samsung heavy industries

Samsung Heavy Industries Annual Report 2009

Sam

sung Heavy Industries A

nnual Report 2

00

9

SAmSung HeAvy InduStRIeS

CORPORAte HeAdQuARteRS

Samsung Life Insurance Seocho Tower 1321-15,

Seocho-Dong, Seocho-Gu, Seoul, 137-857, Korea

Tel: 82-2-3458-7000

geOJe SHIPyARd

530, Jangpyeong-Dong, Geoje-Si,

Gyeongsangnam-Do, 656-710, Korea

Tel: 82-55-630-3114

www.shi.samsung.co.kr

2 Samsung Heavy Industries Annual Report 2009 1Embracing the Challenge

02 CommittedtoInnovation

04 FinancialHighlights

05 AtaGlance

06 MessagefromtheCEO

10 BoardofDirectors

21 CommittedtoExcellence

28 BusinessOverview

41 CommittedtoaBetterWorld

47 FinancialStatement

94 GlobalNetwork

95 InvestorInformation

Contents

Leadershipforthecomingyearandthelong-termreliesonaccurately

identifyingfast-movingopportunitiesandrespondingwiththe

innovativetechnologiesandsystemsthatwillcontinuetodifferentiate

ourhigh-valueshipsandworld-classproducts.Thekeytofuturebold

achievementsisourvisionforGreenManagement,whichissupported

byourcorporatephilosophyofrespectingpeopleandnature.Designed

toprotecttheplanetaswellasgrowourbusiness,thepioneeringSHI

GreenManagementpolicywillleadtheglobalmarketbydeveloping

eco-friendlyproductsandtechnology.Wewillhelptoreduce

greenhousegasemissions.Wewilldrivegreenmanagementpolicies.

SHIintendstobuildabettertomorrowandatrulyglobalsociety.

We are pushing the limits of the imagined future

2 Samsung Heavy Industries Annual Report 2009 3Embracing the Challenge1CREAtIvE And ContInuouS InnovAtIon wIll lEAd

tHE wAy to bREAktHRougH pRoduCtS And tECHnologIES.

Committedto

InnoVAtIon


Financial Highlights At a glance

2009 2008 2007

operating Results (in millions of Korean won)

Revenue 13,094,944 10,664,465 8,519,066

Operatingincome 793,631 755,331 457,245

Incomebeforeincometaxes 854,757 842,326 658,542

NetIncome 669,855 627,343 485,386

CAPEX 721,035 1,002,793 626,372

Balance sheet (in millions of Korean won)

Totalassets 20,187,524 26,084,117 10,560,624

Cashandmarketablesecurities 1,085,266 2,489,905 2,595,869

Totalliabilities 17,346,963 23,760,015 8,750,700

Interest-bearingdebt 2,779,953 158,154 132,059

Shareholders’equity 2,840,561 2,324,102 1,809,924

Financial Ratios (%)

Netoperatingmargin 6.1 7.1 5.4

Netincomemargin 5.1 5.9 5.7

Debt-to-equity 97.9 6.8 7.3

Returnonequity 23.6 27 26.8

Returnonassets 3.3 2.4 4.6

shareholder structure (%)

Relatedparties 24.25 24.25 24.25

Treasurystock 6.55 6.67 5.9

Foreign 20.10 18.85 28.81

Institutional 13.90 16.77 10.04

Individual 35.20 33.46 31.00

(*)Debt-to-equityratio=Interest-bearingdebt/Shareholders’equity

ReVenue In millions of korean won

2009

2008

2007

opeRAtIng InCome In millions of korean won

793,631

755,331

457,245

2009

2008

2007

totAl Assets In millions of korean won

2009

2008

2007

13,094,944

10,664,465

8,519,066

20,187,524

26,084,117

10,560,624

shAReholdeRs’ equIty In millions of korean won

2009

2008

2007

2,840,561

2,324,102

1,809,924

In2009,despitetherecessionaryclimateanddepressedshipbuildingmarket,

SamsungHeavyIndustriessuccessfullymetthechallenges.Werecordedhistoricresultsof

KRW13.095trillioninrevenue,KRW854.8billionpretaxprofitandKRW669.9billionnetincome.

usd 41 billion 100% 210

In2009,worldwideshipbuilding

ordersdroppedto33millionDWT,

thelowestlevelin18years.SHI

annualorderswereUSD1.4billion,

butbyyear-end,theSHIorder

booktotaledUSD40.7billionfor

183ships,whichaccountsfor34

monthsworthoffutureoperation.

InJanuary2009,SHIwonanorder

fromaEuropeancompanyforthe

newtypeofLNG-FPSOvessel,

valuedatUSD680million.Withfour

previousordersin2008fromUK-

basedFLEXLNG,SHIcommands

100%ofLNG-FPSOmarketshare.

SHIsetazero-tolerancequality

controlpolicyin2005.Sincethen,

SHIhasdeliveredanunprecedented

210zero-defectships.Therecordis

aresultofcontinuousinnovationand

qualitypoliciesandsystems,such

astheSamsungQ-MarkCertificate,

whichfostersqualityassurance

amongpartnersandvendors.

lng-sRV Cruise ship Atlântico sul shipyard

InNovember2009,SHIcompleted

thefirsteco-friendlyLNGShuttle

andRegasificationVessel(LNG-

SRV).Designedtoregasifyon-board

anddeliverdirectlytoportwithout

pollutingseawaterordisruptingsea

mammals,thisistheonlyshipof

itskindpermittedtotravelunder

theNorthAmericanregion’sstrict

environmentalregulations.

InNovember2009,SHIsecured

aLetterofIntent(LOI)agreement

tobuildtheUSD1.1billionUtopia

cruiseshipforaUS-basedowner

andoperator.Thenew-concept,

condo-styleshipwillcombine

leading-edgeconstructionwithhigh-

fashionarchitecturaltechnologies.

Akeel-layingceremonyin

September2009celebratedthe

firstshiptobebuiltatAtlânticoSul

Shipyard,theBrazilianshipyard

selectedasaSHIstrategicpartner

in2006.SHIownsa10%stakein

AtlânticoSulShipyard.

2.5mW hybrid quay Wall Xailorstar

InMay2009,SHIannounced

successfulentryintotheUSwind

powergeneratormarketbywinning

orderstobuildthree2.5MWwind

turbinesinTexas.SHIhasalready

deliveredandinstalledthefirstof

these,alsoafirstevertobeexported

fromKorea.

TheHybridQuayWallisafloating

containerterminalwithadvanced

technologydevelopedbySHI

thatpermitscargohandlingon

eithersideofVeryLargeContainer

Ships(VLCS).Thistechnological

breakthroughspeedsloadingtime

andlowersshippingcosts.

SHIlaunchedXailorStar,an

advancedintegratedbridgesystem

forvesselnavigation.Designed

tomeettheneedsofaone-man

bridgeoperation,thesystemuses

radar,electronicchartdisplayand

multifunctiondisplaytooptimize

navigationalsafetyandcosts.


to ouR VAlued CustomeRs,

shAReholdeRs And BusIness pARtneRs

First, Iwould like tooffermyheartfeltappreciation foryourcontinuingsupportandconfidence in

SamsungHeavyIndustriesCo.,Ltd.(SHI).

Asyouareaware,thecollapseoftheglobalfinancialindustryandthesubsequentworldwidereces-

sionbroughtaboutdifficultchallengesforSHIoverthepastyear.SHIexperiencedaradicalreduction

ofordersreceived,causingsomedelaysinourscheduledpayments.Shipdeliverieswerepostponed

asaresultofthepurchasers’inabilitytoobtainadequatefinancing.Atthesametime,SHIfaceda

substantialriseinthecostsoflabor,rawmaterialsandshipbuildingconstruction.

Despite thechallengingenvironment,however, I amproud toannounce thatSHI realizedall of

thebusinessgoalssetfor2009.Inadditiontomeetingourgoals,SHIalsoachievedsomehistoric

breakthroughs.

Firstandforemost,SHIsecuredlong-termordersfromRoyalDutchShell,aglobalenergyandpetro-

leumcompany,toconstructlargeLNG-FPSOsoverthenextfifteenyears.Thisdealnotonlybolsters

SHI’smarket sharebut alsofirmlyestablishes thecompany’s globaldominance in theemerging

LNG-FPSOmarket.Second,SHIwasselectedtobuildanexciting,new-conceptluxurycruiseship,

whichisafirstforaKoreanshipbuilder,andrepresentsfurtherentryintoamarketthatSHIhaslong

pursued.Third,SHIcompletedthefirsteco-friendlyLNGShuttleandRegasificationVesselthatis

designedtoregasifyon-boardanddeliverdirectly toportwithoutpollutingseawaterordisrupting

seamammals.Suchbrilliantsuccessinhigh-endspecialtyshipbuildinghasgeneratedworldwide

recognition for SHI’s technological prowess and underscores our ongoing commitment to green

managementpolicies.

SHIcontinuestoinvestininnovativeresearchanddevelopmentthatwillincreaseitsabilitytoattract

additionalbusiness,producehigh-qualityproductsandmaintainindustryleadership.Byapplyingthe

expertisehonedinshipbuildingandconstruction,SHIhasachievedremarkableprogressinthewind

turbinebusiness,asdemonstratedbythefactthatitsrigorousinternationalsaleseffortsresultedin

SHIbecomingthefirstKoreancompanytoexportawindpowergenerator.Inaddition,theEngineer-

ing&ConstructionDivisionwasawardednotableordersinthepublicsector,includingtheYoungsan

RiverRejuvenationProjectandtheSeoul-IncheonCanalProject.

Message from the CEo


In2009,asaresultofthecreativityanddedicationofemployeesacrossourdivisions,SHIrecorded

historicresultsofKRW13.095trillioninrevenue,KRW854.8billionpretaxprofitandKRW669.9

billionnetincome.Thankstothatoutstandingperformance,SHI’sshareholdersarereceivinga10%

cashdividendthisyear.

AntICIpAtIng suCCess In 2010

Theglobaleconomyispredictedtograduallyrecoverin2010,althoughwecertainlyforeseeongo-

ingchallenges.Forinstance,defaultrisksinEuropeanUnioncountriessuchasGreece,Spainand

Portugalpresentlingeringconcerns.Theshipbuildingindustrycontinuestoconfrontatoughmarket

environment,experiencingreducedordersandfinancialinstabilityamongshipowners.

Inresponse,SHIhaspreparedfortheunsettledenvironment.SHIisdeterminedtoclearthecoming

hurdlesandtostrengthenitsplatformforgrowthbyfocusingonseveralkeyobjectives.

First,SHIwillaggressivelyexpand thedevelopmentof its technologyandproduct lines.Thepath

toovercomingthecurrentcrisisunquestionably lies incost-efficientandinnovativetechnology.By

continuouslysharpeningitsproprietarytechnology,SHIwillgrowitsglobalproductsandbusinesses.

Withthat inmind,SHIintendsto leadtheindustry inproducingenvironmentallyfriendlyproducts

andtoreducegreenhousegasemissions.InJanuary2010,SHIwasthefirstglobalshipbuilderto

unveilgreenmanagementpoliciesthatofferedadetailedvisionforthefuture, including(1)build-

ingeco-friendlyshipswithupto30%lessgreenhousegasemissionsby2015;(2)developinggreen

workplacesandgreenworldwidenetworks;and(3)developingzero-energyhouses.

There’slittledoubtthatthegreeneconomyrepresentsthegrowthengineofthecomingage,andthat

SHIisreadytoembracetheserapidchangesandmaintainitspositionattheforefrontoftheindustry.

Second,SHIisequallydedicatedtoencouragingacreativeorganizationalculture.Asaworld-class

company,SHIrecognizesthatitsuniquecorporatecultureisthewellspringforfuturegrowth.

Acrossdivisionsandlocations,SHIwillcontinuetonourishacreativeculturethatencouragesem-

ployeesateveryleveltopursueinnovationandtoembracechallenge.SHIwillrewardteamworkand

rigorouscollaborationas itstrivestoachieveitsgoals. Intheupcomingyear,employeesarebeing

specificallytaskedwithcost-savingideasandwithdevelopinglong-termperspectivesthatpromote

win-winpartnershipswiththemanagementofSHI.

Third,wearecommittedtoprovidingahealthfulandsafeworkenvironment.

SHI’seffortstoovercomethecurrentfinancialcrisis,andthechallengesthatstemfromit,requirea

returntothefundamentalsandtohavingfaithinSHI’sguidingprinciples.SHIisdedicatedtoquality

andsafety-firstmanagement.SHIwillupholdstrictstandardstomaintainanincident-freeanddefect-

freeworkenvironment.

SHIbelievesthatthebestwaytogrowitsbusinessandretainitscompetitiveedgeistosatisfyitscus-

tomersandmaintaintherespectandtrustofitsemployees.

eXCeedIng eXpeCtAtIons

Overthecourseofthepasttwoyears’economicdifficulties,SHIhascontinuedtogrowandlearned

toprosperduringdifficulttimes.SHIismindfulofthechallengesthatlieahead,andconfidentthatit

hashonedtheskillsandthemindsettoconquerthosechallenges.

Iaskallofyou—shareholders,customersandemployees—tocontinueyoursteadfastsupportfor

SHI,andtobelieveinourdailyandstrategiccommitmentstosafetyandquality.Withyourunwavering

careandsustenance,SHIwillrealizeitsgoalsforthecomingyear.Wearededicatedtobecomingthe

world’sleadingshipyard.

Thankyou.

In-Sik Roh PresidentandChiefExecutiveOfficer

10 Samsung Heavy Industries Annual Report 2009 11Embracing the Challenge 11

the samsung heavy Industries Board of directors is committed to complying with all

laws and ethical standards, and to maintaining a transparent organizational culture.

As a socially responsible global company, we respect our customers and employees,

and we care for health, safety and the environment.

TheSamsungHeavyIndustriesBoardofDirectorsreviews,analyzesandexecutesmajormanage-

mentissuesregardingbasicpoliciesandoperations,withtheexceptionofdecisionsmadeatGeneral

MeetingsbasedontheBylawsandArticlesofIncorporationofthecompany.

TherearesixmembersoftheBoardofDirectors,ofwhichtwoareSamsungexecutivedirectorsand

fourareindependentofthecompany.Thetermofofficeforeachdirectoristhreeyears.Directors

support theCEOandare responsible for specific tasksdeterminedby theBoard, including serv-

ingonBoardcommittees.ThesecommitteesincludetheAuditCommittee,responsibleforauditing

companymanagement,accounting,financialstatus,andforreportingonsuchmattersatmeetings.

TheAuditCommitteeconsistsofthreeindependentdirectors.

TheChairmanoftheBoarddetermineswhenmeetingswillbeheldandchairsthemeetingsofthe

Board.Decisionsaremadebymajorityvoteoftheparticipatingdirectors.Atleastfourdirectorsmust

bepresenttoconstituteaquorum.

TheChiefExecutiveOfficerisnominatedbytheBoard.TheCEOexecutesdecisionsandmanages

theoveralloperationsofthecompany.

Thebusinessof theBoard includescalling forGeneralMeetings,changes inmanagementpolicy,

alterations in organizational structure or regulations, issuing new stock or company bonds; and

overseeingallloansandinvestments.

TheBoardofDirectors is committed to complyingwithall lawsandwith theprinciplesof ethical

practicesbyupholdingthecompany’sstatedstandardsofmaintainingaclearorganizationalculture;

respectingcustomers,shareholdersandemployees;actingwithconcernforhealth,safetyandthe

environment;andbeingasociallyresponsibleglobalcorporatecitizen.

board of directors

1 In-sik Roh ·President,ChiefExecutiveOfficer

2 seo-yoon Kim·ExecutiveVicePresident,

Construction&EngineeringDivision

3 hang-shoon Choi·OutsideDirector

·Professor,DepartmentofNavalArchitectureand

OceanEngineering,SeoulNationalUniversity

4 suk-hwan park ·OutsideDirector

·FormerPresident,JungbuRegionalTaxOffices,

NationalTaxService

5 Chan-soon nam ·OutsideDirector

·Director,TheFoundationforBroadcastCulture

6 dong-hyo Kwak ·OutsideDirector

·Attorneyatlaw,HwangMokParkP.C.,

FormerChiefJudgeatthePatentCourtofKorea

54 6

1 2 3


Greentechnologyshipbuildingwillpilottheindustriesofthefuture.

SamsungHeavyIndustriesisdedicatedtoprotecting the environment and to supporting growth with responsibility.

Wedevoteourhumanresourcesandtechnologytocreatesuperiorproductsandservicesthatcontribute to a better global society.


Continuous Innovationfuelsthehighestlevelsofourachievement,ensuringqualityforourproductsandcost-savingefficienciesforcustomers.

Wearesystematicallyhoningourresearch capabilitiesanddevelopingpioneeringtechnologiesthatanticipate the market and better serve customers.Ourworld-classleadershipis

builtonsmartandsystematicresearchanddevelopment.


health, safety & environmental considerationsformthecorevaluesofmanagementforSamsungHeavyIndustries.

Wearedrivingcorporatevalueandbuildingabetterfuturebycreating workplacesthataresafe, wholesome and environmentally sound.

Bymanagingsafeandeco-friendlyworkplaces

wearebuildingourbusinessandvaluingouremployees.


top qualityisthehallmarkofourcompanyandourgoals.Weupholdazero-tolerancepolicyfordefectsandalwayskeepcustomerstopofmind.Supportedbyaculturethatrewardsquality,SamsungHeavyIndustriesprovidesbest-in-class products and service.

Weaimtoenhanceourbrandvaluebyproducing

superiorproductsandservices.

20 Samsung Heavy Industries Annual Report 2009 2222Committed to

EXCELLENCESAMSUNG HEAVY INDUSTRIES IS

REINVENTING THE IDEA OF POSSIBLE.

With a focused vision for a brighter future for all, we will expand our technology and product lines. We will develop a creative organization that pursues innovation. We will manage incident-free and defect-free workplaces. And we will build on our history of success to satisfy customers and deepen our corporate value.


dRIllshIpAhigh-techoffshoredrillingfacility,the

drillshipcanaccesscrudeoilandgas

fieldsindeepseasthatareinaccessible

byconventionalplatforms.Thedrillship

integratesadvancedtechnologies,exceptional

mobilityandstablepositioninginextreme

conditions.Theshipis228meterslong,with

adisplacementof97,000tonsandcandrill

asdeepas11kilometers.

Asdeep-seadrillingexpandsandenvironmentalregulationstighten,SHIisstrengtheningitspioneeringroleasanindustry

leader.Wearethetopdrillshipbuilder,witha63%marketshareand29outofthe46drillshipsorderedworldwidesince

2000.InNovember2009,weconfirmedouradvantagebycompletingthefirsteco-friendlyLiquefiedNaturalGas-Shuttleand

RegasificationVessel,anewtypeofshipthatcanregasifyLNGatseaanddeliverdirectlytoport.

WIth ContInuous BReAKthRoughs In AdVAnCed teChnology,

shI leAds the hIgh-end shIp mARKet

kyoung-Hoon lee Manager | offshore pM team 2

“ Everyone here works to be the best. that pride makes such

a difference in the innovations we keep developing, from

drillships to the world’s leading offshore platform and

high-end ships.”

Samsung Heavy Industries Annual Report 2009 Embracing the Challenge22 23

lng-sRVAnewtypeofvesselthatcanregasifyLNGat

seaanddeliverdirectlytoland,theLiquefied

NaturalGas-ShuttleandRegasificationVessel

alsouseseco-friendlytechnologytoreduce

noxiousgasemissionsbyupto92%.SHI’s

LNG-SRVistheonlyshipofitskindpermitted

totravelundertheNorthAmericanregion’s

strictenvironmentalregulations.

Asdeep-seadrillingexpandsandenvironmentalregulationstighten,SHIisstrengtheningitspioneeringroleasanindustry

leader.Wearethetopdrillshipbuilder,witha63%marketshareand29outofthe46drillshipsorderedworldwidesince

2000.InNovember2009,weconfirmedouradvantagebycompletingthefirsteco-friendlyLiquefiedNaturalGas-Shuttleand

RegasificationVessel,anewtypeofshipthatcanregasifyLNGatseaanddeliverdirectlytoport.

WIth ContInuous BReAKthRoughs In AdVAnCed teChnology,

shI leAds the hIgh-end shIp mARKet“ Everyone here works to be the best. that pride makes such

a difference in the innovations we keep developing, from

drillships to the world’s leading offshore platform and

high-end ships.”

kyoung-Hoon lee Manager | offshore pM team 2

Samsung Heavy Industries Annual Report 2009 Embracing the Challenge 2524

lng-FpsoSHI’snew-concept,LiquefiedNatural

Gas-FloatingProductionStorageOffloading

eliminatestheneedforcostlyin-land

liquefactionandstoragefacilities,andis

customizedforsmallandmedium-sized

offshoregasfields.Wereceivedordersfor

fiveLNG-FPSOsby2009andalsowillbe

supplyinglargeLNG-FPSOstoRoyalDutch

Shelloverthenext15years.

Thefutureofshipswillbebuiltonadvancedandeco-sensitivetechnologies.SHIhasmetthischallengebydevelopingcom-

plexnewshipsandplatformsthatpreservetheplanet,saveenergyandcostlesstooperate.OurLNG-FPSOsproduce,liquefy,

storeandtransferLNGatsea.Withordersforfiveunits,SHIhaswon100%marketshare.Wehavedevelopedtheworld’s

firsttwo-wayArcticshuttletankertonavigateinextremeconditions.SHIalsobuilttheworld’stwolargestoffshoreplatforms.

smARt InVestments In R&d pRoduCe

shI’s WoRld-FIRst, Best-oF-ClAss shIps And plAtFoRms

deog-Jin Ha Senior Manager | project planning team 2

“ Coming up with exciting concepts and then battling through

the challenges to develop those ideas into new products that

defy the industry traditions and create new markets – that’s

why we come to work every day.”


oIl tAnKeRConstructedtocomplywithworldwide

regulationstopreventseapollution,

SHIcrudeoiltankersareincreasinglyin

demand.In2007,wedeliveredanArctic

shuttletankerthatcanbreakiceataspeed

of2.8knots.Thetwo-wayArcticshuttle

tankeralsocanendureextremeconditions

attemperaturesaslowas-45Celsius.

FIXed plAtFoRmInstalledatafixedlocation,anoffshore

platformallowsresourcedevelopmentin

shallowseaareas.Fixedplatformscome

invarioustypes,suchasconcretegravity,

jacket,guyedtowersandjack-uprigs.We

deliveredtheworld’stwolargestoffshore

platformstoRussia’sSakhalinEnergy

InvestmentCompany.

ContAIneR shIpIn1999,when5,000TEUwasthenorm,

SHIdevelopedtheworld’sfirst6,200TEU

containership.Wefollowedwitheven

largercontainers,developinga16,000

TEUshipby2007.Weleadthemarketin

ultra-largecontainers,winning56of200

worldwideordersintheover-10,000TEU

classofcontainerships.

lng CARRIeRDesignedtotransportliquefiednatural

gas,LNGcarriersarehighvalue-added

shipswithspeciallystructuredcargosthat

canmaintainextremelylowtemperatures.

SHIleadsthehigh-endLNGmarket,with

a33%globalmarketshare.Since2003,

wehavewon62ofthe186worldwide

LNGorders,thehighestintheindustry.

Thefutureofshipswillbebuiltonadvancedandeco-sensitivetechnologies.SHIhasmetthischallengebydevelopingcom-

plexnewshipsandplatformsthatpreservetheplanet,saveenergyandcostlesstooperate.OurLNG-FPSOsproduce,liquefy,

storeandtransferLNGatsea.Withordersforfiveunits,SHIhaswon100%marketshare.Wehavedevelopedtheworld’s

firsttwo-wayArcticshuttletankertonavigateinextremeconditions.SHIalsobuilttheworld’stwolargestoffshoreplatforms.

smARt InVestments In R&d pRoduCe

shI’s WoRld-FIRst, Best-oF-ClAss shIps And plAtFoRms“ Coming up with exciting concepts and then battling through

the challenges to develop those ideas into new products that

defy the industry traditions and create new markets – that’s

why we come to work every day.”

deog-Jin Ha Senior Manager | project planning team 2


WInd tuRBIne BusInessIncreasinglypopular,windturbinegenerators

convertwindenergyintoelectricityandare

keytogreenenergysourcesinthecoming

age.Utilizingitsexpertiseinshipbuilding,

constructionanddigitaltechnology,SHIis

producing2.5MWin-landand6MWClass

offshorepowergenerators,and,by2015,

expectstohold10%ortheseventhlargest

marketshare.

Alerttorelevanttrends,SHIisexpandingintonewmarkets.In2009,weutilizedourknowledgeofbladestoenterthewind

powergenerationbusiness.Already,we’vedeliveredthefirst2.5MWwindturbineeverexportedfromKorea.Weexpecta10%

(USD6billion)marketshareby2015.OursuccessinthepassengershipmarketresultedinaLOIagreementtobuildaluxury,

condo-stylecruiseship.In2009,wealsodevelopedtheworld’sfirstfloatingcontainerterminalquay,theSHIHybridQuayWall.

We leVeRAge ouR eXpeRtIse And hIgh-quAlIty pRoduCts to

AggRessIVely VentuRe Into neW mARKets

In-Ho Cho Manager | wind Marketing team

“ In less than a year, we developed the technologies and the

market for wind power. It’s great to be part of a team that

embraced the future of clean, affordable energy and turned

it into reality so quickly.”


CRuIse shIpSinceformingitsPassengerShipTeamin

1997toenterthecruiseshipmarket,SHIhas

woneightordersforlargepassengerships.

In2009,wesignedaLetterofIntent

agreementvaluedatUSD1.1billiontobuilda

premium,new-conceptcruiseshipforUtopia,

aUS-basedcruiseowner.Theresidential-type

shipwillcombineleading-edgeshipbuilding

andarchitecturaltechnologies.

hyBRId quAy WAllAhighlyefficientalternativeforcargohandling

fromVeryLargeContainerShips(VLCS),

theSHIHybridQuayWallisafloatingcontainer

terminalthatoffersoutstandingmobility.

Itswallcanbemovedtoeithersideofaship

inport,allowingforcargohandlingfromboth

sides.TheSHIHQWcutscargohandlingtime

bymorethan20%andreducesshippingcosts.

Alerttorelevanttrends,SHIisexpandingintonewmarkets.In2009,weutilizedourknowledgeofbladestoenterthewind

powergenerationbusiness.Already,we’vedeliveredthefirst2.5MWwindturbineeverexportedfromKorea.Weexpecta10%

(USD6billion)marketshareby2015.OursuccessinthepassengershipmarketresultedinaLOIagreementtobuildaluxury,

condo-stylecruiseship.In2009,wealsodevelopedtheworld’sfirstfloatingcontainerterminalquay,theSHIHybridQuayWall.

We leVeRAge ouR eXpeRtIse And hIgh-quAlIty pRoduCts to

AggRessIVely VentuRe Into neW mARKets“ In less than a year, we developed the technologies and the

market for wind power. It’s great to be part of a team that

embraced the future of clean, affordable energy and turned

it into reality so quickly.”

In-Ho Cho Manager | wind Marketing team


BusInessovERvIEw

we create world-class, world-first

vessels, designs, technologies,

residential communities and industrial

facilities. thriving on challenge and

innovation, SHI is the top high value-

added shipbuilder, the leading producer

of offshore facilities and a major

player in domestic construction and

engineering. last year, with an eye on

the winds of change, SHI also entered

the wind power business and, already,

our turbines are fueling the future.

In the current unsettled climate, SHI is

expertly poised to lead, to grow and to

excel. we embrace the spirit of joyful

possibility.

SHI’sgrowth-leadingbusiness,theShipbuilding

unitistheworld’sNo.1high-valuespecial

shipbuilder,focusingontankers,LNGcarriers,

containersandpassengerships.Weoffer

technologicallycompetitive,highqualityand

environmentallyfriendlyvesselsfortheworldwide

shippingindustry.

Atrendsetterintheconstructionanddesign

ofoffshorefacilities,includinggasandoil

productionsystems,drillshipsandrigs,SHI

Offshorehasexperiencedremarkablegrowthand

achievements.Itsproductshavewonworldwide

recognitionfortheirstellarperformance,

stabilityandreliability.

shIpBuIldIng oFFshoRe FACIlItIes

TheE&Cunitdesignsandbuildspremiumliving

spaces;research,sportsandindustrialfacilities;

shippingports;office,educationandhospitality

complexes;andurbaninfrastructure,suchas

roads,bridgesandsubways.TheDivisionhas

rackedupnumerousdesignawardsand

areputationforaccident-freeconstruction.

engIneeRIng & ConstRuCtIon

Lastyear,SHIadvancedintothewind

powerbusinessbyharnessingour

knowledgeandtechnologiesinshipbuilding

andoffshorebusiness.Wehavedeveloped

a2.5MWonshorewindturbinegenerator

andaredevelopinga6MWClassoffshore

windturbine.

WInd poWeR BusIness

Intheageofincreasingandubiquitousdigital

convergence,theDigitalBusinesspursues

advancedautomationanddigitalsystems

forvessels,homes,buildingsandindustrial

facilities.Weleverageexpertisebymaximizing

cross-divisionsynergiesandbyintegratingour

pioneeringtechnologyacrossallunits.

dIgItAl BusIness


CRestIng the mARKet ChAllenges

Amidtheeconomicdownturnin2009,annualworldwideordersfornewshipstalliedonly33

millionDWT,downfrom96.2millionin2008,whichwasthelowestinnearlytwodecades.

Inturn,newordersforSHIin2009totaledonlyUSD1.4billion.However,byyear’send,

SHIheld34months’worthofbacklogorders,valuedatUSD40.7billion,thehighestinthe

industry.Morethaneightoutof10(81%)ofthoseorderswereforhigh-valueaddedships,

includingdrillshipsandLNG-FPSOs(LiquefiedNaturalGas-FloatingProductionStorage

Offloading).

HighlightsoflastyearincludeordersforLNG-FPSOsthatgiveSHIanunprecedented100%

marketshareforthisnewtypeofvessel.SHIalsoisexclusivelyprovidingRoyalDutchShell

withlargeLNG-FPSOsoverthenext15years.Webecamethesolecontractortobuildalux-

ury,condo-stylecruiseshipforUtopia,aUS-basedcruiseoperator,inanagreementvalued

atUSD1.1billion.

Since1974,SHIhasattractedordersfor855shipsfromworldwideshippers.Todate,we

havedelivered672ships.In2005,SHIimplementedazero-tolerancepolicytoensurequal-

ityand,sincethen,wehavedelivered210defect-freeships,arecordunmatchedbyother

globalshipbuilders.TheSamsungQ-MarkCertificatecertifiesourpartnersandvendorsand

nowisatrustedbrandofquality.

InVestIng In InnoVAtIon

Advancedtechnologycontinuestodriveoursuccessandsharpenouredge.SHIleadsthe

marketinLNGcarriers,witha33%globalmarketshare.Attheendof2009,weheldorders

for62carriers,bringingtotalorderssince2003to186suchships,theindustry’sbest.We

alsoareactivelydevelopingnewkindsofships.

InNovember2009,wecompletedaneco-friendlyLNG-SRV(LiquefiedNaturalGas-Shuttle

andRegasificationVessel).TheLNG-SRVcanregasifyon-boardanddeliverdirectlytoport

withoutpollutingseawaterordisruptingseamammals.

AsdemandforArcticOceanoilincreases,in2007,SHIcreatedtheworld’sfirsttwo-wayice-

breakingshuttletankerthatcombinesanicebreakerandanoiltanker.Moreexpensivethan

aconventionaltanker,theSHIshipcanmovethroughthickice,seekanewcoursewhen

encounteringanicebergandperforminextremecold.

ReInVentIng the FutuRe

Weconsistentlysatisfyclientneedsbyimprovingproductivityandinvestinginresearch

andtechnologicaldevelopment.TheSamsungShipModelBasin(SSMB)boastsoneofthe

world’slargestcommercialtowingtanks:400meterslong,14meterswideand7meters

deep.Testscarriedoutinthetankbolsterthesafety,superiorityandcomfortofourvessels.

Forward-thinkingR&Dsparkedthedevelopmentofultra-largecontainerships.Forthepast

decade,SHIhasconsistentlyoutstrippedcompetitorsbyproducinglargerandbettercon-

tainers.SHInowleadstheindustryinordersforultra-largecontainers.

SHIdevelopedasmall,simpledevice,theSAVERFin(SamsungVibrationandEnergy

ReductionFin)toreducefuelconsumptionby3%to5%anddecreasehullvibrationlevels

asmuchas70%.Inaddition,SHIhasachievedtheworld’shighestautomationrateof65%

bydevelopingarangeofrobotictechnologiesthatcutcostsandtimebyautomatingthe

processes,includingspiderweldingrobot,triplexrobot,pipeinspectionandcleaningrobot

andvacuum-blastingrobot.

shIpBuIldIng the leading business for SHI, the Shipbuilding and offshore division is the world’s

no. 1 high-value special shipbuilder, focusing on tankers, lng carriers, containers

and passenger ships. we harness long-standing expertise and continuous investments

in technology, processing techniques and new products to deliver the highest quality

in shipbuilding, offshore facilities and cutting-edge digital technologies.

seA smARt

In the face of the worldwide economic downturn, the Shipbuilding division is astutely piloting

toward growth and innovation. In 2009, despite tough market conditions, we secured long-

term orders for lng-FpSos and were selected to build a luxury cruise ship. with foresight

for the future, SHI became the first shipbuilder in the world to declare a detailed vision for

environmentally friendly products. our new green Management policy, announced in January,

will lead the industry and propel SHI’s growth engines in the coming age.


meetIng RIsIng demAnd

Whiletheinternationalrecessioncontractedshipfinancingandledtoanoversupplyofships,

demandforoffshorefacilitiesisexpectedtocontinue.Indeed,theOffshoreDivisionlikelywill

farecomparativelybetterthanshipbuilding.Ordersareexpectedtoresumeasrisingoilprices

drivedevelopmentsinoffshoregasandoilfields.SHIiswellpositionedtomeetthisdemand.

Adecadeago,SHIpredictedtheincreasedneedforoffshorefacilitiesandinvestedinbuild-

ingdrillshipsandfloatingfacilities.Thatbethaspaidoffhandsomely.In2009,theratioof

SHI’soffshorebusinessroseto37%,upfrom32%in2008.In2010,weexpecttheratioto

climbtomorethan40%.

domInAtIng the mARKet In dRIllshIps

AsdeepseaandArcticareascontinuetobedeveloped,oilexploitationtechnologyalso

advances.SHI’sdrillshipbuildingtechnologyhasevolvedtoleadthetrend.Theadvanced

technologyandhighvalue-addeddrillshipisanoffshoredrillingfacilitythatcanreachoil

andgasfieldstypicallyinaccessiblebyseaplatforms.SHIhasdevelopedanArcticdrillship

thatdrillsasdeepas11kilometersintothesea.Thehullofthisshipisfourcentimeters

thickandfeaturestheworld’sfirstice-resistantdesigntoenablestableoperationthrough

floatingiceintheArcticOcean.WithitsDynamicPositioningSystem,theshipcanmain-

tainpositioninsevereweatherconditions,withstandingwavesofupto16metersandwind

speedsofupto41meterspersecond.

Witha63%shareoftheglobaldrillshipmarket,SHIistheindustry’sundisputedleader.At

theendof2009,wedelivered14drillshipswhileholdingordersfor21more.Wearesched-

uledtodeliver7in2010and11in2011.Since2000,SHIhaswonordersfor29drillships

outoftheworldwidetotalof46.

eXpAndIng the FloAtIng FootpRInt

SHIistheonlyshipyardthathascontinuouslywonordersforLNG-FPSOs.TheLiquefied

NaturalGas-FloatingProductionStorageOffloadingcanproduce,liquefyandstoreLNG

whilestillatsea.Theshipiscustomizedforcommercialoperationinmorethan2,400small

tomedium-sizedmarinegasfieldsandeliminatestheneedtobuildcostlyinlandfacilities.

LastJanuary,SHIreceivedanorderforaLNG-FPSOfromaEuropeancompanyvaluedat

USD680million(partofthecompany’sUSD1.4billioninannualshipbuildingorders).Back

in2008,SHIreceivedordersfromUK-basedFLEXLNGtobuildfourLNG-FPSOs.Thatfifth

orderconfirmedSHI’stotalmarketdominance,witha100%share.In2009,SHIalsowas

selectedbyRoyalDutchShelltobethesoleprovideroflargeLNG-FPSOsoverthenext15

years.InMarch2010,webeganworkonthefirstofthoseships.

Wehavealsorecentlydevelopedtheworld’sleadingsemi-submersiblerig,whichboasts

unprecedentedcapabilities.Theultra-largedrillingrigis112meterstallwithanavailable

areaofnearly1,000squaremetersand935kilometersofwiringandpiping.Therigcan

drilltodepthsof12,000metersandoffersanadvancednavigationsystemthatwillfunction

instormsandtidalwaves.Itcomplieswiththestricteststandardsforstabilityandprevention

ofmarinepollution.SHIdeliveredtworigs,theWestPhoenixandtheWestEminence,witha

capacityof30,000tonseach,in2008and2009,respectively.

RemAppIng the hoRIZon

SHIconstantlyseeksnewandbetterwaystoservecustomersandtoproducebreakthrough

products.Lookingahead,SHIisfocusedonadvancingitsoffshorecapabilitiesandmain-

tainingitsworld-leadingmarketshare.

oFFshoRe FACIlItIes

A trendsetting force in the construction of offshore facilities, such as gas and

oil production systems, SHI offshore is widely recognized for the quality, stability

and reliability of its products. the division consistently bests its own record

performance, for instance, by completing in 2007 the world’s largest offshore

platform, which rises 40 stories and occupies the area of two soccer fields.

poIsed FoR pRogRess

SHI offshore continues to demonstrate its capacity for innovative growth and its ability

to succeed. orders for offshore platforms are expected to fare comparatively better than

shipbuilding over the next few years and in the long term, owing to intense development of

new offshore gas and oil fields and the rise in oil prices. SHI offshore is poised to perform well

in this market, notably with orders for its high-end drillships and FpSos.


hIgh-peRFoRmAnCe IntellIgent pRoduCts

Ourflagshipproductsincludeshipnavigation,automationandpowersystems,homeand

buildingautomationsystems,aventilationsystemandanelectricpowercontrolsystem,

whichisidealforpowergenerationplantsandotherindustrialfacilities.

In2009,DigitalBusinesscompleteddevelopmentofsoftwarefornavigationalinterfacesand

receivedseveralnoteworthycertifications,includingtheMarineEquipmentDirective(MED)

forRADAR,theKoreaGovernment(KG)MarkforECDISandISO17894fortheSamsung

ShipAutomationSystem-Master.

dIgItAl Vessel systems

TheSamsungNavigationSystem,XailorStar,isanadvancedintegratedbridgesystemwith

aflexibleandmodulardesignthatcanbeappliedtoanybridgestyle.Ithasbeendeveloped

tomaximizesafetyandminimizecostsbyfacilitatingone-manbridgeoperation.

TheSamsungShipAutomationSystems,SSAS-MasterandSSAS-Pro,arefullyintelligent

automationsystemsdevelopedfromoverthreedecadesofourknowledgeofandexperience

incommissioning,seatrialsandtheindustry.Thesystems’outstandingperformanceand

exceptionallyuser-friendlyoperationmeetcustomerneedsbyprovidingflexibleon-board

managementwidelyapplicabletoallmarineprojectsandships.

TheSamsungPowerSystemsoffertwosafeandhighlyefficientproducts:mediumandlowvolt-

ageswitchboards.Theswitchboardpreventsaccidentsduringpowertransmissionanddistribu-

tion.Unlikeland-basedindustrialsystems,avessel’spowergenerationandloadsarelocated

together,whichintensifiestheriskofelectricalaccidents.Oursafety-firstsystemsarebuilton

decadesofexperienceandexpertiseinthefield,includingtrialsformorethan350vessels.

Withthegoalofcuttingcustomercosts,andbybuildingonourexpertiseinengineeringde-

signandinseaandgastrials,wehavedevelopedtheSamsungMarineAdvancedProcess

Solution(SSAS-MAPS),ahighlyefficient,total-solutiontechnologythatoptimizesandinte-

gratesavessel’sautomation,navigationpowersystems.

u-CIty totAl solutIon

Samsung’sU-CityTotalSolutionofferingsincludeSHI’sBuildingAutomationsHomeAuto-

mationSystems(BaHa)aswellasintelligentventilationsystemsandhealthcaresolutions.

SamsungBaHaushersconsumersintothefuturisticworldofubiquitoustechnology.Its

cutting-edgetechnologies,whichhavebeenusedtostabilizeandmanagethehugeships,

orso-called“movingbuildings,”ontheocean,nowareenablingconvenientsystemsfor

homes,buildingsandfacilitiesonland.

TheBaHaHomeNetworkSystemsupportsaccesstoPCs,mobilephones,wallpadsand

TVs,witharemoteforease-of-control.ThroughBaHa,wearecreatingtheintelligenthous-

ingenvironmentsandlifestylesofthefuture.

Anopen,intelligentanddecentralizedsystem,BaHa’sIntelligentBuildingAutomationSys-

temenablesefficientandeconomicalbuildingmanagement.Byoptimizingcontrolofma-

chines,powerandlighting,thesystemservesbothresidentsandbuildingowners.

TheBaHaVentilationSystemhelpsmanageabuilding’sairqualityandenvironmentbyre-

tainingheatandhumidityinsideduringcoldseasonsandblockingheatandhumidityfrom

theoutsideinhotweather

dIgItAl BusIness

In the age of digital convergence and ubiquitous computing, SHI’s digital

business division pursues advanced automation for vessels, homes,

buildings and industrial facilities. we leverage our long-standing expertise by

maximizing cross-division and cross-industry synergies and by integrating our

pioneering technology across all units.

ConneCtIon to tomoRRoW

Inspired by our world-class digital technologies and cutting-edge automated products, the

SHI digital business division focuses on continuous innovation and performance that is

consistently ahead of its time, proven by the more than 200 international patents we have won

in these fields. looking ahead, we are focusing on cost-effective green technologies that are

reinventing ship automation, navigation and power systems. we also are developing advanced

residential and building systems, including the Electric power Control system and u-City It

to provide total solutions for urban and regional areas. today, we continue to invest in digital

technologies that will lead to a better tomorrow.


meAsuRIng mARKet CondItIons

Inthepastdecade,theKoreanconstructionmarkethascontractedconsiderably,firstbe-

causeofgovernmentstabilizationpoliciesandthenowingtotheglobalfinancialcrisis.Asa

consequence,ordersreceivedbytheKoreanE&Cindustryin2009werevaluedatapproxi-

matelyKRW112trillion,a6.7%dropfrom2008.Weforeseeimprovementastheworldwide

economysteadies,andanticipateordersin2010atKRW116trillion,up3.6%from2009.

ReVIeWIng peRFoRmAnCe

SHIE&Cprovidesthehighestlevelofcustomersatisfactionbasedonworld-classqualityas-

surancesystemsandcustomer-centeredpolicies.Ourpremiumresidentialprojectsinclude

Chereville,thefirstofitskindcommercial-residentialcomplex,andTowerPalace,agroup

ofsevenluxuryresidentialtowers.ThelatestE&CresidentialshowcaseisLaFoliumTown-

house.ThenameisfromtheLatinfor“forest.”Thismodelcommunityofferscustomized

homesandlivingspaces.Wind,water,light,plantingsandlandareincorporatedintothe

elegantdesigntointegratewithnature.Currentlysevencomplexesarebeingbuiltaround

theSeoulmetropolitanarea.In2009,LaFoliumwasselectedasthe“BeautifulBuilding”by

Gangnam-gu,oneofSeoul’smostaffluentmunicipaldistricts.

FloAtIng InnoVAtIon FoR IndustRIAl FACIlItIes

SecuringsitesforindustrialfacilitiesinKoreahasbecometoughaslandturnsscarceand

thepopulationgrows.Todate,thebestsolutionhasbeenmovingontothewatertoconstruct

hugefloatingstructures.Anticipatingthetrend,SHIE&Ctargetedsuperlarge-scalefloating

marinestructuresasanewgrowthengine.IncooperationwiththeKoreaOceanResearch

&DevelopmentInstitute,wedevelopedafloatingcontainerterminalquay.TheSHIHybrid

QuayWall(HQW)ishighlyefficientatloadingandunloadingcontainersfromVLCS(Very

LargeContainerShips).Itsoutstandingfeatureismobility.Thewallcanbepositionedon

eithersideofcontainerships,allowingforcargohandlingfrombothsides.Asaresult,ship-

pingcostsarereducedandcargohandlingtimeiscutbymorethan20%.

Leveragingthissuccess,weareadvancingintothesuperlarge-scalefloatingstructures

businesswithmoreproductsandtechnology.Inaddition,inMarch2009,SHIE&Cre-

ceivedaGreenBuildingcertificatefortheSamsungElectro-MechanicsbuildinginSuwon,

anachievementlikelytogrowbusinessandenhanceourimage.Uponcompletionofour

GyeongamGymnasiumatPusanNationalUniversitylastFebruary,wealsowona“Best

Building”BusanArchitectureAward.

BuIldIng BusIness In 2010

Intheyearahead,SHIEngineering&Constructionexpectstobolsteritsmarketprofileby

maximizingprospects.Wewilldeveloplargemultipurposebuildingandconstructionproj-

ectswhilenurturingemergingtalentandexpandingournewbusinesses,includingthefloat-

ingmarinestructuresandoverseassales.

AlignedwiththenewSHIGreenManagementPolicy,E&Cwillpursuequalitymanagement

andsafetycheckpointsthatfullyimplementgreenandeco-friendlypractices.Simultane-

ously,wewillaggressivelyhoneourcompetitiveedgebyreducingenergyandothercosts

andbypursuingnewtechnologyandproducts.

Aswemoveforward,E&Ciscommittedtoforginganeworganizationalculturethatwill

deepentrustandincreasecommunicationamongemployees.Thisincludesmorejobrota-

tion,consistentmanagementprocessesandmoremanagementtraining.Weareactively

engagedinpromotinghealth,safety,innovationandmaximumprofit.

engIneeRIng & ConstRuCtIon

the Engineering & Construction division of Samsung Heavy Industries designs and

builds premium living spaces; research, sports and industrial facilities; shipping

ports; office, education and hospitality complexes; and urban infrastructure, such

as roads, bridges and subways. the E&C division has earned a stellar record of

design awards and an unparalleled reputation for accident-free construction.

posItIoned to gRoW

despite the global financial crisis, which contracted the korean construction market, SHI E&C

business managed the challenges with orders valued at kRw 1.1075 trillion in 2009. we

also sharpened our competitive advantages. looking forward, E&C will maximize prospects by

developing large, multipurpose building projects, expanding overseas capacity, reducing costs

and continuing pioneering advances in marine business technology, such as our out-of-the-box

concept for a hybrid quay wall, unveiled last year.


Windturbinegeneratorsconvertwindenergyintoelectricity.Likesolarpower,windpoweris

increasinglypopulararoundtheglobebecauseofitsenvironmentalbenefits.Wind-powered

energyisrenewable,cleanandwidelyavailable.Renewableenergybusinessessuchas

windpowergenerationarekeytoeco-friendlyenergysourcesforfuturegenerations.

leVeRAgIng shIpBuIldIng eXpeRtIse to gRoW WInd poWeR

Ourcompetitiveadvantagesintheshipbuildingandoffshoreindustries,inengineeringand

constructionoperations,andinourdigitalbusinesses,makeitnaturalforustodevelop

windturbinegeneratorsthatintegraterelatedtechnologies.Technologyusedtoproduce

shippropellersisakintothatrequiredtocreateblades,acorepieceoftheequipmentthat

convertswindintoelectricity.SHInowisapplyingitsworld-classshipbuildingtechnologies

toproducinggeneratorsandcontrolsystems,whicharecrucialcomponentsofawindtur-

binegenerator.

Inaddition,SHI’sEngineering&ConstructionDivision’sexperienceinlarge-scaleengineer-

ingandplantconstructionisfuelingsynergiesindesigningandproducingreliablewindtur-

binegenerators.

Wealsobelieveourcapabilitiesinoffshorefacilitiesandconstructionwillbeanassetin

makingoffshorewindturbinegenerators.Currently,wearedevelopinga2.5MWonshore

windturbineforlowwindspeedandcolderclimates,anda6MWClassforoffshore.

the WInd Is At ouR BACK

WithinayearoflaunchingtheWindPowerBusiness,wehavecompleteddevelopment,re-

ceivedordersanddeliveredourfirstproduct.SHIwindpowergeneratorsdelivermorethan

10%higherpowergenerationefficiencyandfiveyearslongerdesignlifethanotherprod-

ucts.Asaresult,inourtargetwindpowermarketoftheUS,theworld’slargest,wehave

gainedinterestfromkeywindfarmdevelopersthatwanttoincreasetheirefficiency.

InNovember2009,SHIdeliveredits2.5MWwindpowergeneratortoCieloWindPower,

aUScompanybasedinAustin,Texas.Thiswasthefirstwindpowergeneratormanufac-

turedinGeojeShipyard,andmarkedthefirstevertobeexportedfromKorea.

InMay2009,wesetupaninternationalwindpowergeneratorsalesofficeinHouston,

Texas.Through2010and2011,wewillestablishadditionalofficesintheUSandEurope.

Wealsoexpecttolaunchlogisticsandservicecentersin2011inordertofullyadvanceinto

theUSmarket.

SHIhassetamid-termtargetofsecuringa10%worldwidewindpowerbusinessmarket

shareandUSD6billioninsales—theworld’sseventhlargestshare—by2015,withannual

productionofon-shoreandoffshoregenerators.Torealizethisgoal,SHIisbuildinganas-

semblyplantinGeoje-Si,justoffthecoastoftheportcityofBusaninSouthKorea.Sched-

uledtogoonlinebyJuly2010,thefacilitywillhaveanannualproductioncapacityof200

turbineunits.

SHIexpectstobecometheworld’stopwindturbinemanufacturerby2020.

WInd poWeR BusIness

with a strategic eye for future opportunities, last year, SHI moved into the

promising wind power business, which doubled between 2005 and 2008.

by leveraging our world-leading expertise and technologies in shipbuilding and

construction, we have quickly advanced. we have developed a 2.5Mw onshore

wind turbine and are developing a 6Mw Class offshore wind turbine.

neW mARKets

SHI has set an aggressive goal of becoming the world’s no. 1 wind turbine manufacturer by

2020. Already, we have achieved significant success. In 2009, our wind power business

attracted interest from wind farm developers in the uS. we delivered the first 2.5Mw wind

turbine ever exported from korea. And we established a sales office in texas (uS), with plans

to expand offices over the next two years. In 2010, we expect to secure a 1% global market

share (uSd 300 million) and 10% share (uSd 6 billion) by 2015.

40 Samsung Heavy Industries Annual Report 2009 41Embracing the Challenge333

Globalleadershiprequiresustoanticipatetrendsandmarketsandtodevelopsmart,cost-effectiveinnovationsthatwillcontinuetodifferentiateourhigh-valueships,world-classproductsandadvancedtechnologies.

In2010andbeyond,wewillcreatesuperiorproductsandservicesthatbuildabetterglobalsociety.

Committedto

A BetteR WoRld

SAMSung HEAvy InduStRIES pRovIdES CREAtIvE

SolutIonS tHAt bEnEFIt pEoplE And tHE EnvIRonMEnt.


shI AIms to leAd the WoRldWIde gReen mARKet

Unquestionably,thegreeneconomyrepresentsthefuturegrowthengineforshipbuilding,shippingandother

industries. In2009,bybuildingonour corporatephilosophyof respect forpeople andnature,we therefore

broadenedourguidelinesforgreenmanagementinalloperations.SHIintendstoleadtheglobalgreenmarket

bydevelopingeco-friendlyproductsandtechnology.

OuradvancedSHIGreenManagementpolicy,officiallyunveiledinJanuary2010,providesadetailedvisionof

ourinitiatives.By2015,wewilldevelopahighlyefficient,eco-friendlyshipthatreducesgreenhousegasemis-

sionsbyupto30%.Wewilldevelopazero-energyhouseby2011.Wewillcontributetoreducinggreenhouse

gasemissionsbypromotingnewandrenewableenergyinourworkplaces.Inaddition,wewilldrivetheGreen

ManagementPolicybybuildinganeffectiveGreenNetwork.Thiscompanywidenetworkwillencourageemploy-

eesandcustomerstoworktowardprotectingtheplanet.

2009 gReen mAnAgement AChIeVements

Buildingonouraccomplishments in2008,which includedopeninganewsewage treatmentplant thatuses

biotechnologytoreducecostsandpollutants,SHIannouncedamajorinnovationinpassengershipbuildinglast

year.Aftertwoyearsofresearch,earlyin2009,SHIdebutedaLNG-poweredpassengershipthatmeetsstrict

newNorthernEuropeanenvironmentalregulations.This21stcenturylargepassengershipreducesemissionsof

nitrogenoxideandsulfuroxidesduringoperationbymorethan90%.Itscarbondioxideemissionsarereduced

bymorethan20%.Evenso, theship isremarkablycost-efficient,capableofreducingoperatingcostsbyas

muchas38%byrecyclingheatgeneratedbytheengine.InitsJuly2009issue,theprestigiouspassengership

magazine,Cruise & Ferry Info,publishedinSweden,paidtributetoSHI’sachievement.

Alsolastyear,inafirstforaKoreanshipbuilder,SHIwontheCleanShippingAward.Withtheimplementationof

stricterenvironmentalregulationsfortheglobalshipbuildingindustry,DNVandNor-Shipping,theworld’slargest

marinetransportationandshippingfair,createdtheseawardstorecognizecompaniesthattakealeadershiprole

in environmental protection andeco-friendly shipbuilding technology. SHI’s award-winningAmundsenSpirit,

currentlyunderconstruction,isthefirstofthefour110,000DWTshuttletankersthatwearebuildingforTeekay,

aCanadiancompany.Thecutting-edgeshipfullycomplieswithDNVenvironmentalregulations,whicharethe

moststringentintheworld,andhasbeenbuiltinaccordancewiththeGreenPassport,internationalguidelines

soontobemandated.

Lookingahead,SHI’spioneeringGreenManagementpolicieswillmaintainourworldwideleadershipandcon-

tributetoabettertomorrow.

SinceourGreenManagementproclamationin1996,SHIhasimplementedanenvironmentmanagementsystem

basedonglobalstandards.Wearecommittedtocreatingacleanerworldandgreenerworkplaces.Thatsame

year,SHIearnedanISO14001certificate,thefirstevertobeawardedintheinternationalshipbuildingindustry.

Wecontinuetosupporteco-friendlyworkplaces,toparticipateinactivitiesthatpreservetheplanetandtodevelop

technologiesthatreflectourgoals.Inaddition,forthepastdecade,SHIhasconsistentlyappliedstricterenvi-

ronmentalstandardsthanthoselegallyrequiredinmanagingsewage,dust,airpollution,wasteandchemicals.

CoRpoRAte CItIZenshIpwith green growth and sustainable profits, Samsung Heavy Industries

is bolstering its business and burnishing its global reputation.

44 Samsung Heavy Industries Annual Report 2009

SinceSHIlauncheditssocialcontributionteamin1995,wehaveenthusiasticallyparticipatedinactivitiesthat

helpneighborsandorganizationsinneed.Oursocialcontributions,builtonourcorporatephilosophyofsharing

andco-prosperity,arecustomizedtomeetthedifferentneedsofdifferentcommunities.Asof2009,morethan

12,600employeesfromallbusinessunitswereservingonthe255SHIsocialserviceteams.

SHIsocialcontributionshavelongbeenrecognizedbyawardsfromlocalorganizationsandgovernments,includ-

ingtheKoreanNationalRedCross,theMayorofSeoulandGyeongsangnam-doprovince.

shI suppoRts A RAnge oF soCIAl pRogRAms

Ouremployeesvolunteerforabroadarrayofcausesandactivities.Theseincludereliefeffortsforareasdamaged

bynaturaldisasters,suchas typhoonsorblizzards; improving facilities forseniorsandchildren;establishing

sisterrelationshipswithnearbyvillages;supportingrehabilitationeffortsforthedisabled;constructingenviron-

ment-friendlyparks;providingInterneteducationforseniors;supportingscholarshipandFoodBankprograms;

donatingbooksforyoungfamilies;donatingKimchi,thetraditionalKoreandish,forpeopleinneed;pitchingin

duringbusyseasonstohelpfarmingvillages;andmore.OneoutstandingprogramistheLoveRiceJar,funded

byemployees,whichprovidesricetolow-incomehouseholds.

FoCusIng on the neXt geneRAtIon

SHI’sprimaryfocusforsocialcontributionsistohelpteenagers,whoaretheleadersoftomorrow.Oneofourflag-

shipinitiativesisateenmentoringprogram.Wealsosupportacampaigntopreventteendelinquency,nightduty

toescortteensincrime-riddendistricts,teenagervolunteerclubactivitiesandfamilyvolunteerclubactivities.SHI

operatesavolunteereducationprogramtoimprovetherecognitionandresolutionofcontemporaryteenissues.

hIghlIghts oF 2009 soCIAl ContRIButIons

Last year, a key accomplishmentwas the reorganization of our Social ContributionCenter in order to better

servevolunteersandthecommunity.Wealsodebutedanin-houseonlinenewsletterthatcoverscompanysocial

contributionnewsandfeatures.Wedevelopedaspecialvolunteerteamtoworkwithyoungchildren,performing

magicandtellingstories;ameal-deliveryprogramforseniorswholivealone;andtheSmileTherapyprogramfor

thehomelessandmentallyill.WealsoofferedEnglishclassesforteenagers,taughtbyinternationalemployees.

enCouRAgIng engAgement

Each year, SHI rewards employees who make outstanding social contributions. We also evaluate executives

basedonthenumberofhourstheyvolunteer.TheSHImanagementsystemencouragesvolunteercontributions

and,tothatend,wehavedevelopedactivitiesthatspecificallyutilizeemployeeexpertise.

Intheyearstocome,SHIwillcontinuetofulfilloursocialresponsibilitiesandworktobuildasocietythatoffers

eachcitizenanopportunitytoachievehealthandhappiness.

SHI vigorously supports the philosophy and practice of sustainable

management, believing that social responsibility and financial

success go hand-in-hand. we are deeply committed to making

a positive difference in local and worldwide communities through

social contributions and employee volunteer programs.


SamsungHeavyIndustriesintendstoleadtheglobalgreenmarketby

developingtheeco-friendlyproductsandtechnologythatwillbethe

growthengineforsustainableprofitsinthecomingage.Acrossour

worldwidebusinesses,wearebuildingeco-friendlyships,investingin

clean,renewableenergy,creatinggreenworkplacesandmentoring

thenextgeneration.

SHIisdedicatedtoprotectingtheplanetandtopursuingthecommon

goodaroundtheglobe.

FInAnCIAl StAtEMEnt

samsung heavy Industries Co., ltd.

non-Consolidated Financial Statements

december 31, 2009 and 2008

48 Report of Independent Auditors

non-consolidated Financial statements

50 StatementsofFinancialPosition

52 StatementsofIncome

53 StatementsofAppropriationsofRetainedEarnings

54 StatementofChangesinShareholders’Equity

55 StatementsofCashFlows

57 notes to Financial statements

92 Report of Independent Accountants’

Review of Internal Accounting Control system

93 Report on the operations of the Internal Accounting

Control system


We have audited the accompanying non-consolidated statements of financial position of Samsung Heavy In-

dustries Co., Ltd. (the “Company”) as of December 31, 2009 and 2008, and the related non-consolidated

statements of income, appropriations of retained earnings, changes in shareholders’ equity and cash flows for

the years then ended, expressed in Korean won. These financial statements are the responsibility of the Com-

pany’s management. Our responsibility is to express an opinion on these financial statements based on our au-

dits. We did not audit the financial statements of Samsung Heavy Industries Ningbo Co., Ltd., Samsung Heavy

Industries Rongcheng Co., Ltd. and Rongcheng Gaya Heavy Industries Co., Ltd., the investments in which are

reflected in the accompanying financial statements using the equity method of accounting. The investments in

those subsidiaries represent 1.9% and 1.5% of the Company’s total assets as of December 31, 2009 and 2008,

respectively, and the equity in their net income represent 1.5% and (-)15.9% of the Company’s net income be-

fore income tax for the years then ended, respectively. These statements were audited by other auditors whose

reports have been furnished us and our opinion, insofar as it relates to the amounts included for the subsidiar-

ies, is based solely on the reports of the other auditors.

We conducted our audits in accordance with auditing standards generally accepted in the Republic of Korea.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether

the financial statements are free of material misstatement. An audit includes examining, on a test basis, evi-

dence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the

accounting principles used and significant estimates made by management, as well as evaluating the overall

financial statement presentation. We believe that our audits and the reports of other auditors provide a reason-

able basis for our opinion.

Report of Independent AuditorsTo the Board of Directors and Shareholders of

Samsung Heavy Industries Co., Ltd.

Seoul, Korea

March 9, 2010

In our opinion, based on our audits and the reports of other auditors, the non-consolidated financial statements

referred to above present fairly, in all material respects, the financial position of Samsung Heavy Industries Co.,

Ltd. as of December 31, 2009 and 2008, and the results of its operations, the changes in its retained earnings,

the changes in its shareholders’ equity and its cash flows for the years then ended in conformity with account-

ing principles generally accepted in the Republic of Korea.

As discussed in Note 16 to the accompanying financial statements, the amount of Company’s obligation aris-

ing from the suit filed by Samsung Motors Inc.’s creditors is uncertain as of date of this report. Accordingly, the

ultimate effect of this matter on the Company’s financial statements can not be reasonably determined.

Accounting principles and auditing standards and their application in practice vary among countries. The ac-

companying non-consolidated financial statements are not intended to present the financial position, results

of operations, changes in shareholders’ equity and cash flows in conformity with accounting principles and

practices generally accepted in countries and jurisdictions other than the Republic of Korea. In addition, 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. Accordingly, this report and the accompanying non-

consolidated financial statements are for use by those who are informed about Korean accounting principles or

auditing standards and their application in practice.

www.samil.com

LS Yongsan Tower, 191, Hangangno 2-ga,

Yongsan-gu, Seoul 140-702, Korea

(Yongsan P.O Box 266, 140-600)

A member firm of

This report is effective as of March 9, 2010, 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 non-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.

Samil PricewaterhouseCoopersDecember 31, 2009 and 2008

50 Samsung Heavy Industries Annual Report 2009 51embracing the Challenge

non-Consolidated statements of Financial PositionDecember 31, 2009 and 2008

non-Consolidated statements of Financial PositionDecember 31, 2009 and 2008

The accompanying notes are an integral part of these non-consolidated financial statements.

(In thousands of Korean won)

2009 2008

assets

Current assets:

Cash and cash equivalents ₩ 546,597,088 ₩ 341,064,893

Short-term financial instruments (Note 3) 535,598,789 1,747,263,066

Available-for-sale securities (Note 7) - 31,494,900

Held to maturity securities (Note 8) 3,070,275 370,082,203

Trade accounts and notes receivable, net (Notes 5 and 23) 3,790,153,913 1,978,257,922

Short-term loans receivable, net (Note 10) 6,109,894 7,354,475

Other accounts receivable, net (Notes 5 and 23) 37,480,521 78,055,252

Inventories (Note 6) 578,979,486 777,744,510

Accrued income 57,702,399 63,508,415

Advance payments (Note 23) 2,404,726,901 2,879,883,356

Prepaid expenses (Note 23) 291,025,737 325,842,185

Prepaid taxes 27,644,291 57,612,277

Current forward exchange contracts (Note 16) 1,356,430,053 1,677,184,956

Current firm commitment assets (Note 16) 2,204,327,082 2,996,562,042

Other current assets 15,370,855 12,133,487

Total current assets 11,855,217,284 13,344,043,939

Long-term financial instruments (Note 3) 30,100 30,100

Long-term available-for-sale securities (Note 7) 55,631,342 43,998,379

Held to maturity securities (Note 8) 4,075,255 6,483,215

Equity-method investments (Note 9) 393,706,032 410,329,334

Long-term loans receivable, net (Note 10) 13,239,475 13,116,217

Property, plant and equipment, including revaluation, net (Note 11) 4,237,426,070 3,802,813,816

Intangible assets, net (Note 12) 97,719,176 92,384,606

Long-term accounts and notes receivable, net (Note 5) - -

Guarantee deposits 85,885,646 83,645,004

Long-term prepaid expenses 28,987,866 80,947,693

Forward exchange contracts (Note 16) 833,443,698 2,546,136,516

Firm commitment asset (Note 16) 2,521,475,438 5,575,991,117

Deferred income tax assets (Note 21) 2,827,932 26,338,755

Other non-current assets 57,858,976 57,858,977

Total assets ₩ 20,187,524,290 ₩ 26,084,117,668


2009 2008

liabilities and Shareholders’ Equity

Current liabilities

Trade accounts and notes payable (Note 23) ₩ 1,054,991,052 ₩ 1,026,355,069

Short-term borrowings (Note 13) 1,505,642,681 20,300,000

Other accounts payable (Notes 16 and 23) 102,890,671 134,047,122

Advance receipts (Note 4) 5,658,110,402 8,631,973,571

Accrued expenses (Note 23) 584,010,206 623,345,253

Income tax payable 41,063,626 200,663,434

Current forward exchange contracts (Note 16) 2,093,206,024 3,043,750,137

Current firm commitment liabilities (Note 16) 1,537,291,439 1,484,798,647

Current deferred income tax liabilities (Note 21) 14,225,647 31,844,546

Other current liabilities 54,091,008 85,583,286

Total current liabilities 12,645,522,756 15,282,661,065

Long-term debts, net (Note 14) 1,272,332,960 137,854,207

Guarantee deposits received 36,734,161 35,487,127

Other long-term liabilities (Note 16) 36,871,240 25,912,599

Warranty provision (Notes 4 and 16) 75,398,198 54,514,575

Provision for losses from construction contracts(Notes 4 and 16) 16,260,970 151,275,962

Accrued severance benefits, net (Note 15) 77,171,823 83,524,313

Forward exchange contracts (Note 16) 2,277,256,487 5,443,100,965

Firm commitment liabilities (Note 16) 909,414,048 2,545,684,510

Total liabilities 17,346,962,643 23,760,015,323

Commitments and contingencies (Note 16)

Shareholders’ equity

Capital stock (Note 1)

Common stock 1,154,376,930 1,154,376,930

Preferred stock 574,225 574,225

Capital surplus

Additional paid-in capital 417,172,244 417,172,246

Other surplus (Note 11) 81,528,501 81,189,926

Capital adjustment

Treasury stock (Note 19) (670,556,809) (674,269,156)

Stock options (Note 20) 735,706 856,573

Accumulated other comprehensive income and expense

Unrealized gain on valuation of available-for-sale securities (Note 7) 49,212,150 14,491,904

Unrealized gain on valuation of investments with the equity method (Note 9) 32,742,579 114,754,144

Unrealized loss on valuation of investments with the equity method (Note 9) (2,228,142) -

Unrealized loss from forward exchange contracts (Note 16) (6,269) -

Retained earnings (Note 17)

Legal reserve 43,800,000 33,000,000

Discretionary reserve 1,063,269,854 554,269,854

Unappropriated retained earnings 669,940,678 627,685,699

Total shareholders’ equity 2,840,561,647 2,324,102,345

Total liabilities and shareholders’ equity ₩ 20,187,524,290 ₩ 26,084,117,668



2009 2008

Sales (notes 4 and 23) ₩ 13,094,943,604 ₩ 10,664,465,459

cost of sales (notes 4 and 23) 11,955,802,920 9,576,644,300

Gross income 1,139,140,684 1,087,821,159

Selling and administrative expenses (note 27) 345,510,173 332,490,420

Operating income 793,630,511 755,330,739

non-operating income

Interest and dividend income 125,500,502 216,010,810

Gain on insurance settlement 21,815,774 -

Realized and unrealized foreign exchange gains (Note 24) 243,112,027 95,475,260

Reversal of allowance for doubtful accounts 546,266 22,676,435

Gain on disposal of inventories 4,556,679 2,312

Realized gains on short-term investments 9,965,413 -

Gain on valuation of equity method investments (Note 9) 43,389,396 6,915,410

Gain on disposal of equity method investment 60,243,159 -

Realized and unrealized gain fromforward exchange contract (Note 16) 3,328,404,556 2,300,157,315

Realized and unrealized gain from firm commitment(Note 16) 2,340,867,953 3,331,673,025

Others 43,938,219 87,745,726

6,222,339,944 6,060,656,293

non-operating expenses

Interest expenses 66,373,832 6,290,949

Fee expenses 4,447,959 7,480,720

Donation 9,024,332 108,145,892

Realized and unrealized foreign exchange losses (Note 24) 75,282,680 141,889,381

Loss on disposal of inventories - 115,305

Loss on valuation of equity method investments (Note 9) 62,094,646 140,579,619

Loss on disposal of property, plant and equipment 22,048,238 1,007,027

Realized and unrealized loss from forward exchange contract (Note 16) 2,564,059,841 3,436,554,811

Realized and unrealized loss from firm commitment (Note 16) 3,287,412,325 2,107,231,509

Others 70,469,196 24,365,693

6,161,213,049 5,973,660,906

Net income before income tax 854,757,406 842,326,126

Income tax expense (Note 21) 184,902,534 214,983,388

Net income ₩ 669,854,872 ₩ 627,342,738

Basic earnings per share (Note 22) ₩ 3,105 ₩ 2,899

Diluted earnings per share (Note 22) ₩ 3,090 ₩ 2,882



2009 2008

Retained earnings before appropriations

Unappropriated retained earnings carriedover from prior year ₩ 85,806 ₩ 342,961

Net income 669,854,872 627,342,738

669,940,678 627,685,699

appropriations of retained earnings (note 17)

Legal reserve 10,800,000 10,800,000

Cash dividends (Note 18)

(Common stock: 10% in 2009 and 10% in 2008) 107,936,529 107,799,893

(Preferred stock: 11% in 2009 and 11% in 2008)

Reserve for facility investment 431,000,000 509,000,000

Reserve for research and human resources development 120,000,000 -

669,736,529 627,599,893

Unappropriated retained earnings carried forward to the subsequent year ₩ 204,149 ₩ 85,806


non-Consolidated statements of IncomeYears ended December 31, 2009 and 2008

non-Consolidated statements of appropriations of Retained earnings Years ended December 31, 2009 and 2008 (Dates of Appropriations : March 19, 2010 and March 13, 2009 for the years

ended December 31, 2009 and 2008, respectively)



2009 2008

cash flows from operating activities

Net income ₩ 669,854,872 ₩ 627,342,738

Adjustments to reconcile net income to net cash provided by(used in) operating activities

Provision for severance benefits 62,124,735 72,025,121

Depreciation and amortization 281,242,486 239,265,377

Loss(Gain) on foreign currency translation (27,449,685) 70,377,200

Loss(Gain) on disposal and valuation of forward exchange (764,344,715) 1,136,397,496

Gain on disposal and valuation of firm commitment 946,544,372 (1,224,441,516)

Gain on disposal of equity method investment (60,243,159) -

Warranty provision 37,720,141 19,362,176

Provision of construction contracts loss (135,014,992) 91,335,252

Others 10,835,201 80,779,614

351,414,384 485,100,720

Changes in operating assets and liabilities:

Increase in trade accounts and notes receivable (1,817,327,497) (846,659,485)

Decrease in other accounts receivable 41,084,872 53,321,803

Decrease(increase) in inventories 203,321,704 (465,551,805)

Decrease(increase) in advance payments 475,156,455 (1,109,939,618)

Decrease(increase) in prepaid expenses 84,360,369 (27,742,162)

Increase in trade accounts and notes payable 28,632,522 248,884,236

Increase(decrease) in advance receipts (2,973,863,169) 2,103,493,440

Increase(decrease) in accrued expenses (25,100,901) 228,593,591

Increase(decrease) in income taxes payable (159,599,808) 78,675,602

Increase(decrease) in withholdings (32,778,205) 34,021,990

Decrease in severance benefits (42,385,308) (46,154,427)

Increase in pension plan assets (36,818,540) (50,264,504)

Others 71,555,655 (144,527,900)

(4,183,761,851) 56,150,761

Net cash provided by(used in) operating activities (3,162,492,595) 1,168,594,219


Capital stock Capital surplus

Capitaladjustment

Accumulated other

comprehen-sive income

and expense

Retainedearnings

Total

Balances as of January 1, 2008 ₩ 1,154,951,155 ₩ 496,056,747 ₩ (592,455,527) ₩ 55,068,636 ₩ 696,303,108 ₩ 1,809,924,119

Dividends - - - - (108,690,293) (108,690,293)

Retained earnings after appropriation - - - - 587,612,815 1,701,233,826

Net income - - - - 627,342,738 627,342,738

Gain on disposal of treasury stock - 2,305,424 - - - 2,305,424

Treasury stock - - (80,798,014) - - (80,798,014)

Stock purchase options - - (159,042) - - (159,042)

Unrealized gain on valuation of available-for-sale securities - - - 4,869,585 - 4,869,585

Unrealized gain on valuation of equity method investments - - - 64,717,490 - 64,717,490

Unrealized loss from forward exchange contracts - - - 4,590,338 - 4,590,338

Balances as of December 31, 2008 ₩ 1,154,951,155 ₩ 498,362,171 ₩ (673,412,583) ₩ 129,246,049 ₩ 1,214,955,553 ₩ 2,324,102,345

Balances as of January 1, 2009 ₩ 1,154,951,155 ₩ 498,362,171 ₩ (673,412,583) ₩ 129,246,049 ₩ 1,214,955,553 ₩ 2,324,102,345

Dividends - - - - (107,799,893) (107,799,893)

Retained earnings after appropriation - - - - 1,107,155,660 2,216,302,452

Net income - - - - 669,854,872 669,854,872

Gain on disposal of treasury stock - 338,574 - - - 338,574

Treasury stock - - 3,712,347 - - 3,712,347

Stock purchase options - - (120,867) - - (120,867)

Unrealized gain on valuation of available-for-sale securities - - - 34,720,245 - 34,720,245

Unrealized gain on valuation of equity method investments - - - (82,011,565) - 82,011,565

Unrealized loss on valuation of equity method investments - - - (2,228,142) - (2,228,142)

Unrealized loss from forward exchange contracts - - - (6,269) (6,269)

Balances as of December 31, 2009 ₩ 1,154,951,155 ₩ 498,700,745 ₩ (669,821,103) ₩ 79,720,318 ₩ 1,777,010,532 ₩ 2,840,561,647


non-Consolidated statements of Changes in shareholders’ equityYears ended December 31, 2009 and 2008

non-Consolidated statements of Cash FlowsYears ended December 31, 2009 and 2008


notes to non-Consolidated Financial statementsDecember 31, 2009 and 2008


2009 2008

cash flows from investmenting activities

Disposal of short-term financial instruments 1,211,664,277 264,003,353

Disposal of available-for-sale securities 38,743,913 19,964,115

Disposal(Acquisition) of held-to-maturity securities 369,419,888 (33,711,499)

Acquisition of equity-method investments (21,339,566) (163,733,846)

Acquisition of property, plant and equipment (721,035,425) (1,002,793,205)

Others (737,427) 77,118,351

Net cash provided by(used in) investing activities 876,715,660 (839,152,731)

cash flows from financing activities

Increase in (Repayment of) short-term borrowings 1,485,873,954 (3,629,741)

Increase in long-term borrowings 450,000,000 -

Decrease in other accounts payable (35,599,303) (14,280,202)

Issuance of debentures 697,397,500 -

Stock purchase options 1,436,872 1,149,660

Payment of dividends (107,799,893) (108,690,293)

Acquisition of treasury stock - (83,775,825)

Net cash provided by(used in) financing activities 2,491,309,130 (209,226,401)

Net increase in cash and cash equivalents 205,532,195 120,215,087

cash and cash equivalents

Beginning of the year 341,064,893 220,849,806

End of the year ₩ 546,597,088 ₩ 341,064,893

1. Organization

Samsung Heavy Industries Co., Ltd. (the “Company”) was incorporated in 1974 under the Commercial Code of the

Republic of Korea to build ships and off-shore plants. The Company is a member of the Samsung Group of compa-

nies, which consists of numerous companies under a common management control.

The Company’s capital stock was offered for public ownership in December 1993, and all issued and outstanding

shares were listed on the Korea Stock Exchange in January 1994. As of December 31, 2009, 230,990,231 shares,

including 114,845 shares of preferred stock, are issued and outstanding.

Under the Articles of Incorporation, the Company is authorized to issue 300 million shares of capital stock with a

par value per share of ₩5,000, of which 60 million shares are non-voting preferred stock. The non-cumulative,

non-voting preferred stock issued on or before March 14, 1997, are entitled to an additional cash dividend of 1% of

par value over common stock. As of December 31, 2009, 114,845 shares of such preferred stock are issued and

outstanding.

2. Summary of Significant accounting Policies

Basis of Presentation

The Company maintains its accounting records in Korean won and prepares statutory financial statements in Ko-

rean language (Hangul) in conformity with the accounting principles generally accepted in the Republic of Korea.

Certain accounting principles applied by the Company that conform with financial accounting standards and ac-

counting principles in the Republic of Korea may not conform with generally accepted accounting principles in oth-

er countries. Accordingly, these financial statements are intended for use by those who are informed about Korean

accounting principles and practices. The accompanying financial statements have been condensed, restructured

and translated into English from the Korean language financial statements.

The following is a summary of significant accounting policies followed by the Company in the preparation of its finan-

cial statements. These policies have been consistently applied to all the years presented, unless otherwise stated.


non-Consolidated statements of Cash FlowsYears ended December 31, 2009 and 2008



59embracing the Challenge


Revenue and cost Recognition

The Company recognizes revenues from construction contracts using the percentage-of-completion method to

determine the amounts to be recognized as revenues in a given period. The stage of completion is measured using

the percentage of the total contract costs incurred up to the date of statement of financial position over the total

estimated costs for each contract. When the outcome of a construction contract cannot be estimated reliably, the

contract revenue is recognized only to the extent of contract costs incurred that are likely to be recoverable, and

contract costs incurred for the period is recognized as an expense.

Costs incurred for prospective construction projects are accounted for as prepaid construction expense, provided

that they are identifiable and can be measured reliably, and when it is probable that the contract for such project will

be finalized. These prepaid construction expenses are reclassified to contract costs after construction starts.

cash and cash Equivalents

Cash and cash equivalents include cash on hand and in banks, and financial instruments with maturity of three

months or less at the time of purchase. These financial instruments are readily convertile into cash without signifi-

cant transaction costs and bear low risks from changes in value due to interest rate fluctuations.

allowance for Doubtful accounts

The Company provides an allowance for doubtful accounts and notes receivable. Allowances are calculated based

on the estimates made through a reasonable and objective method.

inventories

The quantities of inventories are determined using the perpetual method and periodic inventory count, while the

costs of inventories are determined using the moving-weighted average method. Inventories are stated at the lower

of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business,

less applicable variable selling expense. Replacement cost is used for the estimate of net realizable value of raw ma-

terials. If, however, the circumstances which caused the valuation loss cease to exist, the valuation loss is reversed,

but not exceeding the original carrying amount before valuation. The said reversal is deducted from cost of sales.

investments in Securities

Costs of securities are determined using the moving-weighted average method. Investments in equity securities

or debt securities are classified into trading securities, available-for-sale securities and held-to-maturity securities,

depending on the acquisition and holding purpose. Investments in equity securities of companies, over which the

Company exercises a significant control or influence, are recorded using the equity method of accounting. Trading

securities are classified as current assets while available-for-sale securities and held-to-maturity securities are clas-

sified as long-term investments, excluding those securities that mature or are certain to be disposed of within one

year, which are then classified as current assets.

Held-to-maturity securities are measured at amortized cost while available-for-sale and trading securities are mea-

sured at fair value. However, non-marketable securities, classified as available-for-sale securities, are carried at

cost when the fair values are not readily determinable.

Gains and losses related to trading securities are recognized in the income statement, while unrealized gains and

losses of available-for-sale securities are recognized under other comprehensive income and expense. Realized

gains and losses on available-for-sale securities are recognized in the income statement.

Equity Method investments

Company reflects any changes in the book value of its equity-method investments after the initial purchase date.

Under the equity method, the Company records changes in its proportionate ownership in the book value of the

investee in current operations, as capital adjustments or as adjustments to retained earnings, depending on the

nature of the underlying change in the book value of the investee. All other changes in equity should be accounted

for under other comprehensive income and expense.

In case the investee is also a subsidiary of the Company, the net income and net assets of the investee in its non-

consolidated financial statements should be equal to the corresponding share of the Company presented in the

consolidated financial statements, unless the equity method of accounting has been discontinued on the said

investee.

Property, Plant and Equipment

Property, plant and equipment are stated at cost, which includes acquisition cost, production cost and other costs

required to prepare the asset for its intended use. It also includes the present value of the estimated cost of disman-

tling and removing the asset, and restoring the site after the termination of the asset’s useful life, provided it meets

the criteria for recognition of provisions.

Property, plant and equipment are stated net of accumulated depreciation calculated based on the following depre-

ciation method and estimated useful lives:

Estimated Useful lives Depreciation Method

Buildings and structures 5 - 60 years Straight-Line Method

Machinery and equipment 4 - 25 years Straight-Line Method

Tools, furniture and fixtures 5 - 20 years Straight-Line Method

Vehicles and heavy equipment 5 - 18 years Straight-Line Method

Expenditures incurred after the acquisition or completion of assets are capitalized if they enhance the value of the

related assets over their recently appraised value or extend the useful life of the related assets. Routine mainte-

nance and repairs are charged to expense as incurred.





intangible assets

Intangible assets are stated at cost, which includes acquisition cost, production cost and other costs required to

prepare the asset for its intended use. Intangible assets are stated net of accumulated amortization calculated

based on using the following depreciation method and estimated useful lives:

Estimated Useful lives Depreciation Method

Development costs 5 years Straight-Line Method

Other intangible assets 5 - 10 years Straight-Line Method

Development costs which are individually identifiable and directly related to a new technology or to new products

which carry probable future benefits are capitalized as intangible assets. Amortization of development cost begins

at the commencement of the commercial production of the related products or use of the related technology.

non-capitalization of interest Expense

The Company expenses the interest it incurs on borrowings used to finance the cost of manufacturing, acquisition,

and construction of inventory and property, plant, and equipment that require more than one year to complete from

the initial date of manufacture, acquisition, and construction.

impairment of assets

When the book value of an asset is significantly greater than its recoverable value due to obsolescence, physical

damage or an abrupt decline in the market value of the asset, the said decline in value is deducted from the book

value to agree with recoverable amount and is recognized as an asset impairment loss for the period. When the re-

coverable value subsequently exceeds the book value, the impairment amount is recognized as gain for the period

to the extent that the revised book value does not exceed the book value that would have been recorded without the

impairment.

Derivatives

All derivative instruments are accounted for at their fair value according to the rights and obligations associated

with the derivative contracts. The resulting changes in fair value of derivative instruments are recognized either

under the income statement or shareholders’ equity, depending on whether the derivative instruments qualify as a

cash flow hedge. Fair value hedge accounting is applied to a derivative instrument purchased with the purpose of

hedging the exposure to changes in the fair value of an asset or a liability or a firm commitment that is attributable

to a particular risk.

income Tax and Deferred income Tax

Income tax expense includes the current income tax under the relevant income tax law and the changes in deferred

tax assets or liabilities. Deferred tax assets and liabilities represent temporary differences between financial report-

ing and the tax bases of assets and liabilities. Deferred tax assets are recognized for temporary differences which

will decrease future taxable income or operating loss to the extent that it is probable that future taxable income will

be available against which the temporary differences can be utilized. Deferred tax effects applicable to items in the

shareholders’ equity are directly reflected in the shareholders’ equity.

Discounts on Debentures

Discounts on debentures are amortized over the term of the debentures using the effective interest rate method.

Amortization of the discount is recorded as part of interest expense.

accrued Severance Benefits

Employees and directors with at least one year of service are entitled to receive a lump-sum payment upon termina-

tion of their employment with the Company based on their length of service and rate of pay at the time of termina-

tion. Accrued severance benefits represent the amount which would be payable assuming all eligible employees

and directors were to terminate their employment as of the date of the statement of financial position .

The Company has partially funded the accrued severance benefits through severance insurance deposits with an

insurance company. Deposits made by the Company are recorded as deductions from accrued severance benefits.

The excess portion of deposits over accrued severance benefits is recorded as other investments.

The Company has a defined benefit pension plan, and accrues severance benefits for current employees and pen-

sion payables for retired employees.

Pension plan assets are presented as a deduction from the total accrued severance benefits and pension payables.

The excess of pension plan assets over pension plan liabilities is recorded as investment assets.

The Company deposits certain portion of severance benefits to National Pension Service according to the National

Pension Law. The deposit amount is recorded as a deduction from accrued severance benefits.

Provisions and contingent liabilities

When there is a probability that an outflow of economic benefits will occur due to a present obligation resulting from a

past event, and whose amount is reasonably estimable, a corresponding amount of provision is recognized in the fi-

nancial statements. However, when such outflow is dependent upon a future event, is not certain to occur, or cannot

be reliably estimated, a disclosure regarding the contingent liability is made in the notes to the financial statements.





4. construction contracts

The Company’s contract balances as of December 31, 2009, and the related revenues recognized thereon for the

years then ended are as follows:


Beginning Balance

increase (Decrease)

construction Revenue

Ending Balance

Shipbuilding ￦ 27,661,536,019 ￦ 2,001,880,034 ￦ 8,381,146,754 ￦ 21,282,269,299

Plant-building 11,343,053,977 326,842,441 3,801,092,421 7,868,803,997

Construction 1,165,216,724 813,352,897 833,502,312 1,145,067,309

Others 70,668,286 82,554,316 79,202,117 74,020,485

￦ 40,240,475,006 ￦ 3,224,629,688 ￦ 13,094,943,604 ￦ 30,370,161,090

As of December 31, 2009, the Company is guaranteed for up to ₩485,573 million for the execution and ₩47,990

million for the warranty after completion of its shipbuilding contracts.

The Company is guaranteed up to ₩298,071 million for the execution and ₩296,216 million for the warranty after

completion of its construction contracts. In addition, a warranty provision of ₩75,398 million is provided for com-

pleted contracts and provision of ₩16,261 million is provided for losses from construction contracts (Note 16).

5. accounts and notes Receivable

Accounts and notes receivable, and their allowance for doubtful accounts as of December 31, 2009 and 2008,

consist of the following:


2009 2008

Trade accounts and notes receivable ₩ 3,814,043,637 ₩ 1,998,726,606

Less: Allowance for doubtful accounts (23,889,724) (20,468,684)

₩ 3,790,153,913 ₩ 1,978,257,922

Other accounts and notes receivable ₩ 47,459,943 ₩ 88,661,899


₩ 37,480,521 ₩ 78,055,252

Warranty Provision

Subject to sales contracts, the Company is liable to repair any defects in its products arising during the warranty

period. Accordingly, the Company provides, as of the date of statement of financial position, a provision for warranty

to cover any obligations which may arise during the warranty period. Any unused warranty provision is recognized

as non-operating income.

Provision for losses from construction contracts

When foreseeable losses are expected from short-term and long-term contracts in progress, the Company recog-

nizes the total expected loss from the contracts as a provision for losses from construction contracts.

Translation of assets and liabilities Denominated in foreign currencies

Monetary assets and liabilities denominated in foreign currencies are translated into Korean won at the rates of

exchange in effect at the date of the statement of financial position, and the resulting translation gains and losses

are recognized in current operations.

Earnings Per Share

Earnings per share is computed by dividing net income allocated to common stock, by the weighted average num-

ber of common shares outstanding during the year.

Diluted earnings per share is computed by dividing diluted net income, which is adjusted by adding back the after-

tax amount of interest expense on any convertible debt and compensation expense for stock option, by weighted

average number of common shares and diluted securities outstanding during the year.

3. Restricted Deposits

As of December 31, 2009, ₩30 million in bank deposits are restricted to maintain checking accounts. Certain other

financial instruments amounting to ₩5,599 million are subject to with drawal restrictions in relation to government

projects and others.





Long-term accounts and notes receivable, and their allowance for doubtful accounts as of December 31, 2009 and

2008, consist of the following:


2009 2008

Long-term trade accounts and notes receivable ₩ 2,651,807 ₩ 2,651,807


₩ - ₩ -

Long-term other accounts and notes receivable ₩ 179,430 ₩ 13,492,289

Less: Allowance for doubtful accounts (179,430) (13,492,289)

₩ - ₩ -

6. inventories

Inventories as of December 31, 2009 and 2008, consist of the following:


2009 2008

Work in process ₩ 189,218 ₩ -

Raw materials 421,065,915 660,615,769

Materials in-transit 98,883,886 74,552,984

Land 8,558,240 19,420,464

Other 50,282,227 23,155,293

₩ 578,979,486 ₩ 777,744,510

Inventories are insured against fire and other casualty losses for up to ₩134,789 million as of December 31, 2009.

In addition, the Company is insured against other casualty losses of up to approximately US$23,679 million for

ships under construction as of December 31, 2009.

7. available-for-Sale Securities

Available-for-sale securities as of December 31, 2009 and 2008, consist of the following:


2009 2008

Marketable equity ₩ 2,200,007 ₩ 1,404,179

Non-marketable equity1,2,3 41,489,561 31,853,926

Beneficiary certificates - 31,494,900

Equity investments4 11,941,774 10,740,274

₩ 55,631,342 ₩ 75,493,279

1 The fair value of Samsung Investment Trust Management Co., Ltd. was presented at ₩17,939 million, calculated

based on reasonable valuation model and proper estimation.

2 Investment in Doosan Engine Co., Ltd. amounting to ₩12,334 million was transferred from equity-method invest-

ments to available-for-sale securities as the Company lost significant influence over the associate(Note 9).

3 The fair value of non-marketable equity securities, excluding Samsung Investment Trust Management Co., Ltd.

and Doosan Engine Co., Ltd. could not be reliably estimated due to the lack of financial information. Accordingly,

these securities were presented at ₩11,217 million, their acquisition cost.

4 The Company invested in the equity of Korean Construction Guarantee and others as such investments are re-

quired for entities in the industry. The fair values of these equity investments can not be reliably estimated due to

the lack of financial information of the said companies. Accordingly, they are presented at their acquisition cost

and the equity investment is provided as a guarantee for a long-term debt.

Changes in unrealized gain (loss) for the years ended December 31, 2009 and 2008, are summarized as follows:


2009 2008

Balance at the beginning of period ₩ 14,491,904 ₩ 9,622,319

Unrealized gain on valuation of available-for-sale securities1 46,008,036 5,794,701

Realized loss on disposal of available-for-sale securities (1,494,900) (487,500)

Deferred income tax liabilities (9,792,890) (437,616)

Balance at the end of period ₩ 49,212,150 ₩ 14,491,904

1 Unrealized gain on valuation of available-for-sale securities amounting to ₩47,930 million was transferred from

unrealized gain on valuation of equity method investments.





8. Held-To-Maturity Securities

Held-to-maturity securities as of December 31, 2009 and 2008, consist of the following:

Maturity


2009 2008

Within 1 year ₩ 3,070,275 ₩ 370,082,203

Over 1 year and within 5 years 4,075,255 6,477,125

Over 5 years and within 10 years - 6,090

₩ 7,145,530 ₩ 376,565,418

9. Equity-Method investments

Equity-method investments as of December 31, 2009 and 2008, consist of the following:

2009

investee


Percentage of

Ownership

acquisitioncost

net assetvalue

Book value

Samsung Heavy Industries Ningbo Co., Ltd. 100% ₩ 83,347,709 ₩ 167,810,098 ₩ 167,810,098

Samsung Heavy Industries Rongcheng Co., Ltd. 100% 165,047,220 163,647,755 163,647,755

Samsung Sakhalin LLC 100% 3,909 1,015,830 1,015,830

Rongcheng Gaya Heavy Industries Co., Ltd.1 100% 56,100,000 45,643,203 52,194,501

MMHE-SHI LNG Sdn Bhd 30% 291,959 291,959 291,959

Samsung Heavy Industries India Pvt.Ltd. 100% 3,263,121 3,263,121 3,263,121

Camellia Consulting Corporation 100% 2,473,656 2,473,656 2,473,656

Samsung Heavy Industries (M) Sdn.Bhd 100% 184,531 184,531 184,531

SVIC 13 New Technology Business Investment 99% 990,000 990,000 990,000

Fukuoka Engineering Center 100% 405,915 405,915 405,915

Samsung Wind Energy, Inc. 100% 1,195,146 1,195,146 1,195,146

Samsung Heavy Industries Brazil 100% 233,520 233,520 233,520

₩ 313,536,686 ₩ 387,154,734 ₩ 393,706,032

1 Valuation of Rongcheng Bucheon Shipsteel Co.,Ltd. is included in the above amount.

2008

Investee


Percentageof

Ownership

Acquisition cost

Net assetvalue

Book value

Samsung Heavy Industries Ningbo Co., Ltd. 100% ₩ 75,545,716 ₩ 138,853,873 ₩ 138,853,873

Doosan Engine Co., Ltd. 32% 9,600,000 40,548,837 40,548,837

Samsung Sakhalin LLC 100% 3,909 8,123,799 8,123,799

Samsung Heavy Industries Rongcheng Co., Ltd. 100% 148,462,020 160,591,843 160,591,843

Rongcheng Gaya Heavy Industries Co., Ltd. 100% 56,100,000 47,910,877 56,100,000

MMHE-SHI LNG Sdn Bhd 30% 291,959 291,959 291,959

Samsung Heavy Industries India Pvt.Ltd. 100% 3,263,121 3,263,121 3,263,121

Camellia Consulting Corporation 100% 2,473,656 2,473,656 2,473,656

Samsung Heavy Industries (M) Sdn.Bhd 100% 82,246 82,246 82,246

₩ 295,822,627 ₩ 402,140,211 ₩ 410,329,334

The equity method was not applied to the investment in MMHE-SHI LNG Sdn Bhd, Samsung Heavy Industries In-

dia Pvt. Ltd., Camellia Consulting Corporation, Samsung Heavy Industries (M) Sdn. Bhd, SVIC 13 New Technology

Business Investment, Fukuoka Engineering Center, Samsung Wind Energy, Inc. and Samsung Heavy Industries

Brazil as the changes in their equity are not material to the Company’s financial statements.

The details of the equity method valuation for the years ended December 31, 2009 and 2008, are as follows:

2009

investee


Beginning acquisition(Disposal)

Valuation gain(loss)

capital adjustment2

Others3 Ending

Samsung Heavy Industries Ningbo Co., Ltd. ₩ 138,853,873 ₩ - ₩ 42,350,844 ₩ (13,394,619) ₩ - ₩ 167,810,098

Doosan Engine Co., Ltd.1 40,548,837 1,827,500 (61,045,740) (77,170,329) 95,839,732 -

Samsung Sakhalin LLC 8,123,799 - 603,615 (613,859) (7,097,725) 1,015,830

Samsung Heavy Industries Rongcheng Co., Ltd 160,591,843 16,585,200 434,937 (13,964,225) - 163,647,755

Rongcheng Gaya Heavy Industries Co., Ltd.

56,100,000 - (1,048,907) (2,856,592) - 52,194,501

MMHE-SHI LNG Sdn Bhd 291,959 - - - - 291,959

Samsung Heavy Industries India Pvt.Ltd. 3,263,121 - - - - 3,263,121

Camellia Consulting Corporation 2,473,656 - - - - 2,473,656

Samsung Heavy Industries (M) Sdn.Bhd 82,246 102,285 - - - 184,531

Samsung Wind Energy,Inc. - 1,195,146 - - - 1,195,146

Fukuoka Engineering Center - 405,915 - - - 405,915

SVIC 13 New Technology Business Investment - 990,000 - - - 990,000

Samsung Heavy Industries Brazil - 233,520 - - - 233,520₩ 410,329,334 ₩ 21,339,566 ₩ (18,705,251) ₩ (107,999,624) ₩ 88,742,007 ₩ 393,706,032





2008

Investee Beginning Acquisition(Disposal)


Capital Adjustment2

Others Ending

Samsung Heavy Industries Ningbo Co., Ltd. ₩ 68,913,940 ₩ 24,840,000 ₩ 6,837,188 ₩ 38,262,745 ₩ - ₩ 138,853,873

Doosan Engine Co., Ltd. 159,409,847 - (131,214,168) 12,833,158 (480,000) 40,548,837

Samsung Sakhalin LLC 10,675,254 - 78,222 681,241 (3,310,918) 8,123,799

Samsung Heavy Industries Rongcheng Co., Ltd 61,572,785 82,057,030 (9,365,451) 26,327,479 - 160,591,843

Rongcheng Gaya Heavy Industries Co., Ltd. - 56,100,000 - - - 56,100,000

MMHE-SHI LNG Sdn Bhd 291,959 - - - - 291,959

Samsung Heavy Industries India Pvt.Ltd. 2,608,551 654,570 - - - 3,263,121

Camellia Consulting Corporation 2,473,656 - - - - 2,473,656

Samsung Heavy Industries (M) Sdn.Bhd - 82,246 - - - 82,246

₩ 305,945,992 ₩ 163,733,846 ₩ (133,664,209) ₩ 78,104,623 ₩ (3,790,918) ₩ 410,329,334

1 The Company lost significant influence over Doosan Engine Co., Ltd. due to unequal paid-in capital increase on

December 18, 2009. The equity-method investment amounting to ₩12,334 million was reclassified as available-

for-sale securities. 2 The Company calculated its accumulated other comprehensive income by recognizing unrealized gain and loss

on valuation of equity method investments amounting to ₩32,743 million (2008:₩114,754 million) and ₩2,228

million (2008: Nil), respectively, excluding tax effects as of December 31, 2009.3 Others consists of dividends and transfer to other accounts.

Details of changes in the differences between the initial purchase price and the Company’s initial proportionate

ownership in the net book value of the investees are as follows:

2009


Beginning increase(Decrease)

amortization Ending

Rongcheng Gaya Heavy Industries Co., Ltd. ￦ 8,189,123 ￦ - ￦ (1,637,825) ￦ 6,551,298

Summary of financial information of major equity method investees as of and for the years ended December 31,

2009 and 2008, follows:

2009

investee


Total assets

Totalliabilities

Revenue net income

Samsung Heavy Industries Ningbo Co., Ltd. ￦ 292,028,617 ￦ 124,218,519 ￦ 227,495,230 ￦ 42,350,844

Samsung Sakhalin LLC 1,049,125 33,295 - 603,615

Samsung Heavy Industries Rongcheng Co., Ltd 439,308,221 275,660,466 99,214,670 434,937

Rongcheng Gaya Heavy Industries Co., Ltd. 123,207,769 77,564,565 69,258,964 588,918

￦ 855,593,732 ￦ 477,476,845 ￦ 395,968,864 ￦ 43,978,314

2008

Investee


Total Assets

TotalLiabilities

Revenue Net Income (Loss)

Samsung Heavy Industries Ningbo Co., Ltd. ￦ 366,738,529 ￦ 27,884,656 ￦ 351,594,338 ￦ 6,837,188

Doosan Engine Co., Ltd. 3,216,235,511 3,089,520,397 1,734,836,579 (410,044,275)

Samsung Sakhalin LLC 9,759,940 1,636,141 164,241 78,222

Samsung Heavy Industries Rongcheng Co., Ltd 442,043,398 281,451,555 18,903,112 (9,365,451)

Rongcheng Gaya Heavy Industries Co., Ltd. 130,596,258 82,685,381 - -

￦ 4,165,373,636 ￦ 3,683,178,130 ￦ 2,105,498,270 ￦ (412,494,316)

10. Short-Term and long-Term loans Receivable

Short-term and long-term loans receivable at December 31, 2009 and 2008, consist of the following:


interest Rates at

12/31/2009

2009 2008

Loans to employees 0-4% ￦ 13,403,269 ￦ 11,065,660

Other loans receivable 0-6% 7,415,008 10,915,608

20,818,277 21,981,268


Less: Short-term loans receivable (6,109,894) (7,354,475)

￦ 13,239,475 ￦ 13,116,217





11. Property, Plant and Equipment

Changes in property, plant and equipment for the years ended December 31, 2009 and 2008, consist of the following:

2009

(In thousands ofKorean won)

Balance as of January 1,

2009

acquisition Reclassifi-cation

Disposal Depreciation impairment (Reversal)

Balance as of December 31,

2009

Land ￦ 545,731,743 ￦ 4,845,960 ￦ 127,322,659 ￦ (158,658) ￦ - ￦ - ￦ 677,741,704

Buildings and structures 1,532,994,770 5,983,314 303,401,889 (488,755) (44,601,476) - 1,797,289,742

Machinery and equipment 588,817,353 8,700 156,095,375 (71,479) (98,505,859) - 646,344,090

Vehicles and heavy equipment 101,680,223 18,045,428 57,660,353 (174,496) (21,567,972) - 155,643,536

Tools, furniture and fixtures 284,819,290 37,014,119 10,994,376 (300,248) (98,688,014) - 233,839,523

Construction in-Progress 747,478,269 646,526,277 (654,902,811) (21,815,774) - - 717,285,961

Machinery in-transit 1,209,159 8,578,762 (571,841) - - - 9,216,080

Temporary structures 83,009 32,865 - (50,440) - - 65,434

￦ 3,802,813,816 ￦ 721,035,425 ￦ - ￦ (23,059,850) ￦ (263,363,321) ￦ - ￦ 4,237,426,070

2008

(In thousands ofKorean won)


2008

Acquisition Reclassifi-cation1

Disposal Depreciation Impairment2 (Reversal)


2008

Land ￦ 494,134,323 ￦ 22,199,704 ￦ 19,156,363 ￦ (62,041) ￦ - ￦ 10,303,394 ￦ 545,731,743

Buildings and structures 1,327,152,056 3,098,068 240,800,300 (237,035) (37,818,619) - 1,532,994,770

Machinery and equipment 546,994,363 1,838,820 129,480,490 (2,949,954) (86,546,366) - 588,817,353

Vehicles and heavy equipment 85,242,574 30,052,866 5,659,917 (80,939) (19,194,195) - 101,680,223

Tools, furniture and fixtures 258,449,836 64,710,490 56,883,285 (1,017,874) (94,206,447) - 284,819,290

Construction in-Progress 394,975,732 845,388,858 (492,886,321) - - - 747,478,269

Machinery in-transit 14,212,109 35,349,021 (48,351,971) - - - 1,209,159

Temporary structures 32,718 155,378 - (105,087) - - 83,009

￦ 3,121,193,711￦ 1,002,793,205 ￦ (89,257,937) ￦ (4,452,930) ￦ (237,765,627) ￦ 10,303,394 ￦ 3,802,813,816

1 Construction in-progress amounting to ₩89,257 million was transferred to intangible asset(ERP system).2 The Company recognized reversal of impairment of ₩10,303 million in relation to the Chilseo industrial complex.

As of December 31, 2009, balance of revaluation surplus is ₩76,709 million.

As of December 31, 2009, property, plant and equipment are insured against fire and other casualty losses for up

to ₩3,398,557 million (2008: ₩2,854,621 million).

As of December 31, 2009, the value of the Company’s land, as determined by the local government in Korea for

property tax assessment purposes, was ₩766,351 million (2008 : ₩677,487 million).

As of December 31, 2009, the use of certain portions of the Company’s property, plant and equipment are restricted

for real estate lease up to a maximum of 11,028 million.

12. intangible assets

Changes in intangible assets for the years ended December 31, 2009 and 2008, consist of the following:

2009



2009

acquisition amortization Disposal and impairment


2009

accumulated amortization

Development costs ￦ 4,605,612 ￦ 23,119,274 ￦ - ￦ - ￦ 27,724,886 ￦ -

Other intangible assets 87,778,994 94,461 (17,879,165) - 69,994,290 (19,457,119)

￦ 92,384,606 ￦ 23,213,735 ￦ (17,879,165) ￦ - ￦ 97,719,176 ￦ (19,457,119)

2008



2008

Acquisition Amortization Disposal and Impairment


2008

Accumulated Amortization

Development costs ￦ - ￦ 4,605,612 ￦ - ￦ - ￦ 4,605,612 ￦ -

Other intangible assets 20,805 89,257,939 (1,499,750) - 87,778,994 (1,577,954)

￦ 20,805 ￦ 93,863,551 ￦ (1,499,750) ￦ - ￦ 92,384,606 ￦ (1,577,954)





The amortization of intangible assets for the years ended December 31, 2009 and 2008, is charged to the

following accounts:


2009 2008

Production costs ￦ 17,870,480 ￦ 1,487,632

Selling and administrative expenses 8,685 12,118

￦ 17,879,165 ￦ 1,499,750

Research and development expenses charged to operations for the years ended December 31, 2009 and 2008,

consist of following :


2009 2008

Research expenses ￦ 51,765 ￦ 801,685

Ordinary development expenses 113,187,799 104,587,179

￦ 113,239,564 ￦ 105,388,864

13. Short-Term Borrowings

Short-term borrowings as of December 31, 2009 and 2008, consist of the following:


interest Rates at

12/31/2009

2009 2008

General term loans and others 1.7 - 5.7 % ￦ 1,505,642,681 ￦ 20,300,000

14. long-Term Debts

Long-term debts as of December 31, 2009 and 2008, consist of the following:


Reference 2009 2008

Long-term borrowings (a) ￦ 459,533,333 ￦ 9,533,333

Debentures (B) 814,777,200 128,320,874

less: Discount (1,977,573) -

￦ 1,272,332,960 ￦ 137,854,207

(A) Long-term borrowings as of December 31, 2009 and 2008, consists of the following:


interest Rates at 12/31/2009

2009 2008

The Korea Development Bank and others 5.7~6.2 % ￦ 450,000,000 ￦ -

Korea Housing Guarantee Co., Ltd. 1.0 % ￦ 9,533,333 ￦ 9,533,333

459,533,333 9,533,333

(B) Debentures outstanding as of December 31, 2009 and 2008, consist of the following:


interest Rates 12/31/2009

issuance date

Maturity Date

2009 2008

Floating rate notes liBOR + 0.35% 12/19/2006 12/12/2011 ￦ 114,777,200 ￦ 128,320,874

The 88th unsecured debenture 6.05% 3/24/2009 3/24/2012 700,000,000 -

￦ 814,777,200 ￦ 128,320,874

On December 19, 2006, the Company listed floating rate notes on the London Stock Exchange and entered into a

currency swap agreement with financial institutions to hedge interest rate and currency risk(Note 16).

The payment schedule of long-term borrowings and debentures as of December 31, 2009, is as follows:


long-term borrowings Debentures Total

2011 ￦ 450,866,666 ￦ 114,777,200 ￦ 565,643,866

2012 866,667 700,000,000 700,866,667

Thereafter 7,800,000 - 7,800,000

￦ 459,533,333 ￦ 814,777,200 ￦ 1,274,310,533





15. accrued Severance Benefits

Changes in accrued severance benefits for the years ended December 31, 2009 and 2008, consist of the following:


2009 2008

Beginning balance ￦ 247,539,037 ￦ 221,668,344

Increase 62,124,735 72,025,120

Payment (42,385,308) (46,154,427)

267,278,464 247,539,037

Less: Pension plan assets (87,083,044) (50,264,504)

National Pension Fund contributions (1,326,649) (1,467,803)

Severance benefit deposits (101,696,948) (112,282,417)

￦ 77,171,823 ￦ 83,524,313

As of December 31, 2009, the Company funded 70.6% (2008: 65.7%) of severance payable through severance

insurance deposits with Samsung Fire and Marine Insurance Co., Ltd.

As of December 31, 2009, the Company has management agreement for the pension plan assets with Samsung

Life Insurance Co., Ltd. The details of pension plan assets are as follows:


2009 2008

Cash and cash equivalents ￦ 15,920,284 ￦ 32,550,681

Available-for-sale securities 45,336,832 10,170,728

Others 25,825,928 7,543,095

￦ 87,083,044 ￦ 50,264,504

16. liability Provision, commitments and contingencies

A. Liability provision

Liability provisions as of December 31, 2009, are as follows:


Reference Balance at 1/1/2009

increase Decrease Balance at 12/31/2009

Provision for long-term incentives (a) ￦ 25,912,600 ￦ 20,094,013 ￦ 4,696,813 ￦ 41,309,800

Warranty provision (B) 54,514,575 42,288,998 21,405,375 75,398,198

Provision for losses from construction contracts (c) 151,275,962 10,000,169

145,015,161 16,260,970

￦ 231,703,137 ￦ 72,383,180 ￦ 171,117,349 ￦ 132,968,968

(A) The Company introduced long-term incentive plans for its executives based on three-year management perfor-

mance criteria and has made a provision for the estimated incentive cost for the current year.

(B) Subject to sales contracts, the Company is liable to repair any defects in its products arising during the warranty

period. Accordingly, the Company provides, as of the date of the statement of financial position, a provision for

warranty to cover any obligations which may arise during the warranty period. Any unused warranty provision

is recognized as non-operating income.

(C) When foreseeable losses are expected from short-term and long-term contracts in progress, the Company rec-

ognizes the total expected loss from the contracts as a provision for losses from construction contracts.

B. Contingencies

(A) As of December 31, 2009, the Company is contingently liable for guarantees of indebtedness of suppliers ap-

proximating ₩3,991 million and for guarantees of borrowings of MMHE-SHI LNG Sdn. Bhd. approximating

US$ 4,000 thousand.

(B) Based on the agreement entered on August 24, 1999, with respect to Samsung Motor Inc.’s (“SMI”) bankrupt-

cy proceedings, Samsung Motor Inc.’s creditors (“the Creditors”) filed a civil action against Mr. Kun Hee Lee,

former chairman of the Company, and 28 Samsung Group affiliates including the Company under joint and

several liability for failing to comply with such agreement. Under the suit, the Creditors have sought ₩2,450

billion for loss of principal on loans extended to SMI, a separate amount for breach of the agreement, and an

amount for default interest.





On January 31, 2008, the Seoul Administrative Court made the ruling on this case. Under the ruling, Samsung

Group affiliates were ordered to pay approximately ₩1,634 billion to the Creditors by disposing of 2,334,045

shares of Samsung Life Insurance Co., Ltd. (the “Shares”) donated by Mr. Lee, excluding 1,165,955 shares

already sold by the Creditors. If the proceeds from sale of Shares are not sufficient to satisfy their obligations,

Samsung Group affiliates were obligated to satisfy the shortfall by either participating in the Creditors’equity

offering or purchasing subordinated debentures issued by the Creditors. In addition, Samsung Group affiliates

were ordered to pay default interest on ₩1,634 billion at 6% per annum for the period from January 1, 2001,

to the date of settlement.

The Company, other Samsung Group affiliates, Mr. Lee, and the Creditors all have appealed the ruling, and cur-

rently, the second trial for this case is pending at the Seoul High Court. The ultimate outcome of this case can

not be determined at this time. Since the amount of Company’s obligation is uncertain, the effects of this matter

on the Company’s financial statements can not be reasonably determined.

(C) As of December 31, 2009, the Company is named as a defendant in 21 legal cases, excluding the case dis-

cussed above(B). The aggregate amounts of claims as the defendant amounted to approximately ₩485,135

million.

As of December 31, 2009, the Company believes that, although the outcome of these cases is uncertain, in

any event, the resolutions of these cases will not have a material adverse effect on the operations or financial

position of the Company.

Main legal actions are as follows:

(In millions of Korean won)

legal actions amount

Claims for damages and others 251,535

Claims for indemnity 233,600

(D) As of December 31, 2009, the Company provided seven notes amounting to ₩10,200 million to Hankook Real

Estate Trust Co., Ltd. and four other companies, as collaterals for the warranty after completion and others.

C. Commitments

(A)

(In millions of Korean won)

financial institutions 2009

Overdraft 6 banks including Woori bank ￦ 56,000

Foreign trade financing 8 banks including Woori bank 1,111,784

General loan 7 banks including Woori bank 1,186,600

Purchase card program and others 7 banks including nonghyup 750,000

Others 2 banks including Korea Eximbank 820,000

(B) As of December 31, 2009, the Company entered into a guarantee agreement for up to ₩21,000 million with

Kookmin Bank for the short-term loan from Korea Construction Financial Cooperative(Note 10).

(C) As of December 31, 2009, the Company has technical assistance agreements with five foreign companies.

(D) As of December 31, 2009, the Company has agreements with the financial institutions including the Korea

Eximbank, wherein institutions guarantee the refund of the advance payments made by the customers of the

Company for up to US$ 13,143 million when the Company cannot meet its obligations in accordance with the

ship building contracts. The ships under construction are pledged as collaterals for the guarantees provided

by the financial institutions.





D. Derivatives

(A) As of December 31, 2009, the Company has forward exchange contracts with Barclays Bank and 22 other

banks to hedge foreign exchange fluctuation risk relation to the foreign advance receipts, foreign payables, and

foreign debentures. The valuation gain(loss) of forward contract exchange contracts are as follows :

Shot position long position Valuation gain(loss)

on forward exchange

Valuationgain(loss)

on forwardexchange

for hedgingpurpose


on firmcommitmentfor hedging

purpose

firm commitment

forward exchangecontract

USD 4,196,332 KRW 5,178,680,423 ￦ 3,645,080 ￦ 238,531,176 ￦ (238,491,423) ￦ 218,653,383 ￦ 237,294,342

USD 20,765,284 KRW 20,187,786,837 (4,029,176) 1,035,346,684 (1,033,629,448) 4,006,928,672 (4,167,407,636)

EUR 2,666 KRW 4,682,335 - 203,776 (203,776) (203,776) 203,776

EUR 147,798 KRW 183,857,756 - 4,097,620 (4,097,620) 63,225,835 (63,225,835)

GBP 2,800 KRW 5,481,794 - 210,181 (210,181) (210,181) 210,181

MYR1 13,522 USD 3,986 - (871) - - 46,474

MYR1 5,746 USD 1,664 (8,464) - - - (14,377)

KRW 9,489,177,107 USD 9,723,803 (7,055,579) (489,501,024) 489,501,024 (2,122,061,649) 1,909,130,870

KRW 2,140,523,928 USD 1,742,505 (839,638) (89,228,979) 89,183,828 90,912,592 (91,622,262)

KRW 4,222,005 EUR 2,488 41,246 - - - 57,888

KRW 44,111,088 EUR 25,282 (493,750) (1,156,313) 1,156,313 1,156,313 (1,650,062)

USD 276,650 EUR 197,854 324,426 8,674,841 (8,674,841) (11,907,534) 8,036,685

USD 1,009,772 EUR 680,002 (81,908) 16,763,104 (16,763,104) 32,443,386 (38,493,758)

USD 2,781 DKK 14,564 - 84,611 (84,611) (25,782) 19,899

USD 558 DKK 2,751 - 6,291 (6,291) 21,665 (31,992)

USD 4,880 GBP 3,058 - 40,311 (40,311) (40,311) 40,311

USD 22,267 GBP 13,492 (4,308) (585,756) 585,756 708,846 (639,455)

USD 18,688 JPY 1,810,713 (20,523) (26,029) 26,029 2,743,297 1,137,923

USD 18,002 JPY 1,619,260 (124,822) (416,200) 416,200 416,200 (541,022)

USD 41,602 nOK 276,070 - 6,816,354 (6,816,354) (6,461,660) 6,399,984

USD 72,540 nOK 404,913 - 6,978,129 (6,978,129) 2,168,657 (3,500,851)

USD 335 SEK 2,429 - 5,402 (5,402) (5,402) 5,402

USD 7,035 SEK 45,447 - 484,701 (484,701) 634,482 (780,585)

KRW 94,508,070 USD 100,000 - (13,543,673) - - 21,457,200

￦ (8,647,416) ￦ 723,784,336 ￦ (735,617,042) ￦ 2,279,097,033 ￦ (2,183,866,900)

1 Including hedge contracts to reduce cash flow fluctuation risk of expected future transaction. Related Valuation

loss amounting ₩6 million was charged into other comprehensive income(expense).

As of December 31, 2009, the Company has forward exchange contracts for nickel. The details are as follows:


Hedged item

counterparty End Date Buy/Sell DealQuantity(in tons)

contract ornotional amount

fair Value net UnrealizedGain(loss)

forward exchangecontract

NickelGoldman

Sachs and2 others

aug 2011 Buy 3,344 ￦ 63,549,572 ￦ 69,024,482 ￦ 5,474,910 ￦ 5,474,910

March 2010 Sell 740 12,969,394 15,166,163 (2,196,769) (2,196,769)

(B) The Company applies fair value hedge accounting and is exposed to fluctuations in fair value until May 31, 2013.

The realized gain and loss on derivative transactions recognized upon the expiration of contracts during the year

amounted to ₩1,968,871 million and ₩1,922,947 million, respectively. The realized gain and loss on firm com-

mitments recognized during the year amounted to ₩1,729,224 million and ₩1,940,151 million, respectively.

17. Retained Earnings

Retained earnings as of December 31, 2009 and 2008, consist of the following:


2009 2008

Appropriated

Legal reserve (A) ￦ 43,800,000 ￦ 33,000,000

Voluntary reserve (B) 1,063,269,854 554,269,854

1,107,069,854 587,269,854

Unappropriated 669,940,678 627,685,699

￦ 1,777,010,532 ￦ 1,214,955,553

(A) The Korean Commercial Code requires the Company to appropriate, as a legal reserve, an amount equal to a

minimum of 10% of annual cash dividends declared, until such reserve equals 50% of its capital stock. This

reserve is not available for payment of cash dividends but may be transferred to capital stock or used to reduce

accumulated deficit, if any.

(B) Voluntary reserves represent reserves for facility investment, research, and human resource development

under the special Tax Treatment Control Law. This reserve may be transferred to paid in capital or used for

reduction of accumulated deficit.

(In thousands of Korean won and other currencies)





18. Dividends

Details of dividends declared for the years ended December 31, 2009, are as follows:


Dividend Rate

Dividend amount

Common shares 10 % ￦ 107,873,363

Preferred shares 11 % 63,166

￦ 107,936,529

The Company’s dividend payout ratio for the year ended December 31, 2009, follows:

(In Korean won)

Total dividends (A) ￦ 107,936,528

Net income (B) 669,854,872

Dividend payout ratio (A/B) 16.1%

The Company’s dividend yield ratios for the years ended December 31, 2009, are as follows:

(In Korean won)

common Shares

Preferred Shares

Dividend per share (A) ￦ 500 ￦ 550

Market price as of statement of financial position date (B) 24,200 31,200

Dividend yield ratio (A/B) 2.1% 1.8%

19. Treasury Stock

As of December 31, 2009, the Company holds 15,128,659 shares of its common stock amounting to ₩670,557 million.

The treasury stock is recorded as a capital adjustment and is reserved for the exercise of stock options and others.

20. Stock compensation Plans

The Company has a stock option plan that provides for granting stock purchase options to employees or directors who

have contributed or are expected to contribute to the management and technology innovation of the Company.

A summary of the terms of stock options as of December 31, 2009, follows :

Date of the grant

March 24, 2000

March 5, 2001

March 9, 2002

february 28, 2003

May 10, 2004

Quantity of stock To be issued 262,000 130,130 416,800 163,800 191,500

Exercise price per share¹ ￦ 5,000 ￦ 5,600 ￦ 5,000 ￦ 5,000 ￦ 5,400

Exercisable period from the date of the grant² 3~7 years 3~7 years 2~8 years 2~8 years 2~8 years

¹ The exercise price can be adjusted in case of issuing new shares, stock dividends, stock splits or stock merger.² The options can be fully vested after two or three years from the date of grant.

21. income Tax and Deferred Tax assets

Income tax expense for the years ended December 31, 2009 and 2008, consist of the following:


2009 2008

Current income taxes ￦ 162,548,630 ￦ 222,798,904

Deferred income tax due to temporary differences 20,745,818 (11,406,948)

Deferred income tax due to tax loss carry forwards (885,097) (383,101)

Deferred income tax charged to equity 2,493,183 3,974,533

Income tax expense ￦ 184,902,534 ￦ 214,983,388

Reconciliation of net income before tax and income tax expense for the years ended December 31, 2009 and

2008, follows:


2009 2008

Net income before tax ￦ 854,757,406 ￦ 842,326,126

Income tax based on statutory rate Adjustments ￦ 206,827,092 ￦ 231,608,885

Adjustments

Tax deduction (27,409,824) (14,649,992)

Permanent differences and others (3,311,402) (82,855)

Effects of the change in the statutory tax rate 8,796,668 (8,944,146)

Unrecognized tax assets from temporary differences - 7,051,496

Income tax expense ￦ 184,902,534 ￦ 214,983,388

Effective tax rate (Income tax over net income before tax) 21.6% 25.5%





2008

Temporary differences Deferred tax assets(liabilities)


Beginning Increase(Decrease)

Ending Beginning Ending

Accrued income ￦ (45,975,358) ￦ (17,493,143) ￦ (63,468,501) ￦ (12,643,224) ￦ (15,359,377)

Inventories 144,293 - 144,293 39,681 31,745

Property, plant and equipment 27,015,496 (27,287,596) (272,100) 7,429,261 (36,127)

Held-to-maturity securities (7,189,817) (8,046,941) (15,236,758) (1,977,200) (3,681,524)

Available-for-sale securities 14,205,500 (3,392,055) 10,813,445 3,906,513 2,378,957

Equity-method investments (143,381,365) 137,455,127 (5,926,238) (32,378,380) (1,303,772)

Loss of impairment of investment 948,390 - 948,390 260,807 208,646

Allowance for doubtful accounts 49,064,173 (42,235,470) 6,828,703 13,492,648 1,502,315

Unrealized foreign exchange gain(loss) (500,000) 75,652,745 75,152,745 (137,500) 17,427,945

Accrued expenses 21,286,528 78,802,210 100,088,738 5,853,795 24,221,475

Warranty provision 58,733,831 (4,219,256) 54,514,575 16,151,804 12,591,962

Provision for losses from construction Contracts 59,940,709 91,335,253 151,275,962 16,483,695 35,556,745

Unsettled debts 3,616,200 16,877,000 20,493,200 994,455 4,582,147

Debentures 1,007,000 (36,154,874) (35,147,874) 276,925 (7,732,532)

Derivatives (58,039,248) (236,669,097) (294,708,345) (15,960,793) (57,041,101)

Deemed dividends 28,737,594 17,330,638 46,068,232 7,902,838 10,135,011

Others 15,133,750 (7,357,094) 7,776,656 4,161,781 1,781,541

￦ 24,747,676 ￦ 34,597,447 ￦ 59,345,123 ￦ 13,857,106 ￦ 25,264,056

Deferred income taxes charged directly to the shareholders’ equity (75,956,739) (89,743,323) (165,700,062) (20,888,103) (36,454,014)

Tax deduction 5,301,067 383,101 5,684,168 5,301,067 5,684,168

￦ (1,729,930) ￦ (5,505,790)

The gross balances of deferred tax assets and liabilities are as follows :


2009 2008

current non - current Current Non - current

Deferred tax assets ￦ 40,391,271 ￦ 117,765,831 ￦ 41,277,455 ￦ 110,706,756

Deferred tax liabilities 54,616,918 114,937,899 73,122,001 84,368,000

￦ (14,225,647) ￦ 2,827,932 ￦ (31,844,546) ￦ 26,338,756

Changes in the temporary differences and related deferred tax assets and liabilities are as follows:

2009

Temporary differences Deferred tax assets(liabilities)


Beginning increase(Decrease)

Ending Beginning Ending

Accrued income ￦ (63,468,501) ￦ 50,685,713 ￦ (12,782,788) ￦ (15,359,377) ￦ (3,093,434)

Inventories 144,293 - 144,293 31,745 31,745

Property, plant and equipment (272,100) (918,241) (1,190,341) (36,127) (253,943)

Held-to-maturity securities (15,236,758) 15,236,758 - (3,681,524) -

Available-for-sale securities 10,813,445 47,024,073 57,837,518 2,378,957 12,724,254

Equity-method investments (5,926,238) (81,464,257) (87,390,495) (1,303,772) (19,225,909)

Loss of impairment of investment 948,390 - 948,390 208,646 208,646

Allowance for doubtful accounts 6,828,703 98,305 6,927,008 1,502,315 1,523,942

Unrealized foreign exchange gain(loss) 75,152,745 (20,958,654) 54,194,091 17,427,945 13,114,970

Accrued expenses 100,088,738 66,905,381 166,994,119 24,221,475 40,412,577

Warranty provision 54,514,575 20,883,623 75,398,198 12,591,962 16,587,603

Provision for losses from construction contracts 151,275,962 (135,014,992) 16,260,970 35,556,745 3,577,413

Unsettled debts 20,493,200 17,281,273 37,774,473 4,582,147 9,141,422

Debentures (35,147,874) 13,543,674 (21,604,200) (7,732,532) (5,228,216)

Derivatives (294,708,345) 76,774,806 (217,933,539) (57,041,101) (50,801,961)

Deemed dividend 46,068,232 (305,050) 45,763,182 10,135,011 10,067,900

Reserve for research and human resource development - (120,000,000) (120,000,000) - (26,400,000)

Others 7,776,656 1,425,348 9,202,004 1,781,541 2,131,229

￦ 59,345,123 ￦ (48,802,240) ￦ 10,542,883 ￦ 25,264,056 ￦ 4,518,238

Deferred income tax charged directly to shareholder’s equity (165,700,062) 63,494,526 (102,205,536) (36,454,014) (22,485,218)

Tax deduction 5,684,168 885,097 6,569,265 5,684,168 6,569,265

￦ (5,505,790) ￦ (11,397,715)

Effect of the changes in Tax law

The tax effect of cumulative temporary difference was calculated based on future tax rate of the fiscal year when

temporary differences are expected to reverse. The 24.2% and 22% tax rates were used for temporary difference to

reverse in 2010 and 2011, and thereafter, respectively. As a result, deferred tax assets and liabilities were higher by

₩5,817 million and ₩3,618 million, respectively, as compared to the amount using the previous tax rate.





Deferred income taxes charged directly to the shareholders’ equity are as follows:


2009 2008

Temporary differences

Deferredincome tax

Temporary differences

Deferredincome tax

Loss on valuation of available-for-sale securities ￦ (63,092,500) ￦ (13,880,350) ￦ (18,579,365) ￦ (4,087,460)

Gain on valuation of derivative instruments 8,037 1,768 - -

Gain on valuation of equity-method investments (41,977,665) (9,235,086) (147,120,697) (32,366,554))

Loss on valuation of equity-method investments 2,856,592 628,450 - -

￦ (102,205,536) ￦ (22,485,218) ￦ (165,700,062) ￦ (36,454,014)

The Company did not recognize the temporary difference amounting to ₩187,157 million as income tax liability

pursuant to the Assets Revaluation Act as it is highly unlikely that the Company will dispose of its land in the near

future.

Income taxes charged directly to the shareholders’ equity are as follows:


2009 2008

Gain on disposal of treasury stock(Increase in capital surplus) ￦ 2,493,183 ￦ 3,974,533

Recognition of Deferred income Tax assets based on future realizability

Realization of the future tax benefits related to the deferred tax assets is dependent on many factors, including the

Company’s ability to generate taxable income within the period during which the temporary differences reverse,

the outlook of the Korean economic environment, and the overall future industry outlook. Management periodically

considers these factors in reaching its conclusion and recognized the deferred income tax asset since all the future

(deductible) tax benefits are determined to be realizable as of December 31, 2009.

22. Earnings Per Share

Basic earnings per share for the years ended December 31, 2009 and 2008, was calculated as follows:

(In millions of Korean won, except per share amount)


2009 2008

Net income ￦ 669,855 ￦ 627,343

Adjustments (362) (340)

Net income available for common stock 669,493 627,003

Weighted average number of common stock(in thousands of share) 215,583 216,255

Earnings per share in Korean won ￦ 3,105 ￦ 2,899

Diluted earnings per share for the years ended December 31, 2009 and 2008, was calculated as follows:


2009 2008

Diluted net income available common stock ￦ 669,493 ￦ 627,003

Weighted average number of common share for diluted1

(in thousands of share) 216,661 217,544

Diluted earnings per share in Korean won ￦ 3,090 ￦ 2,882

1 Weighted average number of common stock is as follows:

(In thousands of shares)

2009 2008

January 1, 2009 215,473 217,254

Acquisition of treasury stock 110 (999)

Adjusted weighted average number of common stock 215,583 216,255

Stock options 1,078 1,289

Weighted average number of common stock 216,661 217,544





24. assets and liabilities Denominated in foreign currencies

As of December 31, 2009, assets and liabilities denominated in foreign currencies and related gains and losses on

foreign currency translation for the years ended December 31, 2009 and 2008, are as follows:

(Only Korea won in thousands)

2009

foreigncurrencies

foreigncurrencyamount

Korean WonEquivalent

TranslationGain

Translationloss

foreign currency assets

Cash and cash equivalents USD 105,790 ￦ 123,521 ￦ - ￦ 12

cnY 35,813 6,127 8,824 9,804

Trade accounts and notes receivable

USD 2,729,788,334 3,187,300,859 92 826,350

EUR 21,720 36,365 - 2,873

JPY 23,665,000 298,846 - 14,228

MYR 284,764 97,050 - 5,895

Other accounts receivable USD 113,693 132,748 - 2,399

foreign currency liabilities

Trade accounts and notes payable

USD 42,012,745 49,054,080 114,469 147,096

EUR 512,460 858,002 30,795 -

GBP 1,417 2,662 64 -

nOK 6,045,808 1,217,988 - 5,985

Accrued expense USD 219,315,409 256,072,671 16,575,946 2,346,281

EUR 47,339 79,259 647 -

GBP 2,186 4,104 358 -

JPY 2,325,000 29,361 512 -

nOK 830,800 167,373 2,750 -

SGD 63,908 53,125 214 -

Debentures USD 100,000,000 114,777,200 13,543,673 -

Borrowings USD 83,764,619 97,803,569 - 128,435

EUR 13,500,818 22,604,150 659,708 -

￦ 30,938,052 ￦ 3,489,358

23. Related Party Transactions

Significant transactions with related parties for the years ended December 31, 2009 and 2008, and the related ac-

count balances as of December 31, 2009 and 2008, are as follows:

(in thousands of Korean won)

2009

Sales Purchases Receivables Payables

Subsidiaries ￦ 565,465 ￦ 342,719,410 ￦ 12,158,187 ￦ -

Equity-method investees - 515,688,640 - -

Others 273,221,337 406,545,990 127,624,130 89,761,630

￦ 273,786,802 ￦ 1,264,954,040 ￦ 139,782,317 ￦ 89,761,630


2008

Sales Purchases Receivables Payables

Subsidiaries ￦ 2,300,393 ￦ 345,369,769 ￦ 45,341,424 ￦ 8,059,171

Equity-method investees - 495,412,874 247,637,507 18,692,885

Others 225,044,137 456,761,294 160,324,807 79,326,344

￦ 227,344,530 ￦ 1,297,543,937 ￦ 453,303,738 ￦ 106,078,400

Key Management compensation

For the year ended December 31, 2009, key management compensation includes short-term benefits (including

short-term incentives) of ₩3,343 million and long-term benefits (including severance benefits) of ₩4,881 million.

Key management consists of registered executive officers who have authority and responsibility in the planning,

directing and controlling of the operations of the Company.





(Only Korea won in thousands)

2008

ForeignCurrencies

Foreign Currencyies

Amount

Korean WonEquivalent

TranslationGain

TranslationLoss

foreign currency assets

Cash and cash equivalents USD 12,857,026 ￦ 16,167,710 ￦ 9 ￦ -

Trade accounts and notes receivable

USD 1,338,876,923 1,683,637,730 1,918,932 360,504

EUR 21,720 38,579 768 200

JPY 41,365,000 576,583 34,213 46,713

Other accounts receivable USD 45,289,954 56,952,117 8,853,658 207,936

foreign currency liabilities

Trade accounts and notes payable USD 138,343,783 173,967,307 12,216,870 1,824

JPY 220,200 3,069 113 -

Accrued expense USD 221,177,412 278,130,595 984,978 64,086,491

EUR 2,780,204 4,938,254 38,845 -

NOK 131,250 23,647 3,411 -

Debentures USD 100,000,000 128,320,874 - 29,725,320

￦ 24,051,797 ￦ 94,428,988

25. Segment information

A summary of information of the Company’s operations by business segments as of and for the year ended Decem-

ber 31, 2009, follows:

General information by business segment

Segment Products and Services Sales ratio (%)

Shipbuilding Tanker, lnG, off-shore platform, others 93.63

Construction Engineering works, construction, others 6.37

100.00

financial data by business segment


Shipbuilding construction Total

Sales

Sales to customers ￦ 12,261,441,292 ￦ 833,502,312 ￦ 13,094,943,604

Inter-segment sales 298,449,323 178,872,666 477,321,989

￦ 12,559,890,615 ￦ 1,012,374,978 ￦ 13,572,265,593

Operating profit ￦836,760,301 ￦ 25,437,847 ￦862,198,148

Property, plant and equipment & intangible assets ￦ 4,305,715,729 ￦ 29,429,517 ￦ 4,335,145,246

Depreciation & amortization ￦ 279,438,564 ￦ 1,803,922 ￦ 281,242,486

Reconciliation to operating profit

Total business segments operating profit ￦ 862,198,148

Inter-segment revenue -

Undistributed selling and administrative expenses 68,567,637

Operating profit per statement of income ￦ 793,630,511

26. comprehensive income

Comprehensive income for the years ended December 31, 2009 and 2008, consists of the following:


2009 2008

Net income ￦ 669,854,872 ￦ 627,342,738

Other comprehensive income(expense)

Gain on valuation of available-for-sale securities, net of related income taxes of ￦(9,793 million)(2008: ￦(438 million)) 34,720,246 4,869,585

Gain on valuation of equity-method investments, net of related income taxes of ￦23,131 million (2008: ￦(13,387 million)) (82,011,565) 64,717,490

Loss on valuation of equity-method investments, net of related income taxes of ￦628 million (2,228,142) -

Unrealized gain(loss) from forward exchange contracts, net of related taxes of ￦2 million (2008: (￦1,741 million)) (6,269) 4,590,338

￦ 620,329,142 ￦ 701,520,151





27. Selling and administrative Expenses


2009 2008

Salaries and wages ￦ 127,504,194 ￦ 135,446,289

Taxes and dues 6,645,733 7,128,279

Commission expense 70,416,373 55,518,430

Depreciation 25,920,702 26,457,143

Warranty expense 30,320,826 25,993,232

Others 84,702,345 81,947,047

￦ 345,510,173 ￦ 332,490,420

28. Supplemental cash flow information

Significant transactions not affecting cash flows for the years ended December 31, 2009 and 2008, are as follows:


2009 2008

Current maturities of long-term prepaid expenses ￦ 49,543,922 ￦ 26,402,237

Reclassification of construction in-progress to other property, plant and equipment accounts 655,474,652 541,238,292

Write-off of long-term receivables 13,210,300 -

Equity method investment transferred to available-for-sale securities 12,333,621 -

Unrealized gain on valuation of equity method investments transferred to unrealized gain on valuation of available-for-sale securities 47,930,194 -

29. final interim Period information

Financial information for the three-month periods ended December 31, 2009 and 2008, follows:

(In thousands of Korean won, except for per share amounts)

fourth quarter of 2009 Fourth quarter of 2008

Sales ￦ 3,467,558,444 ￦ 3,069,714,899

Net income 193,082,500 161,731,911

Basic earnings per share 895 750

Diluted earnings per share 891 746

30. approval of financial Statements

The financial statements as of and for the year ended December 31, 2009, were approved by the Board of Directors

on January 27, 2010.

31. Work Plan for implementation and the Progress of ifRS adoption in Korea

Under the IFRS roadmap released in March 2007, financial reporting using K-IFRS is to become mandatory for the

Company beginning 2011. In December 2008, the Company has assembled a team and appointed a consultant

for the conversion. Accordingly, the Company is analyzing the effects of the adoption, and is providing internal and

external training to related employees. As of December 2009, the Company completed an analysis on the signifi-

cant differences between K-IFRS and current Korean Financial Accounting Standards. The Company is currently

determining the accounting policies where significant differences have been identified.


We have reviewed the accompanying management’s report on the operations of the Internal Accounting Control

System (“IACS”) of Samsung Heavy Industries Co., Ltd. (the “Company”) as of December 31, 2009. The Com-

pany’s management is responsible for designing and operating IACS and for its assessment of the effectiveness

of IACS. Our responsibility is to review the management’s report on the operations of the IACS and issue a report

based on our review. The management’s report on the operations of the IACS of the Company states that “based

on its assessment of the operations of the IACS as of December 31, 2009, the Company’s IACS has been de-

signed and is operating effectively as of December 31, 2009, in all material respects, in accordance with the IACS

standards established by the Internal Accounting Control System Operations Committee (IACSOC) of the Korea

Listed Companies Association.”

Our review was conducted in accordance with the IACS review standards established by the Korean Institute of

Certified Public Accountants. Those standards require that we plan and perform, in all material respects, the

review of management’s report on the operations of the IACS to obtain a lower level of assurance than an audit.

A review is to obtain an understanding of a company’s IACS and consists principally of inquiries of management

and, when deemed necessary, a limited inspection of underlying documents, which is substantially less in scope

than an audit.

A company’s IACS is a system to monitor and operate those policies and procedures designed to provide reason-

able assurance regarding the reliability of financial reporting and the preparation of financial statements for exter-

nal purposes in accordance with accounting principles generally accepted in the Republic of Korea. Because of

its inherent limitations, IACS may not prevent or detect a material misstatement of the financial statements. Also,

projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become in-

adequate because of changes in conditions, or that the degree of compliance with the policies or procedures may

deteriorate.

Based on our review, nothing has come to our attention that causes us to believe that management’s report on the

operations of the IACS, referred to above, is not presented fairly, in all material respects, in accordance with the

IACS standards established by IACSOC.

Our review is based on the Company’s IACS as of December 31, 2009, and we did not review management’s as-

sessment of its IACS subsequent to December 31, 2009. This report has been prepared pursuant to the Acts on

External Audit for Stock Companies in Korea and may not be appropriate for other purposes or for other users.

I, as the Internal Accounting Control Officer (“IACO”) of Samsung Heavy Industries Co., Ltd. (“the Company”), as-

sessed the status of the design and operations of the Company’s internal accounting control system (“IACS”) for

the year ended December 31, 2009.

The Company’s management including IACO is responsible for designing and operating IACS. I, as the IACO, as-

sessed whether the IACS has been effectively designed and is operating to prevent and detect any error or fraud

which may cause any misstatement of the financial statements, for the purpose of establishing the reliability of

financial reporting and the preparation of financial statements for external purposes. I, as the IACO, applied the

IACS standard for the assessment of design and operations of the IACS.

Based on the assessment on the operations of the IACS, the Company’s IACS has been effectively designed and is

operating as of December 31, 2009, in all material respects, in accordance with the IACS standards.

Report of independent accountants’Review of internal accounting control System

Report on the Operations of the internal accounting control System

To the President of


To the Board of Directors and Audit Committee of


Samil PricewaterhouseCoopers March 10, 2010

January 27, 2010

Seo-Yoon Kim, Internal Accounting Control System Officer

In-Sik Roh, Chief Executive Officer and President

Samsung Heavy Industries Annual Report 200994

aSia

SaMSUnG HEaVY inDUSTRiES

ninGBO cO., lTD.

Quingshi Industrial Zone, Xiaogang

Ningbo 315803, China

TEL: 86-574-8622-6688

FAX: 86-574-8622-4275

SaMSUnG HEaVY inDUSTRiES

ROnGcHEnG cO., lTD.

No. 39 Li-Dao Jin

Rongcheng 264317, China

TEL: 86-631-7767-888

FAX: 86-631-7767-009

TOKYO OfficE

Roppongi T-Cube, 17th Floor,

3-1-1, Roppongi, Minato-ku

Tokyo 106-8532, Japan

TEL: 81-3-6234-2237

FAX: 81-3-6234-2189

SinGaPORE OfficE

Samsung Hub, # 21-03,

3 Church Street

Singapore 049483

TEL: 65-6-550-8181

FAX: 65-6-550-8188

DUBai OfficE

P.O. Box 64089,

Al Selemiyah Tower Flat No. 302

Dubai, UAE

TEL: 971-4-229-2254

FAX: 971-4-229-2257

SHanGHai OfficE

Shanghai International Trade Center

Room 2710, No. 2201 Yanan Road

Shanghai 200336, China

TEL: 86-21-6270-3207

FAX: 86-21-6278-9112

inDia EnGinEERinG cEnTER

Logix Cyber Park, Block-B,

1st Floor, C-28&29, Sec-62

Noida 201301, India

TEL: 91-120-468-6001

FAX: 91-120-468-6007

fUKUOKa EnGinEERinG cEnTER

Kyukan Chikushi Dori Building,

8th Floor, 2-6-1

Hakataeki Higashi, Hakata-ku

Fukuoka 812-0013, Japan

TEL: 81-92-451-3711

FAX: 81-92-451-3710

Global network

EUROPE

lOnDOn OfficE

City Tower, 17th Floor,

40 Basinghall Street

London EC2V 5DE, UK

TEL: 44-20-7562-4302

FAX: 44-20-7562-4319

OSlO OfficE

Haakon VII’s Gate 1

Oslo 0160, Norway

TEL: 47-22-83-3777

FAX: 47-22-83-3778

aTHEnS OfficE

229 Syngrou Avenue, Nea Smymi

Athens 17121, Greece

TEL: 30-210-934-4866

FAX: 30-210-934-8163

MOScOW OfficE

WTC, Entrance 3, Office 1408,

12 Krasnopresnenskaya Emb.

Moscow 123610, Russia

TEL: 7-495-258-2223

FAX: 7-495-258-2224

aMERicaS

HOUSTOn OfficE

11777 Katy Freeway, Suite 405

Houston, TX 77079, USA

TEL: 1-281-679-8460

FAX: 1-281-679-8473

nEW YORK OfficE

105 Challenger Road, 6th Floor

Ridgefield Park, NJ 07660, USA

TEL: 1-201-229-5009

FAX: 1-201-229-5110

RiO DE JanEiRO OfficE

228 Praia de Botafogo,

Suite 1110-B, Botafogo

Rio de Janeiro 22250-145, Brazil

TEL: 55-21-2551-0972

FAX: 55-21-2554-4792

HOUSTOnfUKUOKa

SinGaPORE

nOiDaDUBai

aTHEnS

OSlO

MOScOW

ninGBO

lOnDOn

ROnGcHEnGTOKYO

SHanGHai nEW YORK

RiO DE JanEiRO

HEaD OfficE


Samsung Life Insurance Seocho Tower 1321-15,

Seocho-Dong, Seocho-Gu, Seoul, 137-857, Korea

TEL: 82-2-3458-7000

DaTE Of ESTaBliSHMEnT

August 5, 1974

GEOJE SHiPYaRD

530, Jangpyeong-Dong, Geoje-Si,

Gyeongsangnam-Do, 656-710, Korea

TEL: 82-55-630-3114

PRESiDEnT & cEO

In-Sik Roh

nUMBER Of EMPlOYEES

12,623 (As of December 31, 2009)

SEcURiTiES liSTinGS

Korea Stock Exchange: 010140.KS (Common Stock),

010145.KS (Preferred Stock)

London Stock Exchange: Floating Rate Note

TRanSfER aGEnT anD REGiSTRaR

Common stock

Stock Transfer Agent Team Hana Bank

TEL: 82-2-368-5861

aVailaBlE filinGS

Form 20-F

Form 6-K: Quarterly Reports, Proxy Statements and

other material Announcements

GEnERal SHaREHOlDERS’ MEETinG

March 19, 2009

4th Fl., Woonam Hall, Gangnam Branch, YMCA, 225-6

Nonhyun-Dong, Gangnam-Gu, Seoul, Korea

inVESTOR RElaTiOnS OfficE

For any other investor inquiries,

TEL: 82-2-3458-6177

FAX: 82-2-3458-6134

EMAIL: [email protected]

caPiTal STOcK

KRW 1,154,951 million as of December 31, 2009

nUMBER Of cOMMOn SHaRES

230,875,386 Shares as of December 31, 2009

Investor Information

DiSclaiMER

The information in this annual report does not constitute an offer to sell or the solicitation of an offer to buy any securities and should not be

relied upon in connection with any investment decision. With the exception of historical information, the matters discussed in the materials

and documents of this annual report contain assumptions and forward-looking statements regarding the future prospects of Samsung Heavy

Industries, involving growth initiatives, profit figures, strategies and objectives. The risks and uncertainties inherent in all statements regarding

the future can lead to actual profits and development deviating substantially from what has been expressed or implied. For a more detailed

description of these risks, uncertainties and other factors, see Samsung Heavy Industries’ filings with the U.S. Securities and Exchange Com-

mission (and in particular its most recent annual report on Form 20-F). Samsung Heavy Industries disclaims any intention or obligation to

update or revise any forward-looking statements.

samsung heavy industries

Documents