the basis of its success-oriented corporate
accountability advanced environmental DNA and employee loyalty often characteristic of heavy industries, SHI employees
• Enhance safety systems/ risks to zero are trained to remain steady even in the face of crises.
awareness/ culture (Lessons (fugitive
Learned, etc.) dust, green
executional
management
Talent Training Strategy
capability
system)
• Build a Vision To become a leading global player in the shipbuilding, offshore and offshore energy industry
streamlined
Goal Nurture top-notch professionals who lead the global technological scene
management
system Training Job Performance Global Mindset Leadership Competency
Strategy Nurture top-tier pro- Attain global Strengthen manage- Develop commonly-
(4 Focus Areas)
fessionals in the field competitiveness ment leadership shared values
RESPONSIBILITY
Respect for Employees Three Principles of the Ideal SHI Employee
Context of Respecting Employees principle 1
Creating the appropriate work environment is the very first step to take in A person with humanity
improving a company’s competitive edge as well as one of its most fundamental and morality
responsibilities. It is particularly critical to building a corporate culture of
communication and harmony that enable employees to fully engage in their Open
work and unleash their potential. Therefore, companies in Korea and abroad Heart
are increasing their investment in delivering an enjoyable and rewarding work
environment.
Approach to Respecting Employees Open

Person
With the belief that a company is only extraordinary as its own people, SHI is fully
committed to creating a pleasant and enriching workplace where its employees can Open Open
work with pride, royalty, and a sense of accomplishment. To this end, we ensure Mind Behavior
that our employees are fairly evaluated for their competency and performance as
well as offer a range of support systems and facilities to provide our employees
with encouragement, motivation and welfare benefits. principle 2 principle 3
A creative person who A person with global

Ways Forward for Respecting Employees (Ideal SHI Employee) ushers in a future through mindset and competency
The ideal SHI employee is an open person, who demonstrates open behaviors with ingenuity and cooperation
open heart andopen mind. Such employees have the courage to step up to correct
the wrong, dare to challenge their limit, embrace changes and use their ingenuity,
and are capable of surviving amid cut-throat competition.
SAFETY MANAGEMENT
Safety Management System
Safety Roadmap
Under the overarching guideline that safety is the No.1 value by crane collisions. SHI also increased the number of lane
in management, SHI has developed a safety roadmap and is inspectors, strengthened the authority of signalers, located
taking step-wise actions accordingly. Notably, SHI created more base stations and upgraded the two-way radiosas a way
an anti-collision system to prevent safety incidents caused to solidify its safety management system.
'Safety is the No.1 value in our management'
Promote involvement at
all levels and strengthen
safety execution
Strengthening the Safety Creating a New Safety Preventing Crane

Removing Potential Risks
Organization Culture Collisions
• Creating a new HSE • Benchmarking safety cultures • Building an anti-collision • Conducting safety checks
Management Division from global leading companies system and audits
• Operating the Safety • Conducting safety awareness • Strengthening monitoring • Enhancing safety during
Management Committee workshops for coaching systems and training lifting & rigging operations
• Hiring a global safety control employees programs • Fully implementing KSSS
expert • Receiving consulting services • Improving signals and
and taking follow-up measures communication systems
Safety Management Guidelines Twelve Safety Rules

Under the motto of ‘safety is the No.1 value in management’, SHI analyzed the types and causes of safety incidents that occur
we at SHI have experienced an extensive paradigm shift in on the site to set forth twelve safety rules. These rules reflect
safety management; safety management areas were broadened, increases in the use of smartphones and shipyard traffic as well as
responsibilities were strengthened, and a well-aligned management other recent social changes, and are posted across the shipyard
system was established. Best practices were also shared to ensure that to improve employees’ safety awareness and prevent safety
safety management guidelines are implemented across the board. incidents.
12 Safety Rules (As of the end of the 2017)

Always Do Never Do
Secure a full body harness when working at height Do not enter under a suspended load
Always secure a full body harness when working 2 m or higher Evacuate those who are within the path of heavy loads. Those who
above the ground. have been asked to evacuate should abide by the directions.
Attach warning signs and lock out before electrical work Simultaneous hot and painting work is prohibited
Do not make any connections when sending electric currents. Issue Prevent simultaneous work by obtaining a work permit in advance,
warnings and secure measures to prevent random operations and do and identify and eliminate combustibles and inflammables on the
not disable the secure measures. other side prior to hot work.
Comply with permit to work procedures Do not disable safety devices without authorization
Obtain permission from a manager prior to doing any work that requires Do not damage handrails and scaffolds without authorization. Do
a work permit and proceed with work only after applying secure not randomly disable the alarm devices of forklifts and other cars
measures that comply with the checklist attached to the work permit. within the work site.
Conduct gas tests when entering confined spaces Do not use mobile phones while walking, driving or carrying out work activity
Measure the oxygen level and well-ventilate the room before entering Use mobile phones in a safe environment, suspending from work,
confined areas. driving or walking.
Conduct TBMs before starting work

No alcohol or drugs while working or driving
Only after identifying and eliminating risk elements at work sites and
applying secure measures by conducting TMBs should one begin work. Do not drink alcohol or use drugs that may affect work or driving.
Observe all speed limits and wear seatbelts while driving

Do not smoke outside of designated smoking areas
Always observe speed limits and wear seatbelts when driving (speed
Only smoke in designated areas where an ash tray has been placed.
limit: 30km/h for motorcycles and automobiles, 20km/h for heavy
Do not smoke when walking or working.
equipment, and 10km/h for forklifts).
RESPONSIBILITY
Certification of Safety Management Standard Container Safety Inspection

Special container inspections were conducted to prevent fires in
Occupational Health and Safety
the winter season. Container offices and warehouses in use were
Management System checked to see the use of unauthorized electric heating devices, the
In 2001, SHI became the industry’s first storage of inflammables, indoor smoking and housekeeping status.
shipbuilder awarded the internationally
recognized world’s best Health and Safety
Emergency Response Capacity Building Education
Management Certification System, an
and Training
OHSAS 18001, by the British Standard
Institute. SHI is always working hard to In order to help employees build emergency response capacity,
create a safer workplace by exceeding SHI provides a range of training programs and emergency drills.
the requirements of the OHSAS 18001. All employees were given first aid and CPR training so that
OHSAS 18001-2007 Certificate anyone can swiftly handle emergency situations. Production
managers were provided with special safety training to emphasize
Safety Management Initiatives their role and responsibility as well as highlight the importance
of implementing safety rules and hazard prediction activities.
Furthermore, emergency drills were undertaken under 21 different
Create Atmosphere for Safety Practices through
scenarios created in the event of fires, suffocation, drowning and
Management’s Safety Initiatives other types of incidents.
Led by its management, SHI is creating atmosphere where To make employees familiar with emergency procedures
everyone puts safety into action across the yard. Starting from its within buildings, an emergency drill was conducted in four
safety slogan of ‘safety is the No.1 value in management’ declared major buildings at the yard, assuming that an earthquake of
by CEO, its management is taking the lead in conveying safety magnitude 4.0 or above occurred. This was attended by nearly
messages. Its management including Shipyard General Manager 3,500 employees, in conjunction with local authorities including
has gone on patrols on sites to check safety. Under the leadership a local fire station, police station and city hall in Geoje to further
of the Shipyard General Manager, a daily safety information strengthen public-private collaboration in emergency response.
meeting is held in attendance of executives to instill SHI’s In June 2017, a fire evacuation drill was performed in the
principle, Safety Frist, into every corner of the shipyard. During engine room near the stern of Egina FPSO. This was intended
the safety management strategy meeting held in August 2017, to help employees build emergency response capacity through
key strategies and sector-specific action plans were presented to activities such as securing space for an escape route by filling up
eliminate safety incidents and establish a quality-driven culture. the entrance in the engine room. As such, SHI will continue to
SHI is also exerting every effort to carry out the set strategies and conduct capacity-building training and exercise to ensure timely
action plans through various initiatives such as the operation of a response to a range of emergency situations.
safety committee.
Application of KSSS Adopted by Clients and Three
Establishment of a HSE Management Division Major Domestic Shipyards
A HSE Management Division was set up to create a new safety SHI is taking the lead in adopting the Korean Shipyard Safety
culture. A globally-renowned expert was recruited to lead the Standardization (KSSS) with an aim to prevent workers from
division with an aim to secure expertise in HSE and broaden its being confused with different safety standards per each client
horizon. In March 2017, technical advisors were also appointed in as well as to elevate and standardize shipyard safety regulations.
the HSE sector. Through these specialized support, SHI plans to As safety standards based on the consensus among clients and
identify risk factors on site in advance and to promptly establish the three major Korean shipbuilders (SHI, Daewoo Shipbuilding
and share countermeasures in the event of incidents. & Marine Engineering, and Hyundai Heavy Industries), the KSSS
covers seven sectors such as scaffolding, working at height,
confined space entry, permit to work, lifting & rigging, safety
Special HSE Inspection Team
training, and general safety. By forming units dedicated to safety
A special HSE inspection team is under operation to discover and production in each sector, SHI is conducting self assessments
potential safety hazards and prevent safety incidents. The CEO and preparing for the application of this new standard. SHI plans
supervises safety inspections performed across the entire yard to to complete the preparation process by the first quarter of 2018
fundamentally eradicate root causes of potential risk factors. and apply the KSSS into its yard from May onwards. This surely
will enable SHI to become the first Korean shipbuilder to meet
globally-recognized standards in safety management.
Strengthening Lifting & Rigging Operations Management Safety Management for Subcontractors
SHI is committed to strengthening the management of its lifting &
rigging operation from multiple angles as this inherently entails high-
Safety Support for Subcontractors
risk activities. For this reason, SHI has actively benchmarked leading In 2017, SHI developed its Subcontractor Management
companies for their best practices on lifting and rigging operations and Process to provide support in terms of safety. In the process,
then will build its own operational system. For example, engineering SHI broadened the scope of safety assessments to all in-
and design analysis activities which have been currently fragmented so house subcontractors and included outside subcontractors in
far will be integrated to create a system that conducts comprehensive performing safety inspections and offering safety training.
reviews for potential risks in advance. Moreover, in-house trainers will
be nurtured to provide professional job training that meets global
HSE Management Inspection and Training for
standards. SHI also aims to use radio frequency identification (RFID)
technology in developing a computerized history management system Subcontractors
on the use and inspection of lifting and rigging equipment to advance SHI conducts periodic safety inspections and training for its
its equipment management system as a way to improve on any subcontractors to help them meet SHI’s own standards in
omissions or equipment failures and prevent serious incidents. This, safety management and prevent safety incidents. In 2017, SHI
in turn, will allow SHI to make more timely decisions on equipment performed safety management inspections on all subcontractors
repair and replacement. Furthermore, SHI has developed an internal and offered safety training to 65,737 subcontractor employees.
qualification system approved by the Korean Human Resources
Development Service of Korea in the first half of 2018. Furthermore, a HSE Cooperation Program was implemented, and
its launching ceremony was attended by nearly 160 participants,
including SHI production managers, officials from the Ministry
Safety Day and Safety Rally of Employment and Labor, and CEOs of subcontractors.
Since 2015, SHI has been celebrating the Safety Day on 19th of January This program enables subcontractors to improve their self-
each year. With the date inspired by the emergency call number of 119 initiated safety management capabilities and to prevent safety
used in Korea, this has become SHI’s representative safety event. To incidents. SHI will continuously provide support on HSE skills to
commemorate the Safety Day in 2017, a joint fire drill was performed subcontractors to enhance their HSE level.
in cooperation with Geoje fire station under the assumption that a fire
occurred in the shipyard, and a safety oath was taken by all employees. Safety Management Support for Overseas Subsidiaries
In May 2017, all employees at the Geoje Shipyard attended a safety rally,
where the Zero Safety Incident Resolution was declared as well as its SHI sends top-notch experts at the headquarters to overseas
worksites were cleaned and organized to strengthen employees’ safety subsidiaries and offers experience-based safety training to
awareness and eliminate safety incidents. assist their local employees in building safety capacity. Periodic
inspections and special training programs are also provided to
ensure the consistent monitoring of their safety management.
Rongcheng Co., Ltd.z
Established in 2006, SHI Rongcheng Co., Ltd. advances safety

management by creating and spreading a site-driven safety culture.
Its Safety Support Center enables the subsidiary to comprehensively
practice safety management. The center is responsible for managing
CEO has declared its principle: safety Company-wide safety rally
is the No.1 value in management and inspecting not only small safety incidents caused by careless
behaviors of individual employees but also large-scale incidents that
involve damage in facilities and equipment as well as for developing
countermeasures. A Safety Jig & Tools team is also in operation to
pre-emptively assess the risks of jigs and tools while random on-site
inspections are performed by managers to keep workplaces safe.
The subsidiary completed safety inspections across its entire
production site between March and June of 2017 and identified
370 areas that needed improvements. It also created a joint special
safety inspection team among its HSE, production and safety support
Emergency drill in preparation for earthquakes operations in June 2017 to make a total of 1,935 improvements. Once
established, its safety culture was further disseminated through a
range of campaigns, from safety exercise competition to risk prediction
UCC competition and an aerial work platform quiz contest. These
endeavors allowed the subsidiary to become the first foreign-invested
company in China to be chosen as a manufacturer with excellent
safety performance by the Shandong provincial government in July
2017. Moreover, it has been recognized as the safest company in the
region by achieving zero incidents for 674 days. SHI plans to continue
with proactive communication among employees to maintain its
unique safety culture and workplace safety.
KSSS workshop
RESPONSIBILITY
TALENT TRAINING
Employee Capacity Building Leadership Capacity-Building
SHI’s Leadership Academy aims to assist leaders in developing
2017 Training Outcomes
communication skills and empathy mindset. Specifically, for
Average training No. of training
newly-appointed assistant managers and foremen/senior foremen,
No. of trainees hours per person courses capacity building programs are offered to help enhance self-
11,774 person 76.2 hour 483 course leadership capabilities and to bolster their passion again.
Leadership Courses for Part Leaders

Training Outcomes of Overseas Subsidiaries
I n F e b r u a r y 2 0 1 7 , 2 0 1 7 Pa r t
Leaders Leadership training
Average training hours per person at
overseas subsidiaries (China)
was provided at the Sancheong
Training Institute to help part
64.8 hour leaders to build their leadership
capacity. This training was
Job Competency Building attended by a total of 261 part 2017 part leaders leadership training
leaders, and this served as an opportunity to share the Samsung
SHI operates a job-specific expert training system to strengthen Culture Index (SCI) outcomes, study leadership skills, and identify
its technological competitive edge, and provides training courses action plans in order to build communication-driven leadership
to nurture experts in project management, contract management, capacity.
global business, engineering & quality, engineering management,
and procurement, etc. as well as external organization training. Training for Newly-appointed Foremen and Senior Foremen
At SHI, we also developed cyber training courses to nurture job- In March 2017, 55 newly-appointed foremen and senior foremen
specific experts and to support continuous learning. In 2017, were trained at the Sancheong Training Institute. The training
we specifically offered an Online Contract Management Mindset included a range of capacity-building and leadership programs,
training, which was attended by 5,515 employees. In cooperation with a focus on communication skills, empathy and special
of the Korea Marine Equipment Research Institute (KOMERI), Korea humanities lectures. Specifically, conversations with senior
Engineering & Consulting Association (KENCA), Korea Offshore & members allowed trainees to freely communicate on topics
Shipbuilding Association (KOSHIPA), and Engineering Development such as competency required as site manager, organizational
Research Center (EDRC) of the Seoul National University, SHI management tips, and expectations on newly-appointed foremen
provides external training opportunities to its employees to assist and senior foremen.
them in voluntarily improving their job competency.
Job Competency Programs Common Competency-Building
Job Training Trainee (No. Mandatory Training

of persons)
PM/contract PM (project management), contract At SHI, we believe that it is through change in employee
management management, global business, etc. 200
awareness that we can overcome current challenges and
Engineering Engineering, engineering management 3,500 strengthen our competitive edge. As such, SHI’s mandatory
Procurement/ Quality, procurement 250 training has included physical and mental health management
quality
through personality tests and laughter therapy as well as know-
External Training from external organizations, 1,492
training other external training your-customer training.
E-Learning EPC project contract management mindset 5,515
Fresh Training
Coaching Program SHI’s Fresh Training aims to encourage office workers to
develop positive mindset and provide motivation. Reflecting
In November 2017, an Offshore HVAC Design and Control Philosophy training
employee needs, this training consists of yoga, meditation,
was provided as an overseas coaching program for HVAC engineers. Overseas
experts were invited as lecturers, and the training addressed topics such as and self management. This allows employees to reduce their
offshore HVAC systems, relevant regulations and case studies. psychological fatigue and restore their mental health.
Global Capacity Building

SHI offers Language Intensive courses to allow employees to
develop their language skills. The targets for these courses consist
of employees in Engineering, HSE, Customer Satisfaction (CS),
Quality, etc. as well as persons in charge of tasks involved in
clients and expatriate candidates. Mandatory training program Fresh Training
Life Cycle Design Training World Skills Competition

SHI offers a life cycle design training to help employees address SHI attended the 44th World Skills Competition hosted in Abu
their concerns on upcoming changes and develop confidence in Dhabi, UAE, in October 2017. SHI’s employees competed in
rising to new challenges so that they can successfully open a new welding, power control, and refrigeration technology and were
chapter in their life after retirement. awarded across all competition. This served to demonstrate SHI’s
technology prowess and assist Korea in securing the 2nd place in
Life Cycle Design Training
the overall ranking.
SHI provides 50-year-old employees with training programs on how
to manage potential change after their retirement and design their
new future as well as on mindfulness management and personal
branding. In 2017, this training was attended by 160 employees.
Training for Employees Approaching to Retirement

For employees 55 years old or older and thus approaching to
retirement, SHI offers training to support them in their after-
The 26th Internal Vocational Skills The 44th World Skills Competition
retirement life. In 2017, this training was attended by 233 future Contest
retirees to perform self-assessments and share stories of starting
one’s own business or landing a new job.
Training Facility
Technique Training Center
The Technique Training Center
offers a range of job training
p ro g ra m s to n u r t u re p ro -
Life-cycle design training Training for employees approaching fe s s i o n a l te c h n i c i a n s a n d
retirement
meisters as well as to lay
Cyber Training Courses t h e ba s i s fo r p ro d u ct i v i t y
improvement. The center also
SHI operates a Cyber Training Institute to provide customized
runs language courses and in-
training for individual employees. The institute runs its online
house college courses to help employees with capacity-building.
Cyber Academy, which offers nearly 500 courses on management,
leadership, language skills, and job competency. Technique Training Center: Main Responsibilities and Training
Courses
Job Skill Training

Skill improvement programs
SHI encourages its employees to improve their job competency
through job-specific skill training and job relocation training. These
training courses include welding, customer satisfaction (CS), ship In-house undergraduate/college programs
electrical systems, offshore electrical & instrumentations, and cable
pulling. SHI also provides job competency training to subcontractor
employees to help them contribute to mutual growth and maintain WorldSkills Competition
win-win cooperation. Training is conducted on a year-round basis,
and in 2017, 574 persons completed the training.
Subcontractor training
Internal Vocational Skills Contest

Introductory training/
SHI’s Internal Vocational Skills Contest aims to ensure that its
skill training for new hires
employees develop a sense of pride and motivation as skilled
technicians. The 26th contest hosted for two days in 2017 was
attended by nearly 200 employees in 121 events in the areas Language/IT courses
of welding, ship electrical systems, painting, engineering, team
competition in the offshore sector, etc., and eventually contributed
to improving their productivity, quality and competency.
RESPONSIBILITY
RESPECT FOR EMPLOYEES

HR Management Welfare Facilities
Employee Data Canteen
As of the end of 2017, SHI employed 10,753 employees, and male There are 26 canteens that accommodate 17,000 employees at once
employees accounted for 96% of the total given the inherent and provide a balanced diet as a way to promote employee health.
characteristics of the industry. A separate canteen is in operation for foreign employees working at
the Geoje Shipyard. In order to improve their satisfaction, SHI offers
Employee Data in 2017
employees diverse meal menus to freely choose from.
Permanent Contractual
Gender Total
Employees Employees
Residential Space for Employees
Male 10,042 293 10,335
Female 376 42 418 SHI dormitories can accommodate a total of 4,300 persons, with
636 rooms inside the company and 1,520 rooms at the Hue Center
Total 10,418 335 10,753
located outside the company, along with wide-ranging amenities
*As of the end of 2017, a total of 134 foreign workers (male: 132, female: 2) were
included in Part-time Employees.
from fitness clubs and reading rooms to cafeterias. Additionally,
SHI provides 534 units of employee apartments to ensure their
residential stability.
Performance Assessment
At SHI, performance assessments are carried on a semiannual
Samsung Daycare Center
basis. Based on the results, decisions in relation to promotion
and compensation are made. To ensure fairness and objectivity in SHI operates the Samsung Daycare Center as an in-house
performance assessment, evaluators are offered evaluation training childcare facility to help employees reduce their childcare burden
twice a year, and performance assessment determination committee and specifically to assist female employees in unleashing their
meetings are hosted. In 2017, 10,442 employees received such full potential. Nurses are situated within the daycare center to
performance assessments, except for those who could not fulfill systematically take care of the health of employees’ children.
their term requirements due to leave of absence or reinstatement.
Cultural and Sports Facilities
Labor Association
At SHI, cultural and sports facilities are under operation to help its
SHI always strives to build a trustworthy and cooperative labor- employees promote their health and enjoy cultural activities. These
management culture based on communication and respect. By facilities include an indoor gym, a swimming pool, a bowling alley,
operating Labor Association on a periodic or tentative basis, a variety and a baseball park, and a scholarship program is also provided to
of agendas, including wages, welfare benefits, HR systems, are talked employees’ children.
about, followed by discussion on ways forward for improvements.
Cultural and Sports Facilities
Members of Labor Association
Major Facility Details
2015 2016 2017 Swimming pool, bowling alley, fitness club, seminar
Cultural Center
room, indoor gym
5,522 person 5,179person 4,980 person A Stadium Soccer field, basketball court, running track
Welfare Facility Fitness club, gym, soccer field, baseball park, futsal stadium
Insurance and Pension
Scholarship Program Scholarship program, auditorium
SHI fully fulfills its obligation to provide employees with four
major national insurance such as national pension, national
health insurance, occupational health and safety insurance, and
unemployment insurance. In addition, we have taken out a collective
insurance in preparation for occupational incidents. Moreover,
to ensure that its employees are financially stable in their after-
retirement life, a personal pension scheme is offered to employees.
Status of Insurance and Pension Canteen Dormitory
Collective Insurance
The purpose of a collective insurance is to promote the stable livelihood of bereaved
families of SHI employees who lose their lives through incidents, and compensate
for compensate for hospitalization cost.Insurance payments are fully made by SHI.
Personal Pension
Payment support is provided partially (3%) by SHI prior to retirement to
guarantee the financial stability of employees after retirement, and payments can
be made even after retirement.
Geoje Samsung Daycare Center Hue Center Fitness

SHI Core Value
2.Excellence Quality Management

Context of Quality Management
Quality management is increasingly playing an important role as customers require more
specific requirements for product quality. Accumulated experience and technology is
particularly vital to quality management in the shipbuilding and offshore industry. Offering
performance guarantee desired by customers and delivering quality and service that satisfy
customer needs require quality management guidelines and closely-aligned systems that
encompass the entire process including engineering, production and research.
Approach to Quality Management

Driven by the experience and technology built over the past four decades, SHI is
operating independent quality management systems and processes. Our quality experts
with globally-recognized qualifications suggest technical alternatives to handle quality
issues that may arise during the testing process as well as customer demands in order
1. Quality Management to ensure trouble-free process operations while doing their utmost to swiftly address
quality issues and prevent defects.
2. Customer Satisfaction
3. R&D Ways Forward for Quality Management
SHI performs process-specific verifications on its compliance with design standards,
classification regulations and specifications as a way to deliver top-notch quality.
Furthermore, SHI continually advances its quality management system to prevent defects
and control quality so as to stay ahead of the competition in quality management.
Quality Management Principles Customer Satisfaction

Context of Customer Satisfaction
The importance of customer satisfaction is growing even further in line with instable
business conditions such as a slowdown in the shipbuilding and offshore industry
and the sluggish global economy. As competition is intensifying to win orders in this
Deliver zero-
defect products industry, the first strategic step to evolve into a global leader is to deliver differentiated
and maximize customer satisfaction, and success in doing so will determine whether a company could
customer generate substantial business outcomes.
satisfaction
Approach to Customer Satisfaction
At SHI, we make sure that we fully understand customer needs on ships that are under
construction or have been delivered, and send our engineers to ships in operation
across the world to pre-emptively address customer inconvenience. Furthermore, we
Deliver Ensure Operate an
offer tailor-made services that meet customer needs in a swift and accurate manner to
total quality technology and optimal quality support their business success.
execution to management
that moves provide world- system
customers class quality Ways Forward for Customer Satisfaction
• Provide • Root out quality • Establish quality- SHI offers eco-friendly ships and exceptional offshore facilities to fulfill customer
differentiated risks to gain driven awareness
products and trust in quality among all
satisfaction. With the firm determination that once a client places an order, the client
quality services technology employees and will be sure to come again for more orders, we at SHI are exploring win-win solutions
• Identify • Retain human practice a culture that enhance our technological competitiveness as well as customer satisfaction.
customer needs resources of voluntary
and reflect them through engagement Customer Satisfaction Goals and Values
in improving sustained • Secure optimal
a quality training quality among Ensure on-time delivery and prompt response to contribute to business profits
management processes and customer satisfaction
system • Make continuous
improvements
at daily lives
Trust Openness Performance
(Open communication with (Maintenance of top-notch
(Customer confidence) colleagues) CS capacity)
• Pre-emptive risk • Proactive contract • Swift and accurate tailor- • Planned response and
management management made service prevention of recurrence
RESPONSIBILITY
Research & Development (R&D) Mid-to-Long-Term Technology Development

Strategy
Context of R&D
Korean shipbuilding companies are facing intensifying competition as Japanese
shipbuilders recovered their competitive edge thanks to the depreciation of the Build technological
Japanese yen as well as Chinese shipbuilders benefit from full support from the Chinese competitiveness for
survival through
government. Furthermore, the International Maritime Organization (IMO) is tightening differentiated products
regulations on emissions from ships, ranging from NOx and CO2 to SOx. Given that there and core technology
already exist global companies that are dominating the desulfurizer market, building competency
building
differentiated technological capabilities will be critical to address fierce competition
and tightened regulations.
Approach to R&D
SHI is focused on differentiating product performance and reinforcing cost
competitiveness in developing technology as a way to improve its competitive edge Differentiated
Independent
Efficient
offshore
amid challenging market conditions. SHI also endeavors to deliver product quality and product engineering engineering/
technology capacity production
performance that meet customer and market needs. Specifically, the Ship & Offshore
Research Institute drives SHI’s efforts to take the lead in differentiating product
performance, strengthening the independent offshore plant engineering competency,
and using advanced ICT to improve design and production efficiency.
Ways Forward for R&D

SHI designs a mid-term (five-year) product and technology development roadmap
every year in consideration of technology development trends to further strengthen
its technological competitiveness. SHI also performs general technology assessments
to select technological areas that require capacity improvement while developing
strategies that advance its R&D competence.
QUALITY MANAGEMENT
Quality Management System
Quality Management System
Even in the face of challenging market conditions, SHI has defined impressive customer experience.SHI improved its quality capability by
its vision of ‘building stronger quality competitiveness for survival’ implementing various cost reduction activities such as shortening lead
with an aim to go beyond customer satisfaction and deliver truly time, efficiency cost and upgrading the quality management system.
Build stronger
quality
competitiveness
for survival
Strengthen quality management to take a new leap forward
Reliable quality Cost savings Quality capabilities

• Establish the operation of a quality management system • Improve the efficiency of direct expenditures (Non- • Strengthen a job competency system for quality
• Establish/facilitate S-QMS destructive Tests /outsourced tests/source inspection personnel
• Strengthen audits on design quality expenses) • Launch company-wide PR activities to reinforce work
• Manage project risks • Develop/operate a quality failure cost system standards and quality awareness
• Reinforce the management of outsourced production • Improve on chronic/repetitive quality issues • Strengthen the implementation of the FMS (Flange
and equipment • Rationalize unreasonable specification Management System)
• Stabilize quality at overseas subsidiaries • Upstreaming quality/inspection through the use of
SMART technology
• Check on basic quality
Quality Golden Rules

At SHI, we fully comply with our 10 Quality Golden Rules across the we assessed our compliance with the 10 Quality Golden Rules to
entire production process to deliver products with perfect quality in identify a total of 578,681 quality issues and took action on 7,012
time and to bring customer satisfaction while advancing our level defect cases to prevent quality issues from happening.
of quality management to make quality enhancement. In 2017,
10 Quality Golden Rules
[Korean] [English]
RESPONSIBILITY
Renewed the ISO Quality Management System Quality Management Policy and System
Certification Improvement
SHI is renewing its certification in accordance with such
international quality management system standards as ISO
My Area Policy
9001, ISO 3834-2, and ISO/TS 29001 to gain customer trust in SHI has adopted a ‘My Area Quality Management Policy’ to
its compliance with globally-recognized quality and process improve the efficiency of production processes. The policy
standards. Furthermore, a total of 64 departments at the Geoje divided the Geoje Shipyard into a total of 99 areas – 56 and
Shipyard, Pangyo R&D Center, Daeduk R&D Center, Chilseo 43 areas within and outside the shipyard respectively – and
plant, and Chinese subsidiaries received quality management appointed inspection managers to each area to perform year-
assessments, which allowed SHI to establish its quality round inspections on its compliance with basic quality standards.
management system. SHI will be fully committed to remaining This enabled SHI to reduce its average punch issue rates from
updated and certified on these international standards in order to 2.4% in 2016 to 1.2% in 2017.
further strengthen its competitive edge in the market.
Change in Average Punch Issue Rates
(Unit: %)
2.4
1.2
2016 2017
Improvement in Outdoor Piping Welding Defects

SHI aims to build a highly-organized quality management
system to maximize the quality of its products. In particular, the
ISO 3834-2 certificate at the Geoje ISO 29001 certificate at the Geoje
quality of outdoor pipe welding is an important factor in the safe
Shipyard Shipyard operation of clients’ vessels. We take a systematic approach in
quality management, ranging from verifying the skills of welders
to managing the allocation of welders by grade and adopting a
penalty program. This enabled us to significantly improve the
welding quality of outdoor pipes and the maturity of products.
Our welding defects of outdoor pipes for all vessels built by SHI
dramatically fell from 14.1% in 2015 to 4.8% in 2017, and this in
turn helped us reduce the frequency of rework caused by welding
defects while cutting costs and streamlining processes. SHI will
undertake a range of quality initiatives to consistently improve on
welding defects.
Cumulative Trajectory in Outdoor Piping Welding Defects

(Unit: %)
14.1
ISO 9001 certificate at the Geoje 7.2

Shipyard 4.8
2015 2016 2017

Advanced NDT Operation through New Technology Quality Support for Overseas Subsidiaries
SHI has proactively adopted advanced nondestructive testing SHI supports overseas subsidiaries with quality improvement
(NDT) to promote quality management and prevent delays during programs to elevate their quality performance to the level of its
the shipbuilding process. Smart Navi technology makes it easier Geoje Shipyard. Domestic experts have been periodically sent
to detect the location of subsidiary materials in conducting to Chinese subsidiaries to help improve the local NDT system
radiographic testing (RT), and automated lead markers help us and build testing capacity for local inspectors. Geoje Shipyard’s
prevent human errors and reduce reshoots, which increases testing culture of valuing basic quality has been disseminated to Chinese
accuracy while shortening testing time. In addition, developing subsidiaries by sending professional basic quality inspectors and
multi-layer RT shooting equipment has enabled us to significantly continually providing relevant PR materials.
decrease the number of shoots taken for welder qualification testing
(WQT) and to reduce testing time by 72% on average. SHI plans to Key Annual Outcomes of Quality Management
shift from manual to automated systems to improve work efficiency.
2017 • Renewed the ISO quality management system
certification
Computerized S-QMS Quality System • Continuously improved on outdoor piping
welding defects
SHI developed and applied across the board its own quality • Advanced NDT operations through new
management system dubbed S-QMS in December 2017 to technology
maximize the efficiency of quality inspections. This system • Strengthened preventive inspections through
stage-specific design audits
features reorganized work processes, a user-friendly interface
• Rationalized testing to reduce costs
and improved processing speeds and functionalities in order to
• Prevented the recurrence of major quality issues
process a massive amount of complex and diverse information and improved processes
in a more intuitive and efficient manner against the previous
quality management system. In consideration of the inherent
characteristics of the shipbuilding and offshore industry, this 2016 • Transferred to the new quality management
system standards of ISO 9001:2015 (first in the
system has also facilitated versatile applications for different industry)
projects and clients. This has assisted SHI in improving quality • Implemented the My Area policy to strengthen
inspection and data management on shipbuilding and offshore basic quality
projects while increasing customer satisfaction. SHI plans to • Streamlined NDT and process/MC tests
• Elevated the level of NDT operations
provide user training to ensure that S-QMS is swiftly embedded
into its business operations.
*S-QMS: Samsung - Quality Management System • Launched a quality awareness campaign
2015
to ensure the timely delivery of zero-
defectproducts
Quality Talent Training and Support for • Hosted a production/foremen/senior foremen

LINE QC launching ceremony to strengthen
Overseas Subsidiaries quality management
• Held a quality innovation conference to build
quality competitiveness
Quality Talent Training
SHI nurtures outstanding quality professionals to reliably execute
shipbuilding and offshore projects that require sophisticated
technology and to satisfy the quality management expectations
of top-notch clients. In May 2015, a QM (Quality Management) job
training system was developed to help QM personnel build job
capacity, and QM training courses were established by defining
necessary QM capabilities, designing 127 subject-based teaching
plans and hiring experienced lecturers. The Quality Academy
was operated as part of this QM job training system, and a total
of 215 employees have been trained on skills, capabilities and
international qualifications. As a result, SHI has come to secure 49
internationally-certified examiners and its employees have gained
289 international qualifications in the fields of NDT, welding,
painting and explosion-proof as of January 2018. SHI aims to use
this training system to drive its endeavors to foster exceptional
quality professionals.
RESPONSIBILITY
CUSTOMER SATISFACTION
Customer Satisfaction Strategy for training operators and are uploaded on the corporate bulletin
board every month to be shared across the board.
With the goal of ensuring on-time delivery and prompt response
Once a ship is delivered to its client, SHI provides Lifetime Preventive
to bring customer satisfaction, SHI abides by the three principles
Maintenance (LPM) service that sends its engineers (working in the
of customer confidence, open communication with colleagues,
engine, boiler, air-conditioning and other fields) on board when it
and maintenance of top-notch CS capacity to advance customer
enters any of the major ports in Korea and abroad in order to make
satisfaction management.
pre-emptive inspections to prevent any defects. This service enables
SHI to examine in advance both small and big issues that may affect
Detailed policies its ships and to take necessary actions while proactively responding
Expert Risk Management: Pre-emptive response through early risk detection to any requests or answers raised by ship owners to deliver truly-
SHI is undertaking step-by-step improvement activities to respond to impressive customer satisfaction.
risks early on that may occur throughout the entire project execution.
Its database is updated every month in the contract-signing phase
to standardize contract review contents, and training is provided to Swift Claim Handling
improve technical knowledge and prevent process delays in order to
build stronger project management capabilities.
SHI endeavors to shorten claim handling time as a way to provide
swift and accurate customer-oriented service. In the event of
2) Proactive Contract Management: Strengthened response through major claims, SHI immediately sends its staff to concerned areas to
rigorous contract management
In order to conclude mutually-agreeable contracts both on the part
promptly handle such claims raised by ship owners. This enabled
of clients and SHI, SHI promotes communication with its clients and SHI to reduce its average claim handling time by nearly eight days to
reviews customer feedback. Major issues are identified in advance to 44.1 days against the set goal of 52 days.
thoroughly execute contracts and ensure effective response.
Claim Handling Process
3) Carefree Service: Swift and accurate customer-oriented service
SHI has developed its Smart After-Sales system and is closely Notify relevant Reflect
Select claims departments and
monitoring key indicators to offer swift and accurate customer- Measures in
that require receive measures
oriented service. The Early Warning System (EWS) is under operation feedback to prevent successive
to manage the status of claim handling on a daily basis per project/ recurrence ships
ship type. New customer satisfaction systems are also developed,
including real-time monitoring of delivered ships, and information
Notify relevant Request action
collected through such systems is put to use in order to provide tailor- Receive
Submit departments/ • Material
made customer services. counter-
claims vendors of invoice
measures
4) In-advance Management: Thorough preparation against claims and claims • S/E dispatch
strengthened pre-emptive risk management
SHI reviews and consults on contracts before and after an order is
awarded to pre-emptively respond to possible claims and is building Verify outcomes
Close
a database of repair history. If necessary, SHI dispatches its staff to • Invoice
claims
areas where its delivered ships are in operation to ensure to effectively • Service report
respond to customer claims.
Tailor-Made Customer Service

Claim Response and Contract Risk Smart A/S System
Management SHI is developing a SMART A/S System that provides a pre-emptive
service through the fusion of cutting-edge ICT with the shipbuilding
Anti-Claim Programs industry with an aim to deliver customer satisfaction and improve
work efficiency. The system has been completed and will be put to
SHI undertakes a range of claim prevention programs to minimize
its commercial use by building an integrated fleet system.
quality-related claims and ensure the safe operation of ships.
In the case that claims are raised after ship delivery and require Progress of SMART A/S System Development
fundamental change in original drawings and specifications or
the revision of standards or guidelines, immediate action is taken
by responsible departments to prevent the recurrence of such
Phase 1 Phase 2 Phase 3
claims. In particular for a series ship, in order to avoid any claims (2016) (2017) (2018~)
made in the first ship from happening ever again in the successive
ships, Before Service (B/S), a service that dispatches experienced
workers in the previous ships to the successive ship even from its
fabrication stage to make improvements, is in place. Infrastructure Development System Development Life Cycle Service
• A navigation control • Automatic claim • BIG* data alignment
SHI also operates internal claim prevention PR programs. To system for delivered vessels registration system • Platform integration
prevent claims from occurring even before they are raised, posters • Cloud service network • Automatic claim analysis system • MRO* service network
are prepared with photos and description including details in and development • A navigation control development
system for ship owners
presumed causes of claims in relation to non-conformance with
rules and standards and insufficient finishing. Once completed, such *BIG(onBoard Integrated Gateway): Ship data collection devices (AIS, ICMS, Weather, etc.)
*MRO(Maintenance Repair Operation): Ship maintenance and repair market
PR materials are disseminated to relevant departments to be used (tapping into new markets)
Customer Satisfaction Enhancement Components of the CSI Survey Following Ship Delivery
through Communication 1. Background
• Type of ships under operation/management
• Main areas of sailing
Survey
CSI Survey on Ships under fabrication • Overall ship quality
2. Satisfaction • Ship housekeeping and finishing status
SHI performs Customer Satisfaction Index (CSI) surveys on ships with quality • Welding condition
under fabrication to review clients’ satisfaction level during following • Insulation installation status and structural stability
delivery • Vibration and noise level/painting condition
a shipbuilding process. In 2017, SHI surveyed 19 clients and
• Main engine performance and service
scored 69 points. SHI shares survey outcomes with respective 3. Satisfaction
• Generator engine performance and service
working-level departments and come up with areas required for with
• Power control system performance and service
improvement with low satisfaction scores in order to increase equipment
• Navigation, communication and automatic equipment
quality
customer satisfaction every year. performance and service
4. Satisfaction • Technical level of A/S staff
CSI Survey on Ships under Fabrication with Guarantee • Swift responase and handling of A/S staff
Claims service • Claim handling time
Production Quality satisfaction survey on the whole production process
including steel cutting, assembly, fabrication, painting,
quality outfittings installation, commissioning, etc. CSI Survey Score Following Ship Delivery
Satisfaction survey on engineers' performance based on their
Engineering competency, understanding of the latest standards and speed 2017
quality in reflecting modifications in the designing process including
structures, outfitting, piping and electric instrumentation 72.5 Score
Satisfaction survey on Health, Safety and Environment
HSE schemes and management systems as well as overall safety
and environmental facilities within the yard
HSE Alliance Meeting
CSI Survey Score on Ships under Fabrication
SHI hosts monthly HSE Alliance Meetings for clients to highlight and
2017 raise awareness of the importance of health, safety and environment.
69.0Score Attended by ship owners, managers and HSE managers of classification
societies and executives and safety managers of SHI, these meetings
serve to present case studies of serious safety incidents and share
CSI Survey Following Ship Delivery possible countermeasures and ideas to prevent such incidents.
SHI conducts Customer Satisfaction Index (CSI) surveys following

ship delivery to identify customers’ satisfaction with its quality and
Customer Satisfaction Event
service performance. In 2017, SHI surveyed 13 clients and scored SHI provides its foreign clients with an opportunity to enjoy diverse
72.5 points. SHI uses CSI outcomes to reinforce its customer local cultural events, from musical performances to kimchi-making.
feedback system and upgrade its warning system on large-scale Since 2005, SHI has been offering honorary citizenship to clients who
claims as a way to improve customer satisfaction each year. have long been stationed in the city of Geoje and contributed to the
local economy through consultations with the city as a way to help
clients build closer ties with SHI and Geoje.
SMART A/S System Development Roadmap
2016 ~ 2017 2018 ~ 2019 2020 ~ 2021 2022 ~

Category
Phase 1 Phase 2 Phase 3 Phase 4 Phase 5 Phase 6 ~
Ship location Web infrastructure

information A/S web service Automatic claim development
(Automatic (companies,
SMART A/S Identification
for ship owners analysis system dealers,
System) shipyards)
* AIS(Automatic Identification System)
Automatic claim For-profit MRO
analysis system business
Ship navigation
information Predictive maintenance
Fleet system built
(BIG: onBoard solution based on navigation
SMART SHIP Integrated
for ship owners
information
Gateway)
* BIG(onboard Integrated Gateway)
Complete the development of tangible systems

RESPONSIBILITY
RESEARCH & DEVELOPMENT

R&D Operational System emissions. SHI developed an S-Fugas system to supply LNG to low-
pressure (X-DF) and high-pressure (ME-GI) dual fuel engines installed in
R&D Operational Strategy LNG-fueled ships and demonstrated its performance by installing the
system on actual ships. As the LNG-powered ship market is expanding
SHI has set a R&D guideline of ‘focusing on a broader application to include diverse types of ships in addition to container ships and oil
of cost-saving related technology as well as technology tankers, SHI proactively responds to the shifting landscape.
development that contributes to business outcomes for survival’,
and is dedicated to securing topside engineering skills, improving
the efficiency of 3D model-based engineering, differentiating
LNG-related process technology, developing green ships, and
developing core technology on smart yards and smart ships.
2018 R&D Strategy

Broaden the application of cost-saving technology and develop Glycol-based indirect heating Low/high-pressure engine fuel supply
technology that contributes to business outcomes for survival regasification system (S-Regas) system (S-Fugas)
Delivery of LNG Ships Equipped with the Korean-

Differentiate
flagship product
Broaden the appli-
cation of innovative Commercialize Type LNG Cargo Containment System
technology technology technology
Following the development of KC-1, a Korean-type LNG cargo
• LNG: Continuously • Respond to the • Commercialize
develop differentiated digitalization needs of independently- containment system jointly developed by the Korea Gas Corporation
technology clients developed technology and Korea’s three major shipbuilders (SHI, Daewoo Shipbuilding
• Carrier: Develop • Go paperless with shop/ • Independently
& Marine Engineering, and Hyundai Heavy Industries), SHI became
special eco-friendly installation drawings undertake previously-
technology • Expand the application outsourced tasks the world’s first to build and deliver LNG ships equipped with KC-
• FLNG: Internalize of internalized • Expand consignment 1, using its experience in designing and fabricating the conventional
engineering engineering tasks on facility use
technology membrane-type LNG cargo containment system. This has allowed
SHI to develop a network of domestic material suppliers and to
translate into savings worth US$ 10 million per ship in royalty
Differentiated Flagship Product Technology payment. SHI has also developed an independent gas processing
technology recognized for its world-class performance that turns
Independently-developed Glycol-based boil-off gas (BOG) generated during LNG transportation into fuel
Regasification Package to be supplied to engines (S-Fugas) and reliquefies excess boil-
off gas to be stored (S-Reli). SHI independently developed its own
SHI independently developed S-Regas(GI), a glycol-based indirect cargo containment and cargo handling systems in their entirety,
heating LNG regasification system. This system was demonstrated to which play a key role in constructing LNG carriers. This achievement
parties concerned including domestic and overseas ship owners in demonstrates that SHI has fully secured core technologies to
September 2017, and will be installed in a 170,000m3- capacity LNG- become an innovative trend setter in the LNG carrier market. This
FSRU whose order was awarded in October. The LNG regasification will drive SHI’s sustained endeavors to develop market-leading
system plays a key role in LNG-FSRU: it turns liquefied natural gas technology to improve navigational efficiency.
stored in a floating LNG storage/regasification system into gas to be
supplied onshore. While sea water or propane was previously used
Duct-type Fuel Saving Device (SAVER Stator-D)
to directly heat LNG, S-Regas uses glycol-mixed liquids to gasify
LNG and thus is an eco-friendly solution as it minimizes corrosion SHI has developed a SAVER
compared to the use of sea water and reduces the consumption of Stator-D through the combi-
regasification energy by more than 5%. Making patent applications nation of existing stators and
on the regasification system in Korea and abroad and reducing ducts in order to improve the
costs by developing independent package supply capabilities have fuel efficiency of low-speed
allowed SHI to elevate its product competitiveness in the LNG- crude oil carrier whose orders
FSRU market and will surely help strengthen mutually-beneficial are increasing recently and Duct-type fuel saver (SAVER Stator-D)
cooperation with Korean equipment suppliers. to broaden its portfolio of
fuel savers. This new fuel-saving device accelerates the flow of
sea water that comes into propellers to enhance their rotational
Fuel Supply System for LNG-fueled Ships
energy efficiency, and was proven to bring fuel efficiency gains
As the International Maritime Organization (IMO) tightens regulations compared to traditional SAVER Stators through performance
on emissions generated by ships, this is stimulating market needs for testing. SHI plans to combine the SAVER Stator-D with traditional
LNG-fueled ships to replace conventional vessel that produce more fuel savers to be adopted for Very Large Crude-Oil Carriers (VLCC).
Broadened Application of Innovative 1) CFT Simulation

Technology The CFT simulation system uses 3-D scanners to scan and
measure the inside of cargo holds in an efficient and accurate
Offshore Piping Automation Analysis System (OPAAS) manner and allows the direct simulation of container loading
Development condition. This ensures that simulation outcomes are identical
to those generated from actual testing, eliminates the needs
Recently, there has been more demand for piping analysis as for cranes and mock-up jigs, and reduces man power that was
offshore plants grow increasingly larger and more structurally- excessively required in conventional CFT. Furthermore, CFT
complex and verification procedures become more complicated procedures and outcomes can be directly delivered to ship
due to tighter maritime regulations. This means that more man owners to increase reliability in product quality while dashboard
hours, costs and time should be invested in ensuring design functionality makes it easier to manage test schedules. SHI
quality. Thus, SHI has developed the Offshore Piping Automation has already completed the performance verification of this CFT
Analysis System (OPAAS) to improve the efficiency of repetitive simulation system by using it on actual ships.
analyses and re-analyses, and has been able to shorten testing
time for stress analysis and eventually reduce piping stress.
3D Scanning-based CFT/Lashing Simulation System

The conventional mock-up jig approach taken for Containing
Function Test (CFT) and Lashing Test demanded that life-size
containers be used, thereby requiring a huge amount of man Scanning the inside of a cargo hold Loading simulation
power and time while affecting other processes that use cranes.
To improve the situation, SHI has developed and adopted 3D
scanning-based CFT simulation and lashing simulation systems.
Offshore Piping Automation Analysis System (OPAAS)
AS-IS TO-BE
Modeling Modeling
(PDMS, S3D) (PDMS, S3D)
(CAESAR Ⅱ) (CAESAR Ⅱ)
Piping max. stress minimization

Analysis
model
development
Modeling update Modeling update

& re-analysis & re-analysis
repetition No
Analysis
repetition OPAAS
(until answered) execution
Automation + Machine Learning
Manual work optimization
Equipment nozzle/flange load
Pass/Fail minimization
results
confirmation
Yes Yes
Modeling Modeling
(PDMS, S3D) (PDMS, S3D)
(CAESAR Ⅱ) (CAESAR Ⅱ)
Piping system stiffness
maximization
RESPONSIBILITY
2) Lashing Simulation Technology Commercialization

Lashing simulation has been designed to calculate container
lashing margins through 3D scanning to improve its precision Commercialization of DP, PMS, and SPT HILS
performance against the conventional mock-up jig approach
As systems installed on ships and offshore plants become
and to significantly reduce man power and time. While mock-up
more and more sophisticated, the importance of preliminary
jigs way consumes 1.5-2 hours per container row and requires
verification on system control logic prior to Commissioning has
16 persons and an exclusive use of cranes, lashing simulation
been increased. In this sense, SHI has developed a Hardware-
takes only 10 minutes per container row, can be performed by 5
in-the-Loop (HIL) simulation, which a technique that is used
persons only, and does not need to use cranes or make mock-up
for verifying systems through simulation rather than going on
jigs. SHI has conducted a trial application of this new simulation
board for physical system verifications. SHI is the first Korean
system on actual ships in combination with mock-up jigs and will
company that independently developed Dynamic Positioning
broaden its application in the upcoming years.
(DP), Power Management System (PMS), and HIL simulation and
has adopted these technologies on board. When it comes to SPT
Digital Transformation (Steering/Propulsion/Thruster) HIL simulation, SHI is the world’s
first to develop and apply the technology on board. Developing
Global corporate leaders are embracing digital transformation
and commercializing HIL simulation technology has enabled
that is characterized by a fusion of advanced technologies and
SHI to improve its system verification environment and reduce
the integration of physical and digital systems couple the as a
verification costs. SHI plans to develop an integrated software
way to adapt to ever-changing business conditions and build a
management system through expansion of HIL simulation
sustained competitive edge. At SHI, digital transformation is also
validation in order to improve the quality of commissioning.
underway to shift from paper-based disposable 2D drawings
to paperless 3D models. In so doing, contents can be accessed
anytime, anywhere and work efficiency improves as 2D drawings
are not needed anymore for pipe support production. In 2018, Technical Committee System
SHI aims to go paperless first with general pipes, and extend the
In 2017, SHI created its own Technical Committee as a move
scope to electric instrumentation components and others from
to respect talented individuals with unrivaled technological
2019 onwards to ultimately create a paperless shipyard.
competency and abundant work experience as well as to
SHI is also using its internal wireless communication network
improve its competitive edge in undertaking EPC projects. Nine
installed in 2016 to ensure that all information required for
employees were chosen as Technical Committee members for
production is verified in real time across its production sites
their exceptional performance in the seven core job groups such
through mobile devices. SHI plans to adopt augmented reality
as engineering, PM, procurement, research, production, HSE, and
technology to accurately predict the completion status of work
quality. SHI plans to fully utilize their expertise to build capacity
prior to installation and to check even work outcomes in the
in technology innovation.
future. In addition, SHI is working to visualize the status of piping
logistics through the use of big data technology and will combine
this technology with artificial intelligence to develop a system
that predicts workload in advance.
Application of HILS Technology

HILS not applied: Control logic verification on board HILS applied: Virtual preliminary verification on shore

SHI Core Value
3.Change Production Innovation

Background of Production Innovation
Responding to rapidly-shifting external conditions and promoting sustainable growth
demand that we secure new growth engines through change and innovation. It is
forecast that the global economic recovery and rising oil prices will invigorate the
shipbuilding and offshore industry. Even so, clients in this industry are still reluctant
to place orders. As such, the key to sustainable growth lies in building a differentiated
competitive edge by reducing costs and improving production efficiency through
innovation initiatives.
Approach to Production Innovation

In an effort to stay ahead of the competition amid turbulent market conditions, SHI is
launching company-wide innovation initiatives while developing and adopting strategies
1. Production Innovation to advance its core capacity in the fields of engineering and winning contracts.
2. Risk Management
3. Corporate Culture Ways Forward for Production Innovation
SHI’s has set the action guidelines of cost savings, production efficiency enhancement,
and autonomous improvement for production innovation and is prioritizing and
systematically implementing necessary initiatives.
Ways Forward for Risk Management Risk Management

Background of Risk Management
Risk management aims to pre-emptively identify each and every factor that may
have negative impact on project goals and to develop response systems and
countermeasures. When the business landscape shifts rapidly, it is imperative that a
Production company understands potential risk factors before they occur and effectively responds
Innovation at SHI to them. Systematic risk management is an essential component of business activities
as it can help reduce possible impact and costs which can be derived from risk factors.
Approach to Risk Management

SHI operates a dedicated risk management unit to effectively address a range of financial/
non-financial risks that may occur across the entire business process from winning project
orders and signing contracts to fabrication and delivery. Notably, its Risk Management
Team is closely aligned with working-level departments in undertaking risk management
initiatives. Driven by this systematic risk management system, SHI strives to manage project
profits/losses, prevent construction delays, and ultimately secure business stability.
Production
Autonomous
Cost saving efficiency
improvement
improvement
Ways Forward for Risk Management
To practice systematic risk management, SHI selects focus areas each year and then
develops and implements its detailed action plans. SHI’s risk management system was
established and upgraded between 2014 and 2017, and its 2018 goal is to strengthen
cross-functional cooperation in order to pursue harmonious convergence between Risk
Management Team and working-level departments.
Improve the execution of risk management in contract award/project execution phases
Organization Operation and

Process/System
and HR Status
• Strengthen • Establish a management system to • Operate PLC management processes • Reinforce the
contract address unknown risks • Strengthen the integrated RM management
management • Operate L/L (Lesson Learned) system system monitoring of risks/current
capacity • Establish a cost improvement • EDevelop a company-wide issues on major
target management system contract management support offshore facilities
systemtarget management system and projects
RESPONSIBILITY
Corporate Culture Ways Forward for Risk Management
Background of Corporate Culture

Ways
Cooperation among employees plays a key role in the shipbuilding and offshore Forward for
industry as the industry involves the construction of ultra-large-size structures. This Corporate
Culture
implies that companies in the industry need to create a healthy corporate culture to
prevent the turnover of top talents and to improve organizational productivity.
Approach to Corporate Culture Create a great Evoke work

workplace engagement
+
SHI is building its unique corporate culture to promote both business growth and the
contentment of individual employees. Driven by mutual respect and care, SHI aspires
to establish corporate culture that values thorough compliance with fundamental
principles. This will surely increase employees’ work engagement and help them enjoy
a flourishing and fulfilling life. Corporate
Culture
Ways Forward for Corporate Culture Promotion
Strategy
SHI continues with campaign programs to improve its corporate culture (Change),
revitalizes the entire organization to maximize interactions among employees (Cheer),
and promote the psychological fitness of its employees (Care) to ultimately deliver a
Change Cheer Care
great work place. Revitalize the
Improve Promote
corporate organization and mental
culture pursue better fitness
communication
PRODUCTION INNOVATION
Cost Reduction Activities Undertaken to Reduce Production Consumables Expenses
Category Project Directions Project Details
Value Chain Cost Activities (VCC) Normalize unreasonable/irregular
processes
Value Chain Cost activities are designed to develop an efficient Set the
Identify VOC/ Set the condition for code-based
condition
decision-making system by analyzing production activities for cost
unreasonable consumables management
practices → Build cost-conscious mindset among
throughout the entire value chain, from overseas subsidiaries to reduction
Establish processes
(Innovation) all employees
subcontractors, and by reducing costs and developing production
Develop systems to comply with
technology. SHI is focused on these VCC activities to manage standard processes
consumables and increase its shopfloor operation capacity. In Optimize the specification of high-
2017, six immersion workshops were held on projects for which spec items and develop substitutes
Compare items Purchase in large quantities through
we plan to submit bids, and nine VCC innovation activities supplied by industry item standardization and supplier
Reduce
(incl. workshops and task forces) were undertaken on awarded unit prices
peers/relevant integration
companies →
contracts to identify cost reduction initiatives. The outcomes were (Procurement)
Identify alternative Encourage competition by discovering
new subcontractors
reflected in determining bidding prices, which increased the rate subcontractors/items
Reduce procurement agency fees by
of return on orders awarded. Furthermore, identified initiatives expanding direct transactions
were registered at a corporate system to strengthen project Extend lifespan through reuse/
supervision while these initiatives were verified for their financial recycling
benefits to be horizontally undertaken within the company with Reduce Develop/discover best Reduce long-term inventory
an aim to build intellectual property assets. consumption practices →
(Innovation + Disseminate across the Remove wastage by establishing usage
VCC Activities Undertaken in 2017 production) board standards
Establish warehouse operation
No. of Type of standards and calculate standard
Project Period
Ships Project consumption quantities
VLCC Jan. 23rd ~ Jan. 26th, 2017 W/S
Shuttle Tanker Feb. 14th ~ Feb. 17th, 2017 W/S
Materials Management System Innovation
Bids RO-PAX Mar. 27th ~ Mar. 31st, 2017 W/S
submitted SM Line 22K CNT Jul. 31th ~ Aug. 2nd, 2017 W/S SHI places major materials on a standard packing list and registers
Evergreen 11.5K CNT Nov. 13th ~Nov. 17th, 2017 W/S them at its system to increase the accuracy of its shipping and
20K Drillship Mar. 13th ~ Mar. 17th, 2917 W/S receiving operations. This allows persons in charge of procurement
Hoegh FSRU 1 Feb. 6th ~ Feb. 9th, 2017 W/S and engineering in SHI and supply managers in vendors to check
BW VLCC 4 May 22nd ~ Aug. 25th, 2017 T/F material information in real time and efficiently manage materials
Capital VLCC 4 May 22nd ~ Aug. 25th, 2017 T/F
on the shopfloor. Wide-ranging system improvement task force
Aewol 7.5K LNG carrier 2 Jul. 20th ~ Jul. 21st, 2017 W/S
Contracts SCF 42K AST activities are also underway. For example, loss & damage cause
1 Dec. 6th, 2017 T/F
awarded AET SHTL codes are established to minimize the losses and damage of
2 Oct. 30th ~ Oct. 31st, 2017 W/S
materials, and a loss & damage dashboard and an organizational
TKY SHTL 2 Nov. 1st ~ Nov. 2nd, 2017 W/S
responsibility indicator system are adopted. Concerning materials
Offshore) MD2 FPU (2 )nd
1 Jul. 3rd ~Nov. 16th, 2017 T/F
Offshore) ENI Coral logistics, signature is always requested through personal digital
1 Aug. 1st ~ Dec. 21st, 2017 T/F
FLNG (2nd) assistants (PDA) during the hand-over of materials.
Reduction in Production Consumables Expenses

SHI is undertaking wide-ranging initiatives such as setting the
condition for cost reduction, reducing unit prices and conserving
consumption as a way to cut down on consumables expenses.
To this end, SHI has established a streamlined system by
developing a process/rule-based consumables management
system and practicing code-based consumables management.
Furthermore, SHI has optimized specifications, integrated the pool
of subcontractors, discovered new subcontractors and reduced
fee payments to cut down on unit prices while extending the
lifespan of consumables, securing the transparency of inventory,
eliminating wastage, and establishing warehouse operational
standards to decrease the consumption of consumables.
RESPONSIBILITY
Production Efficiency Enhancement One Company One Innovation Project Program

The One Company One Innovation Project program represents
S-TACT SHI’s sustained endeavors to encourage its executives and
In 2017, SHI laid the foundation for its S-TACT (shopfloor production department heads to discover production innovation
innovation initiative) program to optimize production resources initiatives and make necessary improvements for subcontractors
and improve its manufacturing competitiveness. The S-TACT as a way to pursue mutual benefits. In 2017, this program
represents a process management approach that eliminates marked its second year and helped identify 1,355 initiatives in
rework or stock along the logistical cycle, and SHI is working to 25 subcontractors and make improvements. SHI’s 2018 plan is to
fully establish the S-TACT through talent training, fundamentals continue with this program for the third year running to discover
improvement activites and inefficiency improvement. In 2017, innovation tasks and improve on the issues identified.
SHI reached 114% and 133% in improvement of operational
inefficiency and compliance with standards respectively, and Production Process Improvement Committee
exceeded the set targets in most of the categories. The S-TACT
SHI’s Production Process Improvement Committee serves to
certification program was adopted to perform semi-annual
strengthen its competitive edge in production costs and improve
assessments in January and August and to reflect their outcomes
on inefficient production execution management processes
in evaluating the performance of production executives in order
through discussion and problem-solving process. The committee
to bring change on the shopfloor. Top-performing workshops are
has identified 12 execution tasks to improve SHI’s A3 process
graded Gold, Silver and Bronze in accordance with their scores,
management capability and operational performance and took
and certification plaques and prize money are awarded, and
actions accordingly.
incentives are offered to encourage production innovation. SHI’s
2018 plan is to increase the number of S-TACT-certified workshops,
introduce this certification program into overseas workshops, and Materials Supply System Innovation
improve efficiency on the shopfloor through constant progress
SHI ensures that materials
review and talent training.
are supplied within 48 hours
S-TACT Implementation System after an application is received
S-TACT activities
t o fa c i l i ta t e i t s m a t e r i a l s
• Productivity supply process and improve
management TACT-TIME production Progress
(Optimization of management
production efficiency. Once
• Performance
production resources) materials are stocked, their Palletizing system to store materials
management
Allocation of
information is registered at based on the number of units
Efficient use
Process
appropriate
realignment
of resources SHI’s management system, and materials are tagged so that
quantities
inventory data come in sync with system data. Furthermore,
Confirmation materials are palletized based on the number of units, and the
of manpower BOM alignment
allocation in a pallet list is managed to facilitate the materials shipping process.
timely manner
Calculation of S-TACT
criteria
Clarification of
(TACT-TIME)
pre/post work A3 plan
sequence confirmation
Process
High functionality/ Confirmation improvement
specialization of required
manhour
• Elimination of
• Stabilization
inefficiencies
S-TACT distribution of quality and
• Elimination reduction equipment
of the 7 waste • Timely supply of
items materials
Fundamentals
Talent Training, 5S 3Right, Compliance with Standards Improvement
Efficient Stock Management 5S 3Right Implementation System
1) Computerized Multi-Bin System

The Multi-Bin system was adopted in February 2017 with a view to 5S 3Right
Initiative
controlling the location of materials within warehouses and taking
a system-based approach in materials management. This system
allows SHI to monitor the status of delivery, pile-up, stock location
management, release, and warehouses on the basis of materials Geoje Shipyard Guidance and Overseas
worksites
packaging units. In addition, it provides various functions such (Quarterly) assessment
(Half-yearly)
as the integration and streamlining of the receiving and shipping
process, the automation of the development of pile-up and release Other innovation Mutual
Responsible
strategy, and PDA-based mobile stock management. The Multi areas designated On-site facility
activities benchmarking Continuous
(rationalize tool among top- training and
Bin system assists SHI in improving the accuracy and efficiency through the My
Area policy
partner activities
boxes, welding performing promotion
booths, etc.) affiliates and teams
of materials management, identifying the causes of materials
management issues, and setting future strategies. *5S: Arrangement, Order, Cleaning, Cleanliness, Discipline, 3Right: Right Goods,
Right Quantity, Right Place
Benefits of Multi-Bin System
Small Group Activity
SHI’s small group activity program serves to organize production staff
Multi-BIN
into different groups and encourage them to voluntarily undertake
innovation activities in order to identify and correct endemic issues on
site. In 2017, a total of 546 groups were created, and company-wide
group committee meetings were hosted twice to present team-specific
group activity outcomes and share best practices as a way to encourage
group activities. Furthermore, company-wide group presentations
are made each year to assist top-performing groups to compete in
external contests. In February 2017, a selection competition was held
Accuracy improvement
Materials Pile-up/release between actual materials Work speed to identify candidates who would represent SHI at a national quality
tracking strategy system and materials information improvement
group competition, and the winners attended the the 43rd National
Quality Circle Competition hosted in August that year. SHI’s Zero Group
2) Establishment of Predictive Model per Ship Type and Communication Group were honored with the Gold Prize in the
SHI has developed a model that predicts its stock per ship type large company on-site improvement sector and the free-form sector
to improve the efficiency of stock management. This model helps respectively. SHI plans to improve its group activity program by training
calculate stock ratios in accordance with progress made within specific group experts and having more reasonable topics for group activities.
events and set stock targets to ensure efficiency in stock management.
High-quality Suggestion
SHI encourages all its employees to suggest their ideas to facilitate self-
Autonomous Improvement initiated bottom-up innovation. To this end, suggestion cards made
in notebook format are distributed to employees to make it more
5S 3Right Activity convenient to put forward suggestions, and high-quality suggestions are
The 5S 3Right activity forms the basis of SHI’s shopfloor innovation recognized with awards given by the Shipyard General Manager through
programs and aims to eliminate all possible waste factors to monthly screening committee meetings. In 2017, a total of 50,449
improve efficiency and create a safer and cleaner workplace. At the suggestions were submitted, 62 of which were honored with high-quality
Geoje Shipyard, the Shipyard General Manager supervises the 5S suggestion awards. SHI plans to strengthen this program by offering
3Right patrol activities and carries out periodic checks to resolve more incentives and putting brilliant suggestions into action.
any issues. In addition, a team-based patrol program was launched
in May 2017 to strengthen its 5S 3Right activity. Furthermore, Jigs Improvement
Chinese subsidiaries (Rongcheng/Ningbo) are expanding this SHI ensures safety and productivity gains through the improvement of
initiative and perform progress assessments through a professional jigs. In this sense, a Jigs competition is held to maximize the use of jigs
external consulting company. Assessment result briefings are held and create a safer and more efficient work environment. In 2017, jigs
to share actions taken and outcomes generated, and necessary exhibitions and fairs were held in the first and second half respectively.
improvements are discussed. SHI plans to make sustained At the events, 60 outstanding jigs were exhibited in seven job categories,
improvements for worksites and continue with related training and and production workers visited the shows to see improved jigs and
promotional programs to fully establish the 5S 3Right activity. apply them at the site to continuously enhance on-site productivity.
RESPONSIBILITY
Group Activity Strategy
Vision The World’s No. 1 Shipbuilder! The Dream Continues!
Goal Nurture experts in making onsite improvement through group activities
The world class quality

CREATION + TRUST CHALLENGE + PASSION
Safe workplace
Strategy
Reduction in lead time by 30% Reduction in costs by 30% Reduction in inefficiencies by 30%
Production Quality Cost Delivery Safety Morale Environment
Issue Issue Discovery Improve-

+ awa- + + activity
Sugges- Circle Issue
occur- Identifi- ment prevention
rence reness cation awareness tion
Base
Other Innovation Initiatives

Company-wide Innovation Conference
In October 2017, SHI hosted a company-wide innovation
conference to encourage innovation initiatives across the board.
Attended by nearly 270 employees including the CEO and the Company-wide group performance National Quality Group Competition
head of production department, the conference allowed 10 presentation in the second half
teams in engineering, procurement and production disciplines
to present their team-specific innovation case studies. Their
assessments revealed that these 10 teams contributed to saving
costs valued at KRW 217.45 billion in total through piping
performance improvement and on-time delivery.
Training of Innovative Talents Deliberation of high-quality Jigs exhibition

suggestions
SHI nurtures innovative talents to ensure the sustainability of its
innovation initiatives. SHI develops annual talent training plans
and offers training accordingly to expand its group and S-TACT
programs. In 2017, external experts were invited as lecturers
in January and March to provide training on problem-solving
techniques for groups as well as the S-TACT program. These
group training and S-TACT training programs have been attended Innovative Cases Presentation Training of innovative talents
by 1,797 and 406 employees respectively on a cumulative basis. In
2018, SHI plans to pursue the qualitative growth of its innovative
activities through process management expert training, group
expertise development training, and in-house expert training.
RISK MANAGEMENT
Project Risk Management Risk Management Activities Before/After Contract Award
Risk Management System Developed by Project Stage Goal
In order to ensure business stability, it is vital to prevent any

potential risks from happening during project execution by Before Contract Award After Contract Award
identifying them in advance. In this respect, SHI operates its • Proactive management • Stabilization of profit/loss
own Risk Management Team to systematically manage risks for the prevention of poor and construction period
construction work • Achievement of delivery
throughout the entire project lifecycle, from contract award • Strengthening of risk schedule by making all-out
through fabrication to warranty termination following sail- management PLC process efforts
away. By building a phase-specific risk management system
ranging from contract award stage through execution stage to Risk Management
contract management assistance (CMA), SHI has strengthened Approach
its company-wide risk response capabilities. Notably, Agenda
C o m m i s s i o n , R i s k Re v i e w C o m m i s s i o n , M ate r i a l s C o st
Before Contract Award After Contract Award
Commission, and Contract Commission meetings are held from
the contract award phase under the supervision of the Risk • Commencement of early • Identification of company-
manage-ment of identified risks wide risks through workshops
Management Team while feasibility reviews are conducted on • Feasibility assessment on • KPI management and
possible loss/profit and fabrication period to prevent any losses profit/loss and construction period monitoring
that may occur in the project execution phase. Risks are identified
and evaluated through risk workshops or constant reviews and
consultations, and countermeasures are developed accordingly Project Risk Management Enhancement
in the project execution phase. Consistent monitoring is also SHI regularly reviews on projects to find and analyze problems
performed to ensure efficiency by reflecting feedback. in advance. In accordance with review outcomes, action-
Project Risk Management Commissions driven recovery measures are developed and undertaken when
company-wide support is necessary and then are disseminated
Prevent unprofitable contracts by focusing
Agenda
on high-quality agendas and making bids
to other projects. Right after signing contracts, closer reviews are
Commission
selectively performed and initial management plans are designed to stabilize
Risk Review Identify project execution and contract risks project execution early on in order to secure the golden time of
Contract Commission prior to developing countermeasures
Award project risk management. When issues that had arisen prior to
Phase Materials Confirm costs following reviews and contract signing are identified in the project execution phase,
Cost verifications on the adequacy of estimated
Commission costs per discipline they are referred to a contract department. This collaborative
system assists SHI in preventing the recurrence of similar risks
Contract
Set bidding strategy and bidding prices
Commission in following projects. In 2017, SHI also extended the scope of
Develop countermeasures by identifying/ projects to carry out risk management from offshore facilities to
Risk
Workshop
evaluating risks early on and perform shipbuilding and drilling sector.
Project management and monitoring
Execution
Phase Project Systematically manage and control risks
Review while making swift decisions and setting Company-wide Contract Management Standards
Meeting strategy at the management level
SHI has developed company-wide contract management
standards to ensure that contracts are concluded reasonably and
are fully abided by throughout the entire fabrication period, from
contract award, through its execution to a warranty period. SHI
will be continuously committed to minimizing contract risks and
establishing contract management processes across the board.
RESPONSIBILITY
S-EVM Operational System Corporate Culture of Risk Management

Risk management is gaining importance in addressing With a goal of pursuing a harmonious convergence between the
uncertainties over production quantities in the shipbuilding and Risk Management Team and working-level departments, SHI
offshore industry. As Engineering, Procurement and Construction ensures close cooperation and the sharing of relevant information
(EPC) projects become increasingly larger and more complex, it even from the initial project phase. To this end, SHI encourages
is required for companies to take a more systematic approach working-level departments to take the lead in risk management
to inventory and production management. This prompted and strives to establish a closely-aligned risk response system.
SHI to introduce S-EVM as an EPC management operational
system to respond to such market conditions and overcome the
limitations posed by conventional EPC project undertakings.
S-EVM represents SHI’s unique management system that allows
the integrated management of Engineering, Procurement and
Construction. S-EVM is expected to visualize outcomes against the
set plans in executing EPC projects and to improve the accuracy
of planning by using performance data collected via big data
from the engineering phase. S-EVM will enable SHI to predict and
procure the right amount of materials in a timely manner and
to enter production performance into a system within a day and
systematize decision-making processes (Stage & Gate operation)
in order to improve its production competitiveness.
Expected Benefits of S-EVM
Elevate the level of system management to build inimitable competitive edge
Secure first-class contract-winning

Build cost competitiveness Execute projects as planned
capabilities
EVM (Earned Value Management: Improve predictability) SCM (Improve execution)
• Manage costs in alignment with real-time process execution • Develop and implement project plans to reach profit targets
• Detect and address project risks at an early stage ⇨ Maximize company- ⇨ Reduce inter-process losses to zero and prevent load imbalance
wide profits • Shorten lead time t
• Supply an accurate number of quantities in a timely manner • Establish a project master plan (ExP) system
• Make cost forecast in alignment with applicable quantities and processes • Set production plans based on the confirmed design data and quantities
• Develop an actual cost feedback system • Synchronize design, procurement and production schedules
CORPORATE CULTURE
Corporate Culture Improvement (Change) Back to Basics
SHI consistently launches campaigns to
Gratitude Sharing promote basic manners and etiquettes at
A Gratitude Sharing event represents SHI’s unique corporate work in order to improve its corporate culture
culture that values both corporate growth and the contentment and create an employee-friendly workplace.
of individual employees. The 100 Gratitude Sharing event is held Specifically, campaigns on smoking cessation
every month to express gratitude to anyone to whom one would a n d h e a l t h y a l co h o l co n s u m p t i o n a r e
like to extend thanks by giving a small scroll describing 100 undertaken for employee health and safety.
appreciation messages along with a cake. Through this event, As part of SHI’s commitment to advancing
Smoking-cessation
gratitude can be expressed to colleagues, clients, subcontractors its corporate culture, efforts are also made campaign poster
and local organizations, spreading the value of sharing gratitude. to improve a meeting culture and promote
SHI further plans to perform diverse specific activities to embed mobile manners to eliminate inefficient
gratitude sharing into its daily business conduct and extend its work practices. SHI will continue with such
value to employee families, subcontractors and local communities. campaigns to create and share its unique
corporate culture of mutual care.
Organizational Revitalization and

Communication (Cheer)
100 Gratitude Sharing event Fun Leader Program

SHI’s Fun Leader program aims
Work-Life Balance to promote organizational
vitality to suit the specific
SHI aims to assist its employees in striking the right work-life
characteristics of different
balance. To this end, SHI has designated every Wednesday as Up-
teams. Approximately 50
day when there are no meetings, company dinners or overtime
f u n l ea d e r s s h a r e d i v e r s e
work to promote the contentment, health and enthusiasm of
i d e a s t o g e t h e r a n d t a k e Fun Leader workshop in 2017
employees. SHI also encourages employees to take refresh leave
the lead in bringing energy
as a way to lead a balanced work-family life.
and enthusiasm to their teams. Top-performing fun leaders
are additionally awarded to recognize their excellence. SHI will
Samsung Culture Index Survey continue to provide a great workplace through the fun leaders and
fun management initiatives so that its employees can work with
SHI takes a multi-faceted approach to create a flourishing
trust, pride and fun.
workplace and performs annual Samsung Culture Index (SCI)
surveys to measure any progress made. This employee satisfaction
survey, which consists of a total of 50 questions on two impact
factors in three categories, serves to understand the current status
of corporate culture and identify necessary improvements. SHI will
use survey outcomes to encourage all employees to voluntarily
engage in their work and continuously improve on unreasonable
and inefficient work practices.
RESPONSIBILITY
Sorisaem and the Human Rights Violation Center Mental Fitness

Bulletin Board System
Counseling Center
SHI operates Sorisaem, an anonymous bulletin board, and the
Human Rights Violation Center to receive employee complaints Since 2011, SHI has operated a Happy Wellbeing Center to provide
through diverse channels. SHI took prompt actions on 461 in-house counseling service as a way to promote employee
complaints submitted through Sorisaem and made appropriate HR contentment. The center houses three professional counselors to
decisions to address reports made in relation to verbal abuse after assist employees in dealing with a range of psychological issues,
confirming their factual grounds. SHI will sincerely and constantly from job-related stress that arises at workplace and home and
listen to the voice of its employees to deliver an enriching personal relationships to marital conflicts and children issues.
workplace that upholds their human rights.
Complaints Registered at Sorisaem by Year
Category 2015 2016 2017

Vehicle (commute/weekends/
108 198 113
shuttle bus)
Cafeteria, dormitory, restroom 52 229 106

Happy Wellbeing Center logo Counseling office at the Happy
Wellbeing Center
Security, parking 26 41 41
Transport, safety 28 36 29
Mental Fitness Program
In addition to individual counseling service, SHI is also developing
Sports facility 4 14 23
and running wide-ranging group-based collective programs to
Lighting, heating, piping help employees with their emotional recovery and growth. Such
65 53 51
facility
endeavors include a Conversation Skills program for communication
Computer system 24 32 21 skill improvement, Meditation Class for mental stability, and
Working Mom Happy Mom for handling childbirth/childcare stress.
System, welfare 32 66 50
Corporate philanthropy 1 0 2
Mental Fitness Education
Others (equipment,
49 24 25 To help employees heal their mind and stimulate internal
environment, etc.)
communication, SHI implements mental fitness education program
Total 389 693 461
as mandatory training courses and fresh courses as part of in-
* Data Coverage: Domestic worksites 100% house training curriculum. Between April and May of 2017, 1,997
employees in the production sector received mandatory training
and had an opportunity to communicate with one another on
topics such as identifying personality features and understanding
each other as colleagues. In November, a Refresh program was
also offered to 1,398 office workers to help them ease tension and
concentrate through yoga and meditation.
Mandatory training (understanding Fresh course (meditation)

personality features)

SHI Core Value
4.Integrity Compliance Management

Context of Compliance Management
Failure in sincerely practicing compliance management results in trust issues in
business activities, security issues, and product-related negative issues. Countries
across the globe are introducing anti-corruption regulations and are tightening
relevant policies, and international standards have been adopted on anti-corruption
management. Wide-ranging stakeholders also demand that companies endeavor
proactively and consistently to prevent corruption and comply with regulations. Thus,
compliance constitutes the most fundamental principle to be abided by in conducting
business.
Approach to Compliance Management

1. Compliance Management SHI is clearly aware of the importance of compliance management as a way to build
2. Information Management a stronger competitive edge and advance sustainable management and is fully
committed to compliance management. SHI is constantly improving compliance-
related standards and systems to establish and disseminate compliance management
while complying with anti-corruption regulations and global standards in business
conduct across the board.
Compliance Management Process Ways Forward for Compliance Management

At SHI, a compliance program (CP) is in operation with focus on three key actions:
the establishment of compliance management and its discipline, the strengthening of
the risk prevention activities, and the enhancement of reliability at home and abroad.
1 step 2 step 3 step
Notably, anti-corruption, anti-cartel, and subcontracting were chosen as three top
Set standards Plan and
and provide
Review and focused areas as they pose high compliance-related risks, and are addressed through
monitor
procedures training more rigorous preventive measures.
3 Key Actions
5 step 4 step
Identify necessary
improvements and Evaluate and
reflect them report
in business Thoroughly practice Strengthen the compliance- Enhance the reliability in
conduct compliance management and related risk prevention compliance management at
establish compliance discipline activities home and abroad
+
3 Top Focused Areas
Anti-corruption Anti-cartel Subcontracting

RESPONSIBILITY
Information Management Information Management Goals
Context of Information Management

Information
The fourth Industrial Revolution places a growing importance on information Protection
management capabilities on the part of businesses. Corporate information forms
invaluable assets that affect business outcomes, business efficiency and risk
mitigation, and thus ensuring data security is no longer an option but a must. In line
with increasing internet traffic and the advent of the information age, establishing an • Remain certified under the global information
information asset management system is at the core of business activities today. protection management standards program
(ISO 27001)
• Prevent the leakage of key information assets
Approach to Information Management and technologies
• Prevent cyber attacks
SHI takes a multi-layered approach to the management of information assets to
• Comply with data privacy regulations
build closer and more trustworthy relationships with all its stakeholders. At SHI,
a dedicated information asset department is responsible for systematically and
efficiently managing the information generated and collected in conducting business.
Furthermore, SHI strives to prevent the leakage of key information assets and
technologies, fundamentally block cyber hacker attacks, and transparently disclose its Information
Disclosure
major business outcomes and achievements.
Ways Forward for Information Management

Information management consists of information protection and information • Publicly disclose information on business
conduct, key investment decisions and
disclosure. The former aims to prevent the leakage of core technology and other
sustainability management (website,
internal information assets as well as subcontractor/client information while the electronic disclosure, social network, etc.)
latter is focused on sharing and communicating with internal/external stakeholders • Periodically publish sustainability reports
investment information, key financial accomplishments, and sustainability
management practices. SHI promotes systematic information management in
alignment with the goals set in each of these two segments.
COMPLIANCE MANAGEMENT
Compliance Management System
Compliance Management System
As SHI is doing business across the world, SHI ensures its compliance occur throughout the entire business conduct. Since 2010, SHI has
with country-specific regulations, international organization also operated its own compliance programs (CP), and reinforced a
guidelines and market disciplines. To abide by legal and institutional dedicated CP executional organization in order to establish a culture
regulations, SHI is focused on preventing legal risks even before they of compliance management.
Sustainability Management through a Strong Compliance Culture
Compliance Culture
The integration of Compliance programs across all lines of business
Prevention Monitoring Follow-up management
+ +
• CP risk analysis
• Regular/non-regular review • Corrective action
• Regulations/guidelines
• Report/notify • Sanction/reward
• Employee training
• Business agenda monitoring • Recurrence prevention plan
• CP legal advice
Management’s firm commitment to compliance management
Compliance Committee Compliance Committee: 2017 Operational Outcomes
At SHI, the Compliance Committee is in operation under the leadership H1 of 2017 (Feb. 21st) H2 of 2017 (Aug. 29th)
of the CEO to report on the decisions made and actions taken on • Report the progress made in 2016 to • Report the CP operational status in
undertake compliance programs as H1 of 2017 and major plans for 2H of
compliance control policies and relevant key issues. The committee
well as 2017 action plans 2017
consists of nine members, who brief the CEO on the appointment of
• Share major issues • Share major issues
new committee members resulting from organizational restructuring, (subcontractor monitoring system, etc.) (subcontracting, anti-corruption, etc.)
progress made in supporting compliance management in 2016 and
action plans for 2017 while sharing major compliance issues.
Compliance Organizational Structure

• Compliance management top decision-
making body
CL
Compliance Executives/ • General management of team-based
Committee • Determination compliance management team compliance management
(convened plans and a way forward leaders
twice a year) • Deliberate and decide on agendas for
compliance management
On-site CM • Department-level compliance
CEO • Dedicated organization for general Compliance Part leaders management
compliance management operation
Chief Units
Compliance • Set standards and the code of conduct
Officer (CCO)· • Offer compliance education and training
CA
Compliance • Review compliance with control • Operation of team-based compliance
Working-
Team standards level staff management (CL support)
• Assist the Compliance Committee
Discpline Role
RESPONSIBILITY
CCO (Chief Compliance Officer) Policy Compliance Training Offered in 2017
No. of Trainees Training Hours

SHI operates a Chief Compliance Officer (CCO) policy to prevent Category
Sessions
(Unit: No. of per Person
persons) (Unit: No. of hours)
any illegal practices or legal disputes. As legal experts, the CCOs
Compliance
are responsible for reviewing employees’ compliance with relevant Committee members
2 17 0.5
standards and reporting the outcomes to the Board of Directors. CL 4 370 0.5
Notably, the CCOs attend the meetings supervised by the CEO or Performers
CM/CA 9 810 1.0
major management executive meetings and perform compliance Compliance
7 20 1.0
reviews prior to finalizing the content of meeting minutes. Inspectors
Basic Foreign employees 2 170 1.5
Key Management Executive Meetings
Level Newly-appointed
Meeting Schedule senior foremen/ 1 55 0.5
foremen
Strategy meeting 연 2회
Team-based theme-specific
Organizational management meeting Weekly 8 42,721 1.0
training
Business unit leaders’ discussion meeting Weekly Online training 4 44,676 0.5
Weekly team leader meeting Weekly Subcontracting 4 232 1.0
Management executive meeting Monthly Personal information/
6 254 1.0
Safety Management Committee Monthly trade secret
Inter-
Project review meeting Year-round mediate Cartel 2 83 1.0
Anti-corruption 10 719 1.0
Contract Commission Year-round
Customized (small group training) 30 1,021 2.0
External Sponsorship Funds Review Council Year-round
Advan-
External training/seminar 27 32 8.6
ced
Compliance Management Experts Qualifications * Data Coverage: Domestic worksites 100%
SHI nurtures compliance management

ex p e r ts to e n s u re t h e s y ste m at i c Improvement of Employees’ Compliance Awareness
operation of its compliance management
SHI takes a top-down approach in
programs. SHI aims to foster experts
advancing compliance management.
with knowledge and competency for
The CEO shares compliance messages
organizational operation in accordance
on a half-yearly basis to underline
with the ISO 19600 (Compliance Mana-
SHI’s compliance management policy,
gement Systems) standards. It was in
and executives and part leaders are
2015 that SHI first saw its employees
periodically trained on compliance
gain CP qualifications. Currently, there
management. To elevate employees’
are three qualified employees.
Compliance management compliance awareness, all employees
experts qualification
take their compliance oath every year
and the third Tuesday of each month
Compliance Management Awareness is designated as Compliance Day to

offer team-based theme-specific training while job-related risk self-
Development assessments are performed. In 2017, compliance posters were also
distributed to help improve employee’s compliance awareness.
Compliance Training
Compliance Day Themes in 2017
SHI provides compliance training by job level and duty to
Month Theme Month Theme
prevent any legal violations. Specifically, advanced compliance
Jan. Back to basics Jul. Anti-cartel
training has become available since 2017. Whenever a group of
Anti-corruption at overseas
five or more applies for the training to a compliance manager, Feb. 2017 CP guidance Aug.
subsidiaries
compliance experts visit the group to provide tailor-made Mar. Operation of bonded factories Sep. Anti-graft law
training. In 2017, 91,180 employees completed a total of 116 Win-win cooperation
Apr. Oct. Win-win cooperation
sessions of compliance training. (subcontracting)
May Protection of trade secret Nov. Chemicals management
Department-level
Jun. Protection of personal data Dec.
compliance management
Compliance Issue & Trend Sensing Key Compliance Controls Activities Concerning Anti-Corruption in 2017
SHI endeavors to address compliance risks by identifying issues Category Month

and trends that may arise in relation to compliance regulations Revise the external sponsorship standards Mar.
and policies. To this end, regulator y revisions and other Standards/ Revise the CP control standards in the marketing phase May
Guidelines
compliance trends in Korea and abroad are tracked on a daily Distribute anti-corruption regulations compliance
Dec.
basis and then are reflected in SHI’s compliance control system. guidelines
Compliance issues are also analyzed each month and compliance Reviews Review anti-corruption compliance Sep.
management newsletters are published across the company. Training

Perform anti-corruption register management,
Nov.
training and PR
Operate a dedicated support center concerning the Year-
anti-graft law round
Integrate CP provisions in the contract form in Year-
Others
accordance with anti-corruption regulations round
Request subcontractors to submit their DDQ (CP Year-
survey) questionnaires round
Risk Pre-Detection and Management Enhancement

per Marketing Phase
Compliance management newsletter
It becomes more important to control risks in advance as fair trade
and anti-corruption regulations become more complex. This has
prompted SHI to consistently monitor legal risks per each marketing
Internal and External Reporting Channels
phase to eliminate such risks even before they occur.
Included in the wide-ranging reporting channels created to facilitate
Compliance Control Standards per Marketing Phase
communication on compliance issues are the corporate website, an
e-mail (Compliance E-mail Account), the Compliance Online Petition Contract Phase Control Standards
• Raise the bar on the DDQ (CP survey on agents
& Discussion Portal (compliance management system), in-house Agenda Submission and subcontractors) items to be verified as well
phone and fax numbers, a post mail and the Compliance Mailbox. as relevant criteria
To make these channels easily accessible, reports are submitted • Conduct 1st CP checks (pre-survey)
Agenda Commission • Request the CP team to perform CP reviews if
under the principle of confidentiality in accordance with SHI’s report necessary
handling policy and Red Flag handling criteria of anti-corruption Risk Review • Receive inquiries through a separate CP system
Commission • Offer guide feedback on respective issues
regulations. Once a report is submitted, this is immediately forwarded
• Confirm the integration of the final revisions made
and handled according to the process of investigation, analysis, Contract Commission • Conduct the second CP checks and confirm the
countermeasure and feedback. Depending on the characteristics of receipt of DDQ
reports made, some are addressed after obtaining the approval from
the CEO, CCO or team leaders. The completion ratio of handling the Year-Round Management of Competitor Interactions
reports submitted through the above channels amounts to 100%.
SHI ensures that any contact with competitors is reported to its
CP system to identify cartel-related risks that could be caused by
Risk Management Enhancement exchanging information with competitors, and this enables SHI to pre-
emptively manage such risks. In 2017, SHI took appropriate action on
issues that may pose cartel risks following reviews, out of a total of
Strengthening of Anti-Corruption Compliance Regulations
392 reports made on competitor contacts.
SHI has internally and externally declared anti-corruption compliance
regulations to assist its own employees and subcontractors in
Subcontracting Regulation Compliance System
abiding by domestic and international anti-corruption legislations,
Enhancement
and is constantly providing training and promoting the regulations
to review and improve on their compliance performance. Given the inherent characteristics of the industry, SHI is exposed
Specifically, a dedicated anti-graft law center is under operation to to a high ratio of subcontracting transactions, and thus strives to
support employees’ anti-corruption activities, and anti-corruption manage relevant legal risks before they occur. SHI has developed
compliance guidelines were distributed. In 2017, SHI strengthened a subcontracting compliance system in 2017 with an aim to allow
its external sponsorship standards to improve the transparency of relevant departments to offer training and perform reviews on their
its business operations, and revised the CP control regulations on all own in order to identify and remove subcontracting-related legal
awarded projects to make it mandatory for the Compliance Team to risks. SHI is also operating a team-based subcontracting compliance
review the identification of CP risks as a way to raise the bar on CP manager program.
control standards in the marketing phase.
RESPONSIBILITY
INFORMATION MANAGEMENT
Key Details of the Subcontracting Compliance System Information Security Management System
Category Description Schedule
Working-level subcontracting expert Information Security Management Areas
Semi-annually (1H/2H)
course
Training Team-based internal training Semi-annually (1H/2H) SHI operates the Information Security Department as a dedicated
Assessment Semi-annually (1H/2H)
information asset management department to effectively protect
its corporate information assets. To this end, SHI has developed its
Audit performed by responsible
Regular/special audits
Audit departments information security process and system by categorizing work scope
Audit performed by respective teams Semi-annually (1H/2H) into management security, IT security, physical security, national core
technology management and personal data security. In addition,
security management staff were positioned at major facilities such
Reviews Performed by Dedicated Compliance Units
as the Geoje Shipyard and the Pangyo R&D Center to strengthen its
SHI operates dedicated com- company-wide information security system.
pliance units to systematically
Information Security Management Areas
operate compliance management
Management • Develop and apply security regulations, policies and guidelines
programs. Major compliance
Security • Provide security training and perform inspections
management areas selected
• Server security
based on the outcomes of annual • Application security
compliance risk assessments Compliance management at SHI’s IT Security • Network security
• Attach sign detection
and reviews on issues are examined Chinese subsidiary
• Cyber workplace security
by dedicated compliance units. In 2017, such reviews were made on
• Manage a 3-phase multi-layered defense system
anti-corruption and subcontracting. Furthermore, special reviews Physical -1st phase: Perimeter of the worksite
were performed on main overseas subsidiaries and offices in Nigeria Security -2nd phase: Building entrance
-3rd phase: Office
and China to make necessary improvements.
National Core • Develop and execute plans to prevent the leakage of
Main Compliance Audits Activities in 2017 Technology industrial technology and protect such technology
Security • Report any leakage of national core technology
Category Details Target Month
• Take action to secure the safety of personal data for
Operation teams in the procurement Feb.-May, Personal Data
Subcontracting employees and clients
Regular sector and at subcontractors Sept. Security
• Establish personal data handling policies
Audit Anti- Company-wide July-
corruption (including overseas offices) Sept.
Personal data
Outsourcing companies working for
May International Certification Maintenance and
Special entire company (except overseas branches)
Audit Overseas Ningbo and Rongcheng Co., Ltd. in Apr., Sept.,
Management
subsidiaries China, and Nigeria Corporation Nov.
In July 28, 2011, SHI gained the ISO/
IEC 27001 certification, an international
Compliance Management Advisory System Information Security Management System
SHI’s compliance advisory system enables its employees to (ISMS) established by the International
make one-on-one inquiries to experts when they have questions Organization for Standardization (ISO).
or it is difficult to identify the legality of the matters concerned Follow-up examinations are made each
with manuals alone at work. In 2017, a total of 1,870 cases were year in 14 domains, including security
addressed through this system. policy, risk management and asset
categorization, as well as on 114 control
Advisory Activities of Compliance Management items while renewal examinations are
2015 2016 2017 made every three years. In 2017, renewal
examinations were performed by DNV-GL,
2,338 cases 2,267 cases 1,870 cases and SHI successfully renewed the ISO/
(Compliance (Compliance (Compliance
IEC 27001:2013 certification. International
advice: 351 advice: 356 advice: 350
Legal advice: Legal advice: Legal advice: standards and certifications will surely enable SHI to gain reliability
1,987) 1,911) 1,520) in its information security management system and establish a
response system against internal/external security threats.
Information Security Initiatives by Sector Physical Security

SHI performs periodic audits on physical security threats through
Management Security incident prevention, facility protection, and access/crime control.
SHI performs periodic audits on its security performance while Anyone entering SHI’s worksites is subject to security control as well
pre-emptively identifying and fully addressing risk factors. SHI has as entrance limitations placed based on the number of entrants and
extended the scope of security management from domestic worksites entrance sessions while 24-hour control rooms are in operation and
to overseas worksites and subcontractors in conducting mandatory CCTVs and infrared detectors are installed at quaysides and outer
annual security audits. Following such audits, measures are taken walls to ensure security. Other security measures include the use of
by security managers at respective worksites and subsidiaries, and patrol ships for port security, asset receiving/shipping management,
the Information Security Department reviews the progress made to control area security, and hard disc disposal & repair. Furthermore,
constantly elevate SHI’s management security performance. security staff in charge of access control operation receive monthly
Security Assessments Activities in 2017 security regulations training and security guard training to promote
the stability of physical security system management.
Category Target Schedule
Geoje Shipyard Sep.
National Core Technology Security Policy
Korean Worksites Pangyo R&D Center Sep.
Daeduk R&D Center Sep. SHI strives to prevent the leakage of national core technology on high
Indian Engineering Center Nov. value-added vessels, offshore system design, and LNG carrier cargo
Overseas Worksites Chinese subsidiaries (Ningbo, Rongcheng) Oct. tank manufacturing. A department responsible for managing national
Nigeria Oct. core technology fully responds to the security surveys conducted
by the Ministry of Trade, Industry and Commerce on organizations
that own such technology. SHI also performs annual security audits
IT Security on engineering partner companies, and uses the virtualization
SHI implements company-wide IT security policies to protect its environment to prevent the leakage of drawings. In the case that
critical data assets and to respond to potential security threats. national core technology is exported, SHI seeks approval from the
These comprehensive policies encompass not only PCs, networks, Minister of Trade, Industry and Commerce prior to export as stipulated
servers and other IT infrastructure components but also data and by export declaration procedures in conformity with the Act on
applications. SHI’s current IT security policies cover server security, Prevention of Divulgence and Protection of Industrial Technology.
information system security audit, self-initiated security audit
program, and anti-hacking security control service. Personal Data Security
Information Security System
SHI fully complies with the Personal Information Protection Act and
Category Operational Policy the Act on Promotion of Information and Communications Network
PC security operational
• USB, external hard drive, CD R/W control Utilization and Information Protection, etc. SHI has appointed a chief
• External messenger control
policy
• Wireless LAN use control office and person in charge of personal information management,
Web blocking solution
• Non-business-related website control (web mail, web designated departments responsible for specific activities, and
hard, etc.)
operational policy
• Upload blocking reviewed the actual status of personal information protection
• Mock hacking attack management. These efforts help strengthen the level of its security
• Server security audit management. In June 2017, personal data detection solutions were
Information system
• Response to hacker attack
security audit adopted to detect, delete and encrypt the personal data stored within
• DB audit and user account management
• Communications network audit PCs. In addition, SHI ensures that personal data is not retained by
• e-document encryption
DRM operational policy • Encrypted documents accessible by authorized employees once its intended purpose is fully met.
employees only
Personal Data Protection Rules to Be Observed by Employees
Firewall operational policy • In/Outbound Deny ALL
Handling Personal Data
• Server accessible by authorized users only
• Server access made by server operators in the Virtual
Server security policy 1. Install CCTV signboards
Desktop Infrastructure (VDI) environment without
internet connections 2. Notify the person concerned when his/her personal data is leaked
Patch Management • Automatic patches applied to such key software 3. Always dispose of personal data following its use
System (PMS) operation products as MS Windows/Office, JAVA, Adobe, and HWP 4. Take action to establish data security, including firewalls and vaccines
Anti-hacking security control • Web hacking, firewall, DDoS control 5. Disclose personal data handling policies
service (24h/day, year-round) • Malicious code and APT control
6. Ensure the fit-for-purpose use of personal data
• PC security audits and security measures available
7. Prohibit the illegitimate collection of national resident registration
through one-click operation on 19 items – security
PC-based self-initiated numbers
updates, screen saver configurations, security
security audit program
program installations, etc. 8. Collect only absolutely necessary personal data
operation
• Security programs capable of performing self-
initiated audits on PC security configurations
RESPONSIBILITY
Personal Data Security Initiatives Information Disclosure Channel

• Compliance training SHI transparently discloses information on its general business
• Personal data status review
conduct to fully comply with its corporate social responsibility. Its
official website provides a comprehensive view of SHI’s company
profile, flagship products, IR information, and recruitment. Since
Compliance 2011, SHI has published sustainability reports that illustrate its
Team initiatives undertaken and achievements made for sustainability
management. SHI also proactively communicates with
stakeholders through blogs and social networks.
System Information • DB access control
• Personal data
Support Security solution Information Disclosure Channels
DB encryption
Group Department • Security audit
Main Channel Function and Purpose
SHI discloses general business conduct information,
from corporate history and key achievements to
Official Corporate business philosophy and business areas, and provides
a comprehensive view of SHI’s key information ranging
Website1)
Information Security Training and Request for the from key investment data such as financial and
stock information to job posting and sustainability
Security Oath management information.
SHI offers regular security training to raise employees’ awareness SHI discloses its Ethics Charter and Code of Ethics
Code of Ethics through a separate website, and allows users to
of information protection and security. All employees are Website2) confidentially report unfair business conduct and
obligated to receive security training at least once per year to corrupt practices.
build information management capacity. Security managers SHI transparently illustrates its activities, achievements,
and plans made for sustainable growth in the fields of
also take advanced mandatory training courses for more than 24
Sustainability Report economy, society and environment for stakeholders,
hours per year. In-house communication tools (poster, in-house as well as strengthens the financial aspect through the
integration with annual reports since 2013.
electronic bulletin board, CATV, etc.) are used to improve security
awareness and to highlight the importance of information SHI operates diverse channels such as news, special
In-house program, and campaign through in-house broadcasting.
security. In addition, SHI’s information security policy stipulates
Broadcasting Through this, we share important company news across
that its employees and subcontractor employees take their the yard.
information security oath in a written form. Engineering partner SHI provides its employees and subcontractors with
companies also obliged to take such security oath annually Newsletter wide-ranging information from main business activities
<Dream Yard> to compliance and current issues through semi-monthly
in consideration of their business characteristics as a way to company newsletter.
minimize the risk of engineering technology leaks.
SHI posts major news and internal/external news
through a blog to approach stakeholders in a more
Blog3) and Social
cordial manner, and provides news in real time and
Media
strengthen interactive communication through
social networks such as Facebook and Twitter.
1) http://www.samsungshi.com
2) https://audit.shi.samsung.co.kr:8383/kor_outside_src/default.asp
3) blog.samsungshi.com

SHI Core Value
5.Co-Prosperity Mutual Growth

Context of Mutual Growth
In line with increasing social interest in and demand for mutual growth, the Korean government
has placed mutual growth with small and medium enterprises (SME) as its top policy priority
through the enforcement and revision of the Fair Trade Act and Subcontract Act. As mutual
growth is widely recognized as a way to ultimately pursue mutual prosperity and create a
healthy industrial ecosystem rather than one-off events to support SMEs, seeking mutual
growth with subcontractors has become one of the key sustainability management initiatives.
Approach to Mutual Growth

SHI strives to build a culture of co-existence with its subcontractors who supply raw
materials and components. This means that SHI complies with fair trade agreements in
doing business with subcontractors and provides a range of support systems to assist them
1. Mutual Growth in improving their management efficiency. Furthermore, SHI operates communication
2. Environmental Management channels and programs for subcontractors to maximize synergistic effects.
3. Corporate Social Responsibility Ways Forward for Mutual Growth

SHI implements a variety of mutual cooperation activities to contribute to the growth and
development of subcontractors. The activities include, but are not limited to, technology
support and protection, recruitment and financing support, support for its second-tier
subcontractors, and efficiency improvement.
Ways Forward for Mutual Growth Environmental Management

Contribute to the growth and development of Context of Environmental Management
subcontractors
Creating and maintaining a clean environment is our responsibility to employees and
their families, local communities, society, and the nation, and this is also our obligation
to fulfill for our next generations. Environmental management is no longer an option
but a must in business operation on grounds of tighter international GHG emissions
Support for
Win-Win standards, the introduction of an emission trading system in Korea, and the introduction
Cooperation of the Framework Act on Low Carbon, Green Growth. Today, the environment takes on
a more significant meaning in business conduct, and environmental management has a
grave impact on a company’s reputation as well as its corporate value.
Approach to Environmental Management

Driven by its business philosophy of respecting humans and nature, SHI operates a
Recruitment Support for standardized environmental management system to pursue healthy growth and minimize
Technology Efficiency
and its second environmental impact. Periodic monitoring is performed on the discharge pathways of all air
support and financing tier subcont- impro-
protection vement pollutants, harmful chemicals and wastes as well as on energy consumption and greenhouse
support ractors
gas emissions throughout the manufacturing process in order to minimize the use,
Technology Technology/ Agreements Quality/ generation and discharge of these substances that may have impact on the environment.
licensing process signed safety/
agreements,
patent
improvement between the environmental
/technology
Ways Forward for Environmental Management
guidance, first and
grants, joint
recruitment secondtier
management With the aim to reduce and minimize its negative environmental impact, SHI undertakes
development, and training, specialized initiatives in environmental management and green management respectively.
consignment support, subcontractors, support in
research, Mutual NICE WINC entering The former concerns the management of air quality, water quality, waste, and chemicals.
technology Growth system domestic/
escrow Funds overseas Air quality control – Limit, reduce, and efficiently manage the emission of air pollutants
system markets
Water quality control – Thoroughly treat water pollutants, reduce wastewater and maximize the recycling
Environ-
mental Waste management – Properly treat waste by type, increase in-house treatment and recycling
Control Resource management – Undertake the 3R (Reduce, Recycle, Reuse) campaign
Chemicals management – Prevent environmental pollution and accidents, rigorously abide by
usage and disposal procedures
Green Creating a green workplace – Minimize GHG emissions through efficient energy consumption
Manage- Building a green network – Share green management vision and strategy
ment Developing green products – Develop green ships that minimize GHG emissions
RESPONSIBILITY
환경경영
Sharing Management Ways Forward for Sharing Management
Context of Sharing Management SHI, a stepping stone for future happiness

Any global corporate citizen should fulfill its social responsibility as well as create and
distribute economic values. Businesses today need to contribute to the development of
the nation and local communities by creating social values based on their resources and
Undertake proactive and strategic social
capabilities while proactively communicating with their local communities through heartfelt contribution programs for the growth and
social contribution initiatives to build closer ties with these communities. development of local communities
Approach to Sharing Management

Under its business philosophy of pursuing co-prosperity, SHI is fully engaged in a range of
social contribution programs desired by society. In addition to fulfilling its responsibility to 1. Survey
ensure the economic and social development of the local communities where it is based, the needs 2. Review 3. Plan and
of local survey execute
SHI also strives to undertake social contribution activities that help resolve social issues in a communi- outcomes programs
genuine and substantial manner. As such, SHI operates diverse social contribution programs ties
to assist less-privileged individuals including children from low-income families, married
female immigrants, senior living alone. • Identify and • Review the • Plan and execute
gather the identified needs programs
Ways Forward for Sharing Management needs of from diverse • Verify outcomes
stakeholders angles and gather
SHI aims to implement a range of social contribution programs with its local and local • Perform feedback
communities in mind to share hope and love in order to create a flourishing future. SHI’s communities feasibility • Reflect feedback
in-house volunteer groups are engaged in these programs designed for the features of reviews and make
improvements
each region and targets so as to reach SHI’s social contribution vision of becoming a
stepping stone for future happiness.
MUTUAL GROWTH
Support for Building Competitiveness Technology Escrow program that enables subcontractors to place
their key technology assets into an escrow account run by credible
Talent Development and Training foundations in order to minimize any leaks of technology.
SHI implements a range of policies to help its subcontractors

build their competitive edge. Training was provided, and reviews Health & Safety Cooperation Program Launching Ceremony
were performed in the fields of quality, safety, environment, and SHI promotes systematic cooperation on health and safety as a way
technology while best practices of Samsung affiliates were shared to ensure mutual growth with its subcontractors. In 2017, a Health
through benchmarking sessions. SHI dispatched 24 employees in & Safety Cooperation Program launching ceremony was hosted, and
structure procurement, outfitting procurement, etc to subcontractors health & safety technology and financial support was provided to
with a view to helping improve their productivity. In addition, to subcontractors. SHI aims to operate this program effectively to help
help in-house subcontractors with talent recruitment, SHI also subcontractors reduce the possibility of occupational injuries.
offered training opportunities to 89 job applicants on CO2 welding,
TIG (Tungsten Inert Gas) welding, and onboard electrical systems, 51
Partners Council
of which were successfully hired by subcontractors.
SHI strives to build trust-based relationships with its subcontractors
Subcontractor Review and Training Support
through open-minded communication. Thus, SHI directly/indirectly
No. of supports a Subcontractors Council to facilitate communication with
Subcont- No. of
Category Description its subcontractors. The ideas and suggestions gathered through the
ractors Trainees
Reviewed council are referred to responsible departments and swiftly handled.
Quality training to prevent the re-creation
Quality 41 104 of holes on sea water pipes (quality training Subcontractors Council Activities and Schedule
for pipe makers)
Safety 54 65,737 Safety training, qualification training Regular Council Regular General Subcontractor Subcontractor
Executives Proposal
Environmental Data Disclosure System, BOD Meeting Council Meeting Meeting
Environment 54 63 GHG Target Management System,
Emissions Trading System Jan. Apr. July, Dec. Year-round
FLNG job training, job training on
Job Skill - 2,007 scaffold erecting and dismantling, VSM
improvement training, etc.
SMART Factory
Bench- Benchmarking the best practices of group
- 62
marking affiliates
SHI is clearly aware that its competitive edge comes from the
manufacturing competitiveness of its subcontractors. Since 2016, SHI
Support for Tapping into Domestic and Overseas Markets has undertaken shopfloor innovation initiatives to help subcontractors
improve their substandard working conditions and manufacturing
SHI registers competent SMEs as its new subcontractors to ensure
infrastructure, and build their manufacturing competitiveness in
procurement stability and support their growth. In 2017, 418
the fields of quality, delivery, and costs through the SMART Factory
domestic companies were newly registered as subcontractors, and
initiative. In 2017, SHI directly visited a total of 10 subcontractors on
SHI made purchases worth around KRW 45.6 billion in total from
three occasions to identify 1,116 projects to be undertaken on such
337 companies. Furthermore, SHI assisted its clients in qualifying
diverse issues as production, logistics, quality, environment, safety
domestic companies as their subcontractors, and successfully
and 5S 3Right, and made necessary improvements.
sourced domestically-developed components valued at KRW 27.1
billion from a total of 41 subcontractors.
SHI is also focused on helping its subcontractors build their
competitive edge in the overseas market. In September, SHI Financial Support
provided infrastructure training programs and shipbuilding market
presentations to share its data with a total of 61 subcontractors Early Payments Made Before National Holidays
who often find it difficult to enter the overseas market due to their SHI strengthens financial support for subcontractors to build true
lack of market data, professional talent and financial resources. In partnerships with them. To help subcontractors lessen their financial
addition, SHI supported 81 subcontractors with FTA customs refund burden in paying wages and bonuses prior to national holidays, SHI
to facilitate their financial operation. made early payments valued at KRW 60.7 billion.
Early Payments Made to Subcontractors

Technology Support and Protection
2015 2016 2017
SHI assists subcontractors in protecting their technology through (Lunar New Year’s Day, (Lunar New Year’s Day, (Lunar New Year’s Day,
Korean Thanksgiving Day) Korean Thanksgiving Day) Korean Thanksgiving Day)
technology licensing contracts, patent grants, joint development
and research consignment. In 2017, a total of 75 subcontractors KRW KRW KRW
received technology support on 187 cases. SHI also operates the 69.3 billion 122.2 billion 60.7 billion
RESPONSIBILITY
SMART Factory Conceptual Map
Goal SMART Factory Realization
Plant Operational System ICT-based Manufacturing Technology
+
Operational P M F S E
Automation
processing
Simulation
Foundation
Precision
E
L E C R
M
M S S M P
- PLM(Product Lifecycle Management)

- MES(Manufacturing Execution System)
- FEMS(Factory Energy Management System)
- SCM(Supply Chain Management)
- ERP(Enterprise Resource Planning)
Manufacturing
Foundation Shopfloor Innovation: 5S 3Right/ Back to Basics / Waste Elimination / Quality / Productivity
Mutual Growth Funds Fair Trade with Subcontractors

SHI operates Mutual Growth Funds in conjunction with financial
institutions to provide financial support to its subcontractors. SHI
Fair Trade with Subcontractors
uses all the interest profits made from fund deposits to provide low- Building a healthy industrial ecosystem and making supply chain
interest loans to subcontractors. sustainable is only possible when fair and transparent transaction
Mutual Growth Funds Operation practices are established in conducting business with subcontractors.
(Unit: KRW 100 million)
SHI operates an ethics management system as a channel to share
Industrial
Category
Bank of Korea
Woori Bank Total its integrity management guidelines and sends official documents
SHI Deposits 590 215 805 prior to national holidays to highlight the importance of fair trade
Financial Institutions 1,770 430 2,200
practices. SHI also requests them to sign a pledge to comply with
SHI’s Code of Ethics and anti-corruption regulations prior to initiating
Amount of Funds Created 2,360 645 3,005
business transactions.
Loan Balance (as of the end of 2017) 1,957 485 2,442
Mutual Growth Index

Support for the Second tier Subcontractors
The Mutual Growth Index was established by the Fair Trade
SHI has consistently endeavored to extend the scope of its mutual
Commission and the Korea Commission for Corporate Partnership
growth initiatives. By supporting the second tier subcontractors with
to promote mutual growth and to rate businesses Most Excellent,
technology innovation and process improvement, SHI contributes
Excellent, Good or Average in accordance with their mutual growth
to creating a healthy industrial ecosystem. SHI has adopted a NICE
performance. Ratings are calculated based on businesses’ mutual
WINC (Nice Win-win Cooperation) system to support the second tier
growth support outcomes and beneficiary survey results, and Most
subcontractors through improved transaction practices and stable
Excellent and Excellent companies are eligible for diverse incentives
business conditions by increasing the ratio of cash payments and
offered by public organization. The 2016 Mutual Growth Index results
shortening payment periods. This system is also used to provide
published in 2017 graded SHI ‘Excellent’, which is attributed to
customized system management diagnosis consulting to allow
SHI’s endeavors to comply with fair contracting practices and create
subcontractors to perform self-administered management diagnoses.
channels to support win-win cooperation.
NICE WINC System Operation
(First tier Subcontractors ▶ Second tier Subcontractors)
Second tier Total Cash Ratio of Cash Average Cash
Subcontractors Payments Made Payments Made Payment Period
1,606 companies KRW 307.9 billion 60% 26 days
ENVIRONMENTAL MANAGEMENT
Green Management Certification Waste Management
SHI treats the waste generated from manufacturing process
Eco-friendly Workplace through internal incinerators and waste sorters. SHI endeavors to
SHI efficiently consumes resources and energy, reduces the reduce the generation of overall waste, including general waste
generation of pollutants, and minimizes negative environmental treated through outsourcing service providers, and to increase
footprints throughout the entire work process. SHI takes the lead recycling rates.
in environmental management. After obtaining an ISO 14001:2015
certification, SHI has become the first Korean shipbuilder that Resource Recycling
possesses integrated certification (ISO 14001/5001) for green
SHI launches a 3R (Reduce, Recycle, Reuse) campaign to effectively
management.
use limited resources. By operating a recycling center, excess
materials and drums produced from the welding process are
reused. SHI continues to make effort to effectively use resources by
performing activities to recycle rugs and packaging materials at the
departmental level.
Discharge of Wastewater (Unit: kg)
COD SS
52.67
Environmental manage- Energy management
ment system (SIO 14001) system (ISO 50001) 41
32.4
28.55
Environmental Control 14 13.22
Air Quality Control 2015 2016 2017
SHI performs internal monitoring and strict equipment control to Discharge of Waste (Unit: Ton)
ensure cleaner air. Incinerators are equipped with TMS devices Designated General 198,032
that measure gas emissions in real time to periodically monitor the
166,452
emission and concentration of pollutants. Measurement outcomes 151,660
are used as reference data in developing pollutant management
plans. SHI also strives to perform thorough facility maintenance
5,580 5,621
and repair to reduce its generation of pollutants. To cut down 4,755
on the emission of Volatile Organic Compounds (VOC) from the
painting process, SHI plans to consecutively install air pollution 2015 2016 2017
control equipment enabled by Best Available Technology (BAT)
between the years of 2018 and 2022. Amount of Waste Treated by Type (Unit: Ton)
Incineration Landfill
16,061 16,961
Water Quality Control
13,894
SHI made it clear that its discharge of sewage and wastewater 8,148
should not impact the surrounding ecosystem, and is constantly
4,912
making equipment investment and improvement to reduce the 3,393
discharge of wastewater and comply with relevant regulations. In
2017, SHI developed its own HSE system to improve the efficiency 2015 2016 2017
of wastewater management. Reviews are performed on its
compliance with legally-permissible limits in discharging effluent Recycling of Welding Drums (Unit: Ton)
through government-accredited inspectors, and total inspections 367.0
are conducted on water quality to detect any new water pollutants
272.6
and modify the relevant approval process accordingly as a way 223.0
to manage risks. Furthermore, daily equipment and shopfloor
inspections are made to ensure that pollution control devices are
operated in their optimal conditions.
2015 2016 2017
* Data Coverage: Domestic worksites 100%
RESPONSIBILITY
Chemicals Management Energy Consumption (Unit: TJ)
Category 2015 2016 2017

To avoid any possibility of environmental pollution caused by the
chemicals consumed in the manufacturing process, SHI stringently Direct Energy 2,351 1,498 3,002
abides by the approval and authentication process concerning the Indirect Energy 4,671 5,529 4,782
use of chemicals. All chemicals that enter SHI’s worksites should go Total 7,022 7,027 7,784
through the assessments and inspections conducted by HSE Team, and
are stored, used and disposed of according to strict standards. In early GHG Emissions (Unit: tCO2e)
2018, gap analyses were performed against regulatory standards to Category 2015 2016 2017
tighten supervision over facilities that handle chemical substances. SHI Direct Emissions 200,441 149,427 250,236
is already applying even more exhaustive criteria than legal standards Indirect Emissions 226,737 268,415 232,113
in managing chemical-handling facilities and will stay vigilant in Total 427,178 417,842 482,349
controlling chemical materials to minimize environmental risks.
* SHI’s direct and indirect GHG emissions were re-described for the years of 2015 and 2016
** Data Coverage: Domestic worksites 100%
Eco-friendly LNG-fueled Ships

The International Maritime
Organization (IMO) has
Chemicals storage at the washing Materials analysis lab
machine wastewater treatment facility gradually tightened the Tier
I/II/III regulations on NOx
emissions generated from ships
since 2000 to encourage the
use of eco-friendly ship fuels
while adopting regulations on
the total CO2 emissions since 2015 through the Energy Efficiency
Warehouse of adhesives used for LNG carrier construction Design Index (EEDI). From 2020 onwards, the IMO will also heighten
the Sulphur cap placed in 2010 to limit the content of Sulphur in
Periodic Inspections Conducted on the Surrounding Environment ship fuel. LNG-fueled vessels are recognized as the most economic
option when compared to other alternatives including the use of
SHI periodically inspects the quality of air and water to identify its low-Sulphur oil, installation of desulphurizers, and the use of green
environmental footprints on the surrounding areas. Specifically, gas fuels that aim to comply with Sulphur emissions regulations to
such air quality indicators as PM10, SO2, NO2, as well as copper and be adopted in 2020. These vessels can also reduce the emission of
zinc levels are monitored to ensure that SHI does not violate the SOx by up to 100%.
legally-permissible limits set to protect the marine ecosystem.
As a leader in the eco-friendly ship market, LNG-fueled vessels are
Category Regulatory Limit Unit 2015 2016 2017 categorized into pure LNG-fueled vessels and LNG-diesel dual-fuel
PM 10 < 100 ㎍/㎡ 42.3 46.5 36.0 vessels. The dual-fuel type is free from tank capacity limitations
SO < 0.05 0.007 0.007 0.005 unlike the vessels purely powered by LNG and is appropriate for
㎎/㎡
2
NO 2 < 0.06 0.023 0.018 0.009 long-distance sailing and has higher engine efficiency. In 2013,
Copper < 3.0 1.87 1.43 1.06 SHI became Asia’s first shipbuilder to construct a dual-fuel diesel
㎍/l
Zinc < 34 9.52 5.12 3.36 electric propulsion (DFDE) LNG carrier named EcoNuri. Since then,
SHI has built LNG carriers equipped with ME-GI (high-pressure gas)
and X-DF (low-pressure gas) engines (two-stroke, direct propulsion,
Green Management (GHG Emissions dual-fuel type engines). In addition to such LNG carriers, SHI is also
Management) landing orders for LNG-powered shuttle tankers and LNG bunkering
vessels to diversify its product portfolio. SHI will build sustained
SHI constantly endeavors to reduce its energy consumption and GHG competitive edge by independently developing its own fuel
emissions as a way to respond to climate change and GHG emissions supply system (S-Fugas) and the reliquefaction system designed
regulations. As such, lighting devices have been replaced with LED to process boil-off gas (S-Reli) that play a key role in designing
devices in buildings and plants across the yard since 2014, and onboard and constructing gas-fueled vessels. As global environmental
temporary lighting was replaced with LED lighting in 2017. In addition, regulations prompt all industries to shift to cleaner energy sources,
energy/GHG emissions training is regularly provided to managers to gas-fueled ships are expected to emerge as the game-changer in
encourage them to proactively engage in green management. the shipbuilding industry.
Dual-Fuel LNG Carriers Being Constructed Support for Overseas Subsidiaries

Client Type of Ship Type of Engine Ship Number SHI is committed to fulfilling its environmental responsibility
FLEX LNG carrier ME-GI (High- SN2107, 2108 across the entire worksite, including those in overseas regions.
pressure gas)
SK Shipping, KOGAS LNG carrier SN2153, 2154 SHI’s Chinese subsidiaries in Rongcheng and Ningbo obtained
SK Shipping LNG carrier SN2080, 2081 the ISO 14001 (environmental management system) certification
X-DF (Low-
MBK LNG carrier
pressure gas)
SN2148, 2149, 2150 in 2009 to ensure workplace hygiene and have consistently made
GASLOG LNG carrier SN2212, 2213 environmental improvements. Transfer examinations were also
conducted on the revised ISO 14001 certification to confirm their
LNG-fueled Shuttle Tanker and LNG Bunkering Vessel Orders commitment to comply with international standards.
Granted
Client Type of Ship Ship Number
AET Shuttle tanker (Oil tanker) SN2236, 2237
TEEKAY Shuttle tanker (Oil tanker) SN2241, 2242, 2256, 2257

Korea Line
LNG bunkering vessel SN2234
Corporation – KOGAS
Support for Subcontractors and Overseas

Subsidiaries ISO 14001-certified ISO 14001-certified
Rongcheng plant Ningbo plant
Support for Subcontractors

SHI aims to develop an inte-
grated green management
s y st e m b y d i s s e m i n a t i n g
environmental management
into outside subcontractors
and proactively engaging them
in green management. For Working-level training for
two years between 2013 and subcontractors
2014, SHI participated in the government-led Green Partnership
project and has since provided annual shopfloor environmental
guidance and working-level training to outside subcontractors. In
2017, SHI supported 54 subcontractors in reviewing their status
in environmental management and offered working-level training
on workplace environmental management to 63 environmental
managers from subcontractors.
RESPONSIBILITY
SHARING MANAGEMENT
Volunteer Groups Outreach Concert
SHI hosts Outreach Concerts to enable less-privileged individuals
Operation of Volunteer Groups (as of the end of 2017)
who have limited cultural exposure to enjoy cultural performance.
Volunteer Groups Specifically, this initiative targets hospitals and welfare facilities
167teams in total where watching performances is a rare opportunity due to health
concerns and help heal the minds of individuals there through Nanta,
instrumental and musical performances as well as magic shows.
Geoje Shipyard Pangyo R&D Center Daeduk R&D Center Papering Volunteers
150 teams 15 teams 2 teams SHI’s papering volunteers create pleasant and cozy spaces for the
less-privileged and welfare facilities in local communities. These
Volunteer Group Outcomes
volunteers help replace old wallpapers and floorings with new ones
Category 2015 2016 2017 to bring comfort and sanitation to the residential environment of
No. of employee
local community people.
8,340 7,410 5,516
volunteers
No. of volunteer
125,122 82,475 64,819
hours
Employee Donation Record

Category 2015 2016 2017
Outreach Concert Papering Volunteers
No. of employees who
10,788 9,507 8,025
made donations
Do Dream Concert with People with Disabilities
Employee Donation In November 2017, SHI’s culture volunteer group hosted the eighth
13.8 13.5 10.3
(KRW 100 million) Do Dream Concert. The concert serves to allow individuals with
disabilities in local communities to come forward on the stage and
receive the spotlight while performing Nanta and sign language
singing. First hosted back in 2010, the concert is held annually and
Hope Sharing Campaign for New Year’s Day and all the proceeds go to help neighbors in need.
Korean Thanksgiving
At SHI, a Hope Sharing Blood Donation of Love
Campaign has become an
SHI has launched a blood donation campaign in 1995 to ensure
annual event to celebrate
the stable supply of blood and expand the culture of sharing. In
national holidays. In
2017, 1,540 employees participated in the campaign, and SHI was
2017, approximately 1,600
ranked the first in the province where it is based in terms of blood
employees made in-kind
donation.
donations to 141 beneficiaries,
including villages, senior
centers and households
that the company formed sisterhood ties with as well as welfare
facilities prior to Lunar New Year’s Day and Korean Thanksgiving.
Volunteer groups also donated their talent through cultural
performance, foot massaging, and wall papering.
Wall Art Volunteer Group Sharing Kimchi of Love

SHI’s Wall Art volunteer group paints murals in local communities SHI has been hosting a Sharing Kimchi of Love program to donate
to make these communities better. Making beautiful murals near kimchi to the less-privileged in Geoje. In the summer of 2017,
tourist attractions frequented by visitors or on the old village watery kimchi was made by volunteers to help seniors living alone
walls in Geoje City, these volunteers contribute to turning Geoje and less-privileged children in the city get through the hot summer
into a popular tourist destination. season. This event was attended by nearly 40 Chamsarang Group
volunteers to make 1,200 kg of watery kimchi and deliver them
Afterschool Program in Rural and Fishing Villages to 100 seniors living alone and ten children centers. In November,
SHI’s Afterschool Program is provided in rural and fishing villages another kimchi-making event was held to make kimchi with a
to help reduce the educational divide between urban and non- total of 5,000 heads of cabbage with the help of employees, their
urban areas and to encourage students in these villages to have families and clients, and the kimchi was donated to seniors living
dreams and hopes. As part of this program, 30 SHI employees alone and welfare facilities in the Geoje region.
provide nearly 150 students at three middle schools in Geoje
with two-hour guidance and mentoring on English and math four Support for Multicultural Families
times per week as well as learning materials.
SHI’s multicultural family support program targets married female
immigrants and their children from low-income families, and was
initiated in 2008 to help these women settle in Korea early on. In
2017, SHI provided 15 multicultural families with an opportunity
to visit their home country including Vietnam, China, and the
Philippines. SHI also operates multicultural libraries to assist
children from multicultural families in improving their learning
Wall Art Volunteer Group Afterschool Program in Rural and skills and has allowed 80 such children to enjoy cultural excursions.
Fishing Villages
Bring Back Your Bright Smile Program

SHI provides an opportunity to receive surgery and treatment to
individuals who could not afford to treat their facial deformities
(ear deformities, cleft lip & palate, facial asymmetry, etc.).
Not only does the company pay for surgery expenses, it also Sharing Kimchi of Love Support for Multicultural Families
offers psychological therapy to motivate them to get necessary
treatment and to help with their rehabilitation process following
treatment. In 2017, we have helped 234 patients find bright faces,
including 18 new eligible patients.
RESPONSIBILITY
Global Volunteer Initiatives Geoje Hope Welfare Foundation

SHI’s ‘Safe School’ program aims to select schools in need of Geoje Hope Welfare Foundation was established to improve
environmental improvement and help improve their educational the welfare of the city and is providing a range of programs
environment. In 2017, this program was undertaken at an to support the underprivileged who cannot benefit from the
elementary school outside Jakarta, Indonesia: a disaster national welfare system. Through the foundation, SHI assists the
risk mitigation campaign was launched to help create a safe marginalized in the local community in standing on their own
learning environment while the drainage system and restrooms feet by providing financial support concerning livelihood, medical
were upgraded to ensure that students can learn in a healthy care, school qualification exams, scholarships and emergencies.
environment.
School Meal Support for Students from Low-Income

Support for Families in Crisis Families
SHI assists families in crisis to extend a helping hand to the
SHI provides school meal support every year to help teenagers
marginalized who are left behind outside the legal welfare
from low-income families grow up to be a healthy and responsible
system and to lay the basis to help them build the foundation
member of the society. In 2017, donations raised through the
for their self-reliance. Financial support is provided and constant
participation of our employees were delivered to the Geoje
monitoring is performed for families who cannot maintain
Education Support Office.
their livelihood due to diseases or accidents and for families
who cannot afford to receive proper medical treatment due to
financial reasons. SHI also operates a job training institute for
people with disabilities and seniors to help them improve their
job competency.
Geoje Hope Welfare Foundation School Meal Support for Students

from Low-Income Families
Global Volunteer Initiatives Support for Families in Crisis

Financial Statements _ 82
Independent Auditor’s Report_ 89
GRI Index_ 92
GHG Emissions Assurance Statement_ 95
Third Party Assurance Statement_ 96
APPENDIX 82 83
Financial Statements
Consolidated Financial Statements
(Unit: KRW)
2015 2016 2017
Assets
Current assets 10,110,480,734,368 9,950,789,795,899 6,779,932,597,869
Cash and cash equivalents 983,478,373,773 984,075,446,227 353,530,365,169
Short-term financial instruments 1,153,964,617,515 786,472,432,910 769,649,609,817
Trade receivables 350,650,287,238 389,247,494,187 344,452,533,846
Due from customers for contract work 4,291,514,814,100 5,054,636,276,591 3,094,496,613,542
Other receivables 30,172,001,317 127,079,891,765 123,271,126,620
Advance payments 894,966,319,466 360,295,600,190 192,902,915,335
Current portion of derivative financial instruments 245,272,669,603 210,751,182,260 329,288,021,311
Current portion of firm commitment assets 451,717,714,505 479,975,331,410 89,001,810,805
Inventories 1,449,045,285,162 1,226,085,739,772 1,216,760,484,649
Other current financial assets 52,748,575,663 90,498,037,968 75,126,219,728
Other current assets 112,278,509,429 170,751,802,951 139,867,461,406
Non-current assets 7,191,111,253,098 7,266,672,882,754 7,038,180,514,266
Available-for-sale financial assets 61,143,039,512 26,288,657,767 26,805,059,644
Investments in associates and joint ventures 5,705,345,274 3,467,930,910 2,980,801,945
Property, plant and equipment 5,582,821,926,551 6,442,424,538,523 6,162,904,763,415
Investment properties 6,981,786,474 16,839,560,548 16,713,214,325
Intangible assets 101,741,434,244 96,140,776,471 91,579,914,089
Long-term prepaid expenses 75,663,980,553 67,969,654,036 75,830,061,744
Non-current derivative financial instruments 143,056,516,969 82,036,715,609 96,002,440,905
Non-current firm commitment assets 385,128,453,648 106,939,864,653 54,784,997,751
Non-current trade receivables 67,955,945,129 24,500,208,329 43,527,216,438
Deferred tax assets 730,006,107,462 378,626,371,165 455,617,553,457
Other non-current financial assets 30,906,717,282 21,438,604,743 11,434,490,553
Total assets 17,301,591,987,466 17,217,462,678,653 13,818,113,112,135
Liabilities
Current liabilities 9,570,119,230,078 9,045,743,305,814 7,145,282,550,781
Trade payables 1,413,719,841,358 1,320,711,146,304 642,646,767,319
Short-term borrowings 1,908,413,150,868 2,693,765,875,576 1,979,009,098,139
Debentures 162,705,310,784
Other payables 106,499,048,081 137,670,063,887 110,861,390,971

Consolidated Financial Statements
(Unit: KRW)
2015 2016 2017
Liabilities
Advance received 1,114,953,967,408 311,598,353,495 73,353,150,997
Due to customers for contract work 2,813,297,640,828 1,543,796,723,983 1,440,181,081,633
Accrued expenses 502,396,264,847 523,036,322,263 498,359,174,105
Current tax liabilities 4,937,885,534 3,269,361,029
Current portion of derivative financial instruments 521,701,075,486 782,199,306,518 149,504,656,670
Current portion of firm commitment liabilities 246,360,587,891 209,642,478,076 141,873,587,708
Current portion of long-term debts 513,569,600,000 1,158,721,568,655 1,488,090,375,487
Provisions 375,693,088,290 325,215,360,649 419,064,224,802
Other current liabilities 48,577,079,487 39,386,106,408 36,364,371,137
Non-current liabilities 3,465,726,998,103 1,896,408,600,575 875,377,892,598
Debentures 1,098,155,375,018 499,347,207,263 91,812,457,754
Long-term borrowinggs 1,513,180,196,172 975,460,567,761 524,453,765,874
Net defined benefit liabilities 175,924,376,932 101,304,890,943 40,511,052,994
Other provisions 24,072,508,000 24,072,508,000 24,072,508,000
Non-current derivative financial instruments 405,879,686,509 117,833,674,399 66,259,904,877
Non-current firm commitment liabilities 139,239,613,570 34,123,353,398 62,111,037,397
Other non-current financial liabilities 21,811,891,578 18,199,268,257 19,598,643,398
Other non-current liabilities 78,094,236
Deferred tax liabilities 87,385,256,088 126,067,130,554 46,558,522,304
Total liabilities 13,035,846,228,181 10,942,151,906,389 8,020,660,443,379
Equity
Equity attributable to owners of the Parent Company 4,237,368,406,426 6,264,309,339,227 5,789,564,569,756
Share capital 1,154,951,155,000 1,950,574,225,000 1,950,574,225,000
Ordinary shares 1,154,376,930,000 1,950,000,000,000 1,950,000,000,000
Preferred shares 574,225,000 574,225,000 574,225,000
Share premium 417,172,244,393 752,018,095,705 752,018,095,705
Accumulated other comprehensive income 35,616,695,703 1,006,041,933,242 852,435,266,937
Other components of equity -963,896,146,243 -963,896,146,243 -963,896,146,243
Retained earnings 3,593,524,457,573 3,519,571,231,523 3,198,433,128,357
Non-controlling interest 28,377,352,859 11,001,433,037 7,888,099,000
Total equity 4,265,745,759,285 6,275,310,772,264 5,797,452,668,756
Total liabilities and equity 17,301,591,987,466 17,217,462,678,653 13,818,113,112,135

APPENDIX 84 85
Consolidated Statements of Income
(Unit: KRW)
2015 2016 2017
Revenues 9,714,441,843,944 10,414,188,640,168 7,901,235,154,581
Cost of sales 10,676,057,968,401 9,939,108,513,682 8,051,664,380,501
Gross profit (loss) -961,616,124,457 475,080,126,486 -150,429,225,920
Selling and administrative expenses 540,289,374,247 622,279,642,054 373,734,567,689
Operating profit (loss) -1,501,905,498,704 -147,199,515,568 -524,163,793,609
Other income 2,677,989,720,350 1,690,319,949,169 2,024,546,275,726
Other expenses 2,627,069,553,392 1,514,442,302,612 2,007,012,873,290
Finance income 267,148,607,842 227,123,455,160 251,515,105,940
Finance costs 277,323,179,890 324,347,280,634 208,536,281,221
Loss on valuation using equity method 650,814,305 395,296,070 247,683,140
Earnings (Loss) before income tax -1,461,810,718,099 -68,940,990,555 -463,899,249,594
Income tax expenses (benefit) -249,700,704,752 69,835,915,882 -123,150,952,327
Profit (Loss) for the period -1,212,110,013,347 -138,776,906,437 -340,748,297,267
Profit (loss) is attributable to
Equity holders of the Parent Company -1,205,414,369,599 -121,231,328,119 -338,779,135,373
Non-controlling interests -6,695,643,748 -17,545,578,318 -1,969,161,894
Basic earning (loss) per share
Basic earnings(loss) per share from continuing operation -5,879 -485 -930
Basic earnings (loss) per share from discontinued operation -5,879 -333 -930
Diluted earnings (loss) per share from continuing operation -5,879 -485 -930
Diluted earnings (loss) per share from discontinued operation -5,879 -333 -930
Consolidated Statements of Comprehensive Income

(Unit: KRW)
2015 2016 2017
Profit (loss) for theperiod -1,212,110,013,347 -138,776,906,437 -340,748,297,267
Other comprehensive income (loss) -44,052,040,385 1,004,748,749,354 -137,109,806,241
Items that will not be reclassified to profit or loss
Remeasurement of net defined benefit liability -29,369,229,625 45,057,853,983 20,626,628,125
Gains from reevaluation of property, plant and equipment 1,145,802,515,179
Income tax relating to these items 7,107,353,569 -288,188,209,337 -4,991,644,006
Items that may be subsequently reclassified to profit or loss
Changes in the fair value of available-for-sale financial assets -31,388,755,785 -24,651,247,227 208,243,067
Exchange differences on translations of foreign operations 2,274,518,457 120,533,356,801 -152,824,814,776
Share of other comprehensive income of associates accounted for using the equity method -102,197,535 228,878,126 -77,823,829
Tax effects of other comprehensive income 7,426,270,534 5,965,601,829 -50,394,822
Total comprehensive income (loss) for the period -1,256,162,053,732 865,971,842,917 -477,858,103,508
Consolidated Statements of Changes in Equity
(Unit: KRW)
Accumulated Other
Capital in excess Other Components
Capital Stock Comprehensive
of par value of Equity
Income
Balance at January 1, 2015 1,154,951,155,000 417,172,244,393 56,789,076,034 -963,896,146,243
Profit (loss) for the period
Change in the fair value of available-for-sale financial assets -23,962,485,251
Exchange differences on translations of foreign operations 2,892,302,455
Remeasurement of net defined benefit liabilities

Share of other comprehensive income of associates
-102,197,535
accounted for using the equity method
Reevaluation reserves
Issuance of share capital
Acquisition of non-controlling interests
Dividends paid
Balance at December 31st, 2015 1,154,951,155,000 417,172,244,393 35,616,695,703 -963,896,146,243
Balance at January 1st of 2016 1,154,951,155,000 417,172,244,393 35,616,695,703 -963,896,146,243
Change in the fair value of available-for-sale financial assets -18,685,645,398
Exchange differences on translations of foreign operations 120,363,698,305

228,878,126
Reevaluation reserves 868,518,306,506
Issuance of share capital 795,623,070,000 334,845,851,312
Dividends paid
Balance at December 31st of 2016 1,950,574,225,000 752,018,095,705 1,006,041,933,242 -963,896,146,243
Balance at January 1st of 2017 1,950,574,225,000 752,018,095,705 1,006,041,933,242 -963,896,146,243
Change in the fair value of available-for-sale financial assets 157,848,245
Exchange differences on translations of foreign operations -151,680,642,633

-77,823,829
Reevaluation reserves -2,006,048,088
Dividends paid
Balance at December 31st of 2017 1,950,574,225,000 752,018,095,705 852,435,266,937 -963,896,146,243

APPENDIX 86 87
(Unit: KRW)
Attributable equity
Non-controlling
Retained Earnings holders of the Total Equity
Interests
Parent Company
Balance at January 1, 2015 4,872,462,895,977 5,537,479,225,161 35,682,070,606 5,573,161,295,767
Profit (loss) for the period -1,205,414,369,598 -1,205,414,369,598 -6,695,643,749 -1,212,110,013,347
Change in the fair value of available-for-sale financial assets -23,962,485,251 -23,962,485,251
Exchange differences on translations of foreign operations 2,892,302,455 -617,783,998 2,274,518,457
Remeasurement of net defined benefit liabilities -22,261,876,056 -22,261,876,056 -22,261,876,056

-102,197,535 -102,197,535
Reevaluation reserves
Acquisition of non-controlling interests 8,710,000 8,710,000
Dividends paid -51,262,192,750 -51,262,192,750 -51,262,192,750
Balance at December 31st, 2015 3,593,524,457,573 4,237,368,406,426 28,377,352,859 4,265,745,759,285
Balance at January 1st of 2016 3,593,524,457,573 4,237,368,406,426 28,377,352,859 4,265,745,759,285
Profit (loss) for the period -121,231,328,119 -121,231,328,119 -17,545,578,318 -138,776,906,437
Change in the fair value of available-for-sale financial assets -18,685,645,398 -18,685,645,398
Exchange differences on translations of foreign operations 120,363,698,305 169,658,496 120,533,356,801
Remeasurement of net defined benefit liabilities 34,153,853,319 34,153,853,319 34,153,853,319

228,878,126 228,878,126
Reevaluation reserves 13,124,248,750 881,642,555,256 881,642,555,256
Issuance of share capital 1,130,468,921,312 1,130,468,921,312
Dividends paid
Balance at December 31st of 2016 3,519,571,231,523 6,264,309,339,227 11,001,433,037 6,275,310,772,264
Balance at January 1st of 2017 3,519,571,231,523 6,264,309,339,227 11,001,433,037 6,275,310,772,264
Profit (loss) for the period -338,779,135,373 -338,779,135,373 -1,969,161,894 -340,748,297,267
Change in the fair value of available-for-sale financial assets 157,848,245 157,848,245
Exchange differences on translations of foreign operations -151,680,642,633 1,144,172,143 -152,824,814,776
Remeasurement of net defined benefit liabilities 15,634,984,119 15,634,984,119 15,634,984,119

-77,823,829 -77,823,829
Reevaluation reserves 2,006,048,088
Dividends paid
Balance at December 31st of 2017 3,198,433,128,357 5,789,564,569,756 7,888,099,000 5,797,452,668,756

Consolidated Statements of Cash Flows
(Unit: KRW)
2015 2016 2017
Cash Flow from operating activities 620,279,375,943 -1,554,754,530,504 540,067,546,739
Cash generated from operations 860,570,548,010 -1,476,379,297,886 696,682,936,651
Interest received 37,822,169,789 56,226,461,656 33,352,129,398
Interest paid -110,743,840,345 -168,208,135,775 -155,400,752,310
Dividends received 472,988,998 307,026,500 392,955,350
Income tax received (paid) -167,842,490,509 33,299,415,001 -34,959,722,350
Cash flow from investing activities -1,080,653,868,348 129,534,007,631 -74,448,308,937
Acquisition of short-term financial instruments -599,615,029,981 -2,074,388,364,155 -829,518,624,326
Disposal of short-term financial instruments 2,298,647,210,817 827,957,208,821
Acquisition of available-for-sale financial assets -803,657,100 -766,222,000
Disposal of available-for-sale financial assets 1,709,566,280 38,040,036,077 203,656,223
Acquisition of held-to-maturity financial assets -59,000,000,000
Acquisition of associates and joint ventures -1,100,000,000 -250,000,000 -200,400,000
Disposal of associates and joint ventures 1,107,125,782 393,913,127
Acquisition of property, plant and equipment -608,155,589,087 -207,047,445,330 -107,919,196,591
Disposal of property, plant, and equipment 37,749,954,240 97,131,162,528 15,989,961,215
Acquisition of investment properties -737,023,444
Disposal of investment properties 25,122,387,500 17,305,634,230
Acquisition of intangible assets -45,614,273 -535,661,467 -342,131,028
Disposable of intangible assets 3,065,755,943 3,060,582,941
Acquisition of other current financial assets
Disposal of other current financial assets 38,800,088,029 11,131,135,366 9,650,000,000
Disposal of other non-current financial assets 26,631,308,912 8,394,960,235 13,241,170,590
Acquisition of other non-current financial assets -4,816,695,911 -2,521,688,849 -3,137,644,968
Cash flow from financing activities 1,103,694,356,196 1,391,691,302,583 -956,733,475,045
Acquisition of non-controlling interests 8,710,000
Proceeds from short-term borrowings 1,372,596,138,235 2,595,268,654,574
Repayments of short-term borrowings -324,573,102,897 -598,573,505,128 -3,263,194,679,619
Issuance of short-term debentures 162,590,930,000
Repayments of current portion of long-term debts -651,148,177,650 -513,487,915,400 -1,218,813,000,000
Proceeds from long-term borrowings 1,634,255,790,583 687,663,564 759,668,000,000
Repayments of long-term borrowings -1,871,171,090 -84,022,500,000
Dividends paid -51,262,192,750
Issuance of debentures 498,284,500,000 91,769,120,000
Issuance of share capital 1,130,468,921,312

Net increase (decrease) in cash and cash equivalents before effect of
643,319,863,791 -33,529,220,290 -491,114,237,243
exchange rate changes
Cash and cash equivalents at the beginning of year 340,828,995,204 983,478,373,773 984,075,446,227
Effect of exchange rate change on cash and cash equivalents -670,485,222 34,126,292,744 -139,430,843,815
Cash and cash equivalents at the end of year 983,478,373,773 984,075,446,227 353,530,365,169
APPENDIX 88 89
Independent Auditor’s Report
To the Board of Directors and Shareholders of

Samsung Heavy Industries Co., Ltd.
We have audited the accompanying consolidated financial statements of Samsung Heavy Industries Co., Ltd. and its subsidiaries (collectively referred
to as the "Group"), which comprise the consolidated statements of financial position as at December 31, 2017 and 2016, and the consolidated
statements of profit or loss, consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated
statements of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of significant accounting
policies and other explanatory information.
Management’s Responsibilities for the Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International
Financial Reporting Standards as adopted by the Republic of Korea (Korean IFRS), and for such internal control as management determines is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibilities
Our responsibility is to express an opinion on the consolidated financial statements based on our audits. We conducted our audits in accordance
with Korean Standards on Auditing. Those standards require that we comply with ethical requirements, and plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The
procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation
and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position
of Samsung Heavy Industries Co., Ltd. and its subsidiaries as at December 31, 2017 and 2016, and its consolidated financial performance and its
consolidated cash flows for the years then ended in accordance with Korean IFRS.
Emphasis of Matter 1
Without qualifying our opinion, we draw attention to the following area of focus.
1) The auditor’s emphasis on area of focus on construction contracts

Area of focus on construction contracts in accordance with the Practical Guidance of Auditing Standard 2016-1 are those matters that, in the auditor's
professional judgment and communication with those charged with governance, were of most significance in the audit of the consolidated financial
statements of the current period. These matters were addressed in the context of the audit of the consolidated financial statements as a whole, and
in forming our opinion thereon, and we do not provide a separate opinion on these matters.
We have addressed the output of the audit process for the area of focus as below in forming an audit opinion on the consolidated financial
statements of Samsung Heavy Industries Co., Ltd. and its subsidiaries as a whole.
A. General Information
Common information applied to the area of focus on construction contract described in this audit report are as follows:
As explained in the Note 2 to the consolidated financial statements (Critical Accounting Policies), the Group recognizes contract revenue and contract
costs associated with the construction contract as revenue and expense respectively based on the percentage of completion of the contract activity at
the end of the reporting period when the outcome of a construction contract can be estimated reliably. The percentage of completion of the contract
1 This paragraph is being included in accordance with the Practical Guidance of Auditing Standard 2017-1, Practical Guidance for Special Consideration in
Auditing Construction Contracts, prescribed by Korean Institute of Certified Public Accountants, and should not be considered as a communication of key
audit matter described in the International Standards on Auditing 700 (Revised).
Independent Auditor’s Report
activity is the proportion that costs incurred to date, excluding any contract cost that does not reflect the work performed, bear to the estimated total
costs of the contract. The Group presents the gross amount due from customer for contract work as an asset for all contracts in progress for which
costs incurred plus recognized profits (less recognized losses) exceed progress billings, and presents the gross amount due to customers for contract
work as a liability for all contracts in progress for which progress billings exceed costs incurred plus recognized profits (less recognized losses).
B. Revenue recognition based on the input method

As explained in the Note 3 to the consolidated financial statements (Critical Accounting Estimates and Assumptions), total contract revenue is
measured based on the initial amount of revenue agreed in the contract. However, the measurement of contract revenue is affected by a variety
of uncertainties that depend on the outcome of future event; for example, the amount of contract revenue may increase as a result of variations in
contract work, claims and inventive payments, on the other hand, the amount of contract revenue may decrease as a result of penalties arising from
delays caused by the Group in the completion of the contract. The measurement of contract revenue is also affected by the percentage of completion
measured based on the aggregated amount costs incurred. Total contract costs are estimated based on future estimates of material costs, labor costs,
construction period and others.
Also, as explained in the Note 6 to the consolidated financial statements (Construction Contracts), estimated total contract revenue and cost were
changed due to variations in contract work and costs increases.
Estimating total contract revenue with respect to contract changes due to long-term duration of the contract, changes in designs, the down trend in
international oil prices and others of the Group’s major construction contracts; such as, offshore plant and drilling rig etc., are uncertain. The changes
in estimated total contract revenue and costs may have negative impacts on the profit or loss for the period (or for the succeeding year);
therefore, we identified revenue recognition based on the input method as a significant risk.
In respect of the Group’s revenue recognition based on the input method, we have performed the following audit procedures.
· We obtained understanding of the accounting policy of revenue recognition, determined if there were any changes in the accounting policy, and assessed the accounting policy.
· We reviewed significant contents of contracts.
· We inquired about current progress of major contacts and identified any significant changes at the end of the reporting period, and performed analytical audit procedures
on the significant changes.
· We performed analytical review procedures on major financial ratios such as rate of profit.
· We reviewed internal control in relation to reviewing and approval process of a contract by an appropriate approver when a new contract is engaged.
C. Uncertainty of estimated construction costs

As explained in the Note 3 to the financial statements (Critical Accounting Estimates and Assumptions), estimated construction costs are estimated
based on future estimates of material costs, labor costs, construction period and others. Estimated construction costs can be changed due to changes
in designs, raw-material price and construction period.
As the Group’s construction contracts related to offshore plant and drilling rig are usually long-term in nature, the measurement of estimated contract
costs is affected by variety of uncertainties such as changes in the specifications or designs, changes in construction environment, fluctuation of
material cost and others. Considering the impacts of changes in estimated construction costs on the profit or loss for the current period (or for the
succeeding year); we identified uncertainty of estimated construction costs as a significant risk.
As of December 31, 2017, in respect of the Group’s uncertainty of estimated construction costs related to offshore plant and drilling rig, we have
performed the following audit procedures.
· We inquired and performed analytical review procedures on changes in estimated construction cost’s major components.
· We inquired the causes for differences where the construction contracts contain significant differences in change of total estimated construction costs compared to prior
year.
· We obtained understanding of calculation method and significant assumption on estimated construction costs and confirmed its relevant evidences for the calculation.
· We reviewed internal controls in relation to establishing contents of initial estimated construction costs, and reviewing and approval process of estimated construction
costs by an appropriate approver.
· We reviewed internal control in relation to reviewing and approval process of changing estimated construction costs by an appropriate approver.
D. Measurement of percentage of completion

As explained in the Note 6 to the consolidated financial statements (Construction Contracts), estimated total contract cost was changed due to costs
increases.
In case of the Group’s major construction contracts; such as, offshore plant and drilling rig, it is highly probable that the changes in estimated
total contract cost and unexpected cost may occur. According to these uncertainty of estimated total contract costs, we identified measurement of
percentage of completion as a significant risk.
As of December 31, 2017, in respect of the Group’s estimated total contract costs and aggregated cost incurred that have impacts on the measurement
of percentage of completion, we have performed the following audit procedures.
· We performed analytical review procedures on changes in accumulated cost incurred and estimated total contract costs.
· We determined if there were any contract costs that did not reflect the work performed and excluded from the costs incurred and estimated, and reviewed related
accounting policies.
APPENDIX 90 91
· We compared the percentage of completion in the report submitted to ordering company and percentage of completion based on input method, and inquired about the
reason of the difference.
· We obtained understanding of direct cost allocation policy and tested internal control of cost allocation and transfer for each construction.
· We obtained understanding of indirect expense allocation policy and tested internal control of indirect expense allocation.
· We independently tested the occurrence and timing of cost recognition, which incurred during the year, for each construction contract.
E. Collectability of the gross amount due from customer for contract work
As explained in the Note 6 to the consolidated financial statements (Construction Contracts), the amount of due from customer is significant in level
of overall financial statements as at December 31, 2017.
In case of the Group's major construction contracts; such as, drillship and drilling rig, most of contracts are based on tail-heavy payment term, and
it is probable that the payment may delay due to the customer’s financial status caused by the prolonged decline in the global oil price, and may
results an unavoidable payment term extension. Therefore, we identified collectability of the gross amount due from customer for contract work as a
significant risk.
As of December 31, 2017, in respect of the contact that has a significant increase in the gross amount due from customer for contract work, we have
performed the following audit procedures.
· We reviewed changes in contracts regarding to payment term, deferred penalties, time of delivery and other obligations.
· We reviewed date of maturity in contracts and financial soundness of ordering company.
· We reviewed the management’s estimates for collectability of the gross amounts due from customers for contract works.
F. Accounting treatment for changes in construction

As explained in the Note 3 to the consolidated financial statements (Critical accounting estimates and assumptions), the Group measures total
contract revenue at the initial amount of revenue agreed in the contract;
however, the measurement of contract revenue is affected by a variety of uncertainties that depend on the outcome of future events such as increase
contract revenue due to variations in contract work, claims and inventive payment; or decrease contract revenue as a result of penalties arising
from delay caused by the Group in the completion of the contract. A variation is included in contract revenue when it is probable that the customer
will approve the variation and the amount of revenue arising from the variation or the contract is sufficiently advanced that it is probable that the
specified performance standards will be met or exceeded and the amount of revenue can be reliably measured.
Especially, it is probable that a variation may occur in offshore plant contracts, and there is uncertainty in the measurement of contract revenue due
to frequent change in specification or design, change in construction environment and others; therefore, we identified accounting treatment regarding
variations in offshore plant contract work as a significant risk.
As of December 31, 2017, in respect of accounting treatment regarding variations in contract work, we have performed the following audit procedures.
· We inquired about the Group’s accounting policy for accounting treatment regarding variations in contract work and penalties.
· We tested internal control of the Group in relation to reviewing and approval process of a construction contract by an appropriate approver when there is a variation in
the contract amount.
· We independently tested and confirmed with the ordering company if the variation in the contract amount has obtained an appropriate approval of the ordering company.
· We compared the construction completion date of the contract and that of construction schedule of the Group.
· We confirmed appropriate disclosures were disclosed for the variation made in the contract based on amended contract.
Other Matter
Auditing standards and their application in practice vary among countries. The procedures and practices used in the Republic of Korea to audit such
financial statements may differ from those generally accepted and applied in other countries.
Seoul, Korea
March 14, 2018
This report is effective as of March 14, 2018, 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.
GRI Index
GRI Standards Universial Standards (GRI 100)
Topic Disclosure Contents Page Note

GRI 102 General Disclosure
102-1 Name of the organization 8
102-2 Activities, brands, products, and services 14~19
102-3 Location of headquarters 8
102-4 Location of operations 8~9
102-5 Ownership and legal form 8~9, 27
102-6 Markets served 8~9
102-7 Scale of the organization 8~9
GRI 102: 102-8 Information on employees and other workers 43

Organization Profile 102-9 Supply chain 93
No significant changes in
102-10 Significant changes to the organization and its supply chain 92
organizationand supply chain
102-11 Precautionary Principle or approach 54, 60~61
102-12 External initiatives 32~33
Korea Offshore & Shipbuilding
Association, Korea Industrial
TechnologyAssociation, Korea
102-13 Membership of associations 92
Association ofMachinery Industry,
Korean Association forIndustrial
Technology Security, etc.
GRI 102: 102-14 Statement from senior decision-maker 6~7

Strategy 102-15 Key impacts, risks, and opportunities 10~11
GRI 102: 102-16 Values, principles, standards, and norms of behavior 22~23
Ethics and integrity 102-17 Mechanisms for advice and concerns about ethics 68
102-18 Governance structure 24~25
102-22 Composition of the highest governance body and its committees 24
GRI 102:
102-23 Chair of the highest governance body 24
Governance
102-35 Remuneration policies 25
102-36 Process for determining remuneration 24~25
102-40 List of stakeholder groups 34
102-41 Collective bargaining agreements 43
GRI 102:
Stakeholder 102-42 Identifying and selecting stakeholders 34
Engagement
102-43 Approach to stakeholder engagement 34
102-44 Key topics and concerns raised 34
102-45 Entities included in the consolidated financial statements 8~9
102-46 Defining report content and topic Boundaries 30~31
102-47 List of material topics 30~31
102-48 Restatements of information 77
102-49 Changes in reporting 92 No changes in reporting
GRI 102: 102-50 Reporting period 2

Reporting Practice 102-51 Date of most recent reportt 2
102-52 Reporting cycle 2
102-53 Contact point for questions regarding the report 98
102-54 Claims of reporting in accordance with the GRI Standards 2
102-55 GRI content index 92~94
102-56 External assurance 96~97
APPENDIX 92 93
GRI Index
GRI Standards Topic Specific (Material Topics1))

Creating Safe Workplace
103-1 Explanation of the material topic and its Boundary 30~31
GRI 103:
Management 103-2 The management approach and its components 38~40
Approach
103-3 Evaluation of the management approach 36
GRI 403:
Types of injury and rates of injury, occupationaldiseases, lost days, and
Occupational 403-2 23
absenteeism, and number ofwork-related fatalities
Health and Safety
Reinforcing Customer Satisfaction

GRI 103:
Approach
GRI 417: Marketing 417-2 Incidents of non-compliance concerning product andservice information and labeling 93 No cases of violations
and Labeling 417-3 Incidents of non-compliance concerning marketingcommunications 93 No cases of violations
Strengthening Product and Service Responsibility
GRI 103:
Approach
GRI 416: Customer 416-1 Assessment of the health and safety impacts of productand service categories 47
Halth and Safety 416-2 Incidents of non-compliance concerning the health andsafety impacts of products and services 93 No cases of violations
Compliance Management Practice
GRI 103:
Approach
GRI 205: Anti- 205-2 Communication and training about anti-corruptionpolicies and procedures 67
corrution 205-3 Confirmed incidents of corruption and actions taken 68
GRI 206: Anti-

206-1 Legal actions for anti-competitive behavior, anti-trust,and monopoly practices 93
competitive Behavior
Mutual Growth with Subcontractors

GRI 103:
Approach
GRI 204: Procurement
204-1 Proportion of spending on local suppliers 74
Practices
GRI 414: Supplier

414-1 New suppliers that were screened using social criteria 93
Social Assessment
1) Among the material topics, 'Strengthening market dominance' and 'Undertaking innovation initiatives' are not subject to GRI Standard Topic Specific.
Sanctions Imposed and Countermeasure Taken in 2017

On May 1st, following the safety accident at the Geoje Shipyard, SHI was given an order to halt the entire operations from the Tongyeong Branch under the Busan Regional
Employment and Labor Administration in accordance with Clause 7 of Article 51 of the Occupational Safety and Health Act. SHI undertook safety measures by June 1st and resumed
its operations following the confirmation made by the head of the local labor administration office. SHI had the Ministry of Employment and Labor perform special inspections due
to the accident and was imposed KRW 208 million in penalty and made penalty payment on July 10th. In conformity with Article 35 and Article 38-2 of the Korean Stock Exchange
Disclosure Rules, the Korea Exchange took corrective action against SHI for its failure in complying with disclosure regulations on June 26th for reasons of delayed disclosures
(Jun. 2nd, 2017) on the corrections made on the sales and supply contract signed (Mar. 20th, 2016). SHI was imposed KRW 8 million in penalty and paid the penalty on July 21st.
SHI is operating a range of programs to strengthen employee’s regulatory compliance while tightening internal control standards and providing employee training to abide by
environment and safety regulations. In addition, SHI is raising the bar on its disclosure monitoring to prevent any violation of disclosure-related regulations.
Definition and Assessment of the Organizational Supply Chain

SHI’s subcontractors are categorized into suppliers of raw materials consumed for the construction of ships and offshore platforms and providers of technical work – welding,
electrical work, etc. – required as part of such construction. Raw materials include structural steel, piles, engines, section steel, propellers, and interior/external materials. As of
2017, SHI purchased primary raw materials valued at approximately KRW 24.6 billion. SHI conducts fair assessments on subcontractors every year for their quality, price, delivery,
technical competency, and management competency. Specifically, subcontractors are evaluated for their general management status concerning safety and environmental
management, security management and legal compliance.
GRI Index
GRI Standards Topic Specific (OTHER Topics)
GRI 201: Economic 201-2 Financial implications and other risks and opportunitiesdue to climate change 77
Performance 201-3 Defined benefit plan obligations and other retirement plans 43
GRI 203: Indirect 203-1 Infrastructure investments and services supported 79~81
Economic Impacts 203-2 Significant indirect economic impacts 79~81
302-1 Energy consumption within the organization 77
GRI 302: Energy
302-2 Energy consumption outside of the organization 77
305-1 Direct (Scope 1) GHG emissions 77
GRI 302: Emission
305-2 Energy indirect (Scope 2) GHG emissions 77
GRI 306: Effluents 306-1 Water discharge by quality and destination 76

and Waste 306-2 Waste by type and disposal method 76
404-1 Average hours of training per year per employee 41
GRI 404: Training 404-2 Programs for upgrading employee skills and transitionassistance programs 41~42
and Education
Percentage of employees receiving regular performanceand career
404-3 43
development reviews
APPENDIX 94 95
GHG Emissions Assurance

Statement
SAMSUNG HEAVY INDUSTRIES Co., Ltd.
80, Jangpyeong 3-ro, Geoje-si,
Gyeongsangnam-do, Korea
Verification Scope
Korean Standards Association has conducted reasonable GHG emissions
verification based on GHG report provided by SAMSUNG HEAVY INDUSTRIES Co.,
LTd. which includes Scope1 and Scope2 emissions.
Verification Standards and Guidelines

To conduct verification activities, verification team applied verification standards
and guidelines. The standards and guidelines are as follows.
˙GHG&Energy Target Scheme guideline(2016-255) provided by Ministry of
Environment, Republic of Korea
˙Verification guideline for management of GHG emissions trading scheme(2017-012)
provided by Ministry of Strategy and Finance, Republic of Korea
˙KS Q ISO 14064-1,2,3 : 2006
˙IPCC Guideline.
Verification Conclusion
As a result of verification activities, verification team has found no significant errors.
Therefore, Korean Standards Association confirms that following emissions data
are adequately quantified.
GHG Emissions (unit : tonCO2e)
Year Scope 1 Scope 2 Total

2017 250,236 232,113 482,349
※ There is a difference between the total quantity of GHG emission and the sum of each workplace’s emission.
(Decimal place is not considered when calculating the emission of each workplace.)
March 30, 2018

President of KSA Lee Sang-Jin
Korean Standards Association

Independent Assurance Statement
The Business Institute for Sustainable Development (BISD), led by the Korea Chamber of Commerce & Industry, was requested
by Samsung Heavy Industries to serve as an independent ‘third-party assurance institute’ for the ‘Samsung Heavy Industries
Sustainability Report 2017’ (hereinafter ‘Report’), and submits the assurance statement as follows.
Responsibilities and Independence

The Report contains matters on Samsung Heavy Industries’ sustainable management efforts, achievements and future plans in
2017. All responsibility regarding the preparation of the Report lies with Samsung Heavy Industries.
In conducting assurance procedures on the Report and providing assurance opinions to the board of directors, BISD has no
management-related interests in profits with Samsung Heavy Industries, aside from carrying out third-party assurance, in order
to maintain independence and autonomy.
Assurance Standards and Restrictions

BISD performed a Type 2, Moderate Level assurance in accordance with the AA1000AS(2008) and verified if three accountability
principles (inclusivity, materiality and responsiveness) of the AA1000APS(2008) was applied. In addition, BISD verified if the
Report complied with the Global Reporting Initiative (GRI) Standard.
The scope of the assurance engagement was limited to only those performances stated in the Report and excludes data from previous
years and data reported online. Physical inspection was conducted at the Samsung Heavy Industries located in Geoje, Korea.
Major Assurance Procedures

Major assurance procedures undertaken are as follows:
• Review of compliance with GRI Standard Core option.

• Review of rationality of the materiality test process and core issues
• Review of data management and reporting process through interviews
• Review of basis of core data through inspection
Assurance Opinions
BISD performed the assurance engagement in accordance with Major Assurance Procedures and confirmed that the Report was
written in accordance with GRI Standard Core option.
GRI Topics by core issues of Samsung Heavy Industries are as followings:
Core Issues GRI Topic

GRI 403 Occupation Health 403-2 Types of injury and rates of injury, occupational diseases, lost days, and absenteeism,
Workplace Safety
and Safety and number of work-related fatalities
Reinforcing customer GRI 417 Marketing and 417-2 Incidents of non-compliance concerning product and service information and labelling
satisfaction Labelling 417-3 Incidents of non-compliance concerning marketing communications
Strengthening product GRI 416 Customer Health and 416-1 Assessment of the health and safety impacts of product and service categories
and service responsibility Safety 416-2 Incidents of non-compliance concerning the health and safety impacts of products and services
GRI 205-2 Communication and training about anti-corruption policies and procedures
Practicing compliance GRI 205 Anti-corruption
GRI 205-3 Confirmed incidents of corruption and actions taken
management
GRI 206 Anti-competitive Behavior GRI 206-1 Legal actions for anti-competitive behaviour, anti-trust, and monopoly practices
Mutual growth with GRI 204 Procurement Practices GRI 204-1 Proportion of spending on local suppliers
subcontractors GRI 414 Supplier Social Assessment GRI 414-1 New suppliers that were screened using social criteria
APPENDIX 96 97
BISD confirmed that the Report was written in accordance with AA1000APS principles.
• Inclusivity: Does Samsung Heavy Industries adhere to the principle of stakeholder engagement in order to ensure a responsible and
strategic response in advancing sustainability management?
- Samsung Heavy Industries gathered major concerns and opinions from core stakeholders, including shareholders and investors,
customers, Government, employees, Subcontractors, media, and local communities.
- BISD is not aware of any significant stakeholder groups that were omitted from the Samsung Heavy Industries’ stakeholder
communication channels.
• Materiality: Does Samsung Heavy Industries include material issues that affect stakeholders in the entire spectrum of sustainability
management?
- Samsung Heavy Industries identified core issues through the materiality test.
- BISD is not aware of any significant issues that were omitted from the process.
• Responsiveness: Does Samsung Heavy Industries respond appropriately to stakeholder issues?

- Samsung Heavy Industries has acknowledged the impact of its business activities on stakeholders, responded properly with coherent
actions and presented related performances in the Report.
- BISD confirmed that Samsung Heavy Industries responded properly to stakeholders’ needs and interest on core issues.
Recommendations
BISD makes the following recommendations for future reports and improvement of sustainability level.
• Samsung Heavy Industries is remarkable for reporting the details of crane accident which occurred in 2017 and follow-up activities
through the Report. Furthermore, BISD recommends transparently reporting various activities such as conducting special safety checks
in overseas branches, listening to the voices of major clients, and establishing a Safety Roadmap which are for safety accident prevention
and detailed outcomes.
• Various stakeholders are interested in understanding how Samsung Heavy Industries develops sustainability with aspects to economy,
society, and environment. Thus, it is necessary to identify stakeholder’s interests and establish detailed plans & goals by core issues.
Furthermore, BISD recommends elaborating management sustainability system by reviewing quantitative results and reflecting the result
in the future plan.
• As demand for disclosure of ESG (Environmental, Social, and Governance) information has strengthen, Samsung Heavy Industries’
sustainable business activities will receive greater attention. Furthermore, BISD recommend establishing system of reviewing and
reporting by broadening the scope to overseas branches and business partners. KCCI Signature System
국문좌우조합
May, 2018 영문좌우조합
President Lee Kyung-sang

국문좌우조합 (행사용) 영문좌우조합 (행사용)
국문상하조합 영문상하조합
SHI Establishments in Korea and Abroad
Establishment Address
23, Pangyo-ro 227beon-gil, Bundang-gu, Seongnam City,
Pangyo R&D Center
Gyeonggi Province, South Korea
80, Jangpyeong 3-ro, Geoje City, South Gyeongsang
Geoje Shipyard
Province, South Korea
217, Munji-ro, Yuseong-gu, Daejeon, South Chungcheong
Daeduk R&D Center
Province, South Korea
Ningbo Co., Ltd. Quingshi Industries Zone, Xiaogang Ningbo 315803, China
Rongcheng Co., Ltd. No.39 Lidao town,Rongcheng City 264-200, China
9Th Fl., Churchgate Tower 2, Plot PC 30 Churchgate Street,

SHI MCI-FZE
Victoria Island, Lagos, Nigeria
201301 Logix Cyber Park, Block-B, 1st Floor C-2 & C29, Sec-
India Engineering Center
62, Noida-201301 U.P, India
2017 Samsung Heavy Industries Sustainability Report

This report was prepared by
• Procurement Team • General Affairs Group • Compliance Support Team
• Production Innovation Group • HSE Team • S-EVM Team
• RM Team • Quality Management Team • HR Management Team
• Information Security Department • Mutual Growth Office • Technology Planning Team
• HR Planning Team • Customer Satisfaction • Communications Team
(HR Planning) Group (Planning & Publication)
CONTACT
If you have any questions and/or comments on the 2017 Samsung Heavy Industries
Sustainability Report, please contact the Communications Team as follows.
SHI Communications Team

Phone_ +82-55-630-3693 Fax_ +82-55-630-5989
E-mail:_ hongbo.shi@samsung.com

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CONTENTS

SHI’s VALUE CREATION

Samsung Company Profile

Heavy Product Portfolio

Industries Value Creation Results

CORPORATE SOCIAL RESPONSIBILITY

Total Area 4 million m²

* Offshore Floating Dock

Based on the strength we have gained by overcoming obstacles

Since its establishment in 1974, Samsung Heavy Industries

Company Name Samsung Heavy Industries Co., Ltd.

Domestic Worksite Overseas Subsidiary Overseas Office

Overseas Subsidiary Overseas Office

BUSINESS RESULTS and

2017 Business Performance

Consolidated Financial Information in Summary (Unit: KRW Million)

2015 2016 2017

2017 Orders and Order Backlogs

2018 Market Outlook

2018 Strategic Directions

The business landscape is expected to improve in 2018 as macro-economic

There are prolonged delays in market recovery while competition is

Shipbuilding and Offshore Business

Common Process for Both Shipbuilding and Offshore

1 Design 2 Steel Cutting 3 Assembly 4 Outfitting Design 5 Painting

6 Loading 7 Launching 8 Quay Work 9 Commissioning 10 Naming Ceremony

Offshore Plant Process

Under construction: 14 vessels Delivered: 103 vessels

2017 Achievements in Winning LNG Carrier Orders

LNG FSRU (LNG Floating Storage Regasification Unit)

Under construction: 3 vessels Delivered: 7 vessels

Under construction: 34 vessels Delivered: 383 vessels

Artic Shuttle Tanker

Under construction: 1 vessels Delivered: 9 vessels

Under construction: 7 vessels Delivered: 384 vessels

2017 Achievements in Winning Container Ship Orders

Very Large Ethane Carrier (VLEC)

Under construction: Zero Delivered: 6 vessels

Under construction: Zero Delivered: 9 vessels

Floating LNG (FLNG)

Under construction: 2 vessels Delivered: 1 vessels

2017 Achievements in Winning FLNG Orders

Floating, Production, Storage, and Off-loading (FPSO)

Under construction: Zero Delivered: 16 units

2017 Achievements in Winning FPSO Orders

Floating Offshore Structure (TLP/Semi-Submersible/SPAR)

Under construction: 2 units Delivered: 17 units

Fixed Offshore Platform

Under construction: 3 vessels Delivered: 17 units

Under construction: 5 vessels Delivered: 58 vessels

Under construction: Zero Delivered: 2 units

Field Development Ship (FDS)

Under construction: Zero Delivered: 2 vessels

Wind Turbine Installation Vessel (WTIV)

Under construction: Zero Delivered: 3 vessels

S-Fugas S-Reli S-Regas

SAVER-Stator-D Offshore Project Orbital Pipe

Membrane-Type Cargo Onboard Economical/Safe SAVER Air

Drawingless Yard Digital Twin Engineering Data Change

Value Creation Factors

Components of Value Creation

Management Directions Impacts of Value Creation

Major Types of Capital That