DAELIM 2018 Corporate Report

Planning & Design: NSTEIN, 82-2-336-7865

This report has been printed with FSC®

(Forest Stewardship Council®) certified paper

DAELIM Industrial Co., Ltd.

Engineering & Construction Unit

Daelim Bldg., 36, Jong-ro 1-gil,

Jongno-gu, Seoul, Korea

T: 82-2-2011-7114 / F: 82-2-2011-8000

www.daelim.co.kr

Petrochemical Unit

11F Korea Chamber of Commerce,

39, Sejong-daero, Jung-gu, Seoul, Korea

T: 82-2-3708-3000 / F: 82-2-753-1181

www.daelimchem.co.kr

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2018 Corporate Report

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Corporate Profile

Message from the CEO

Business Highlights

Business Streams

Business Overview

Business at a Glance

Plant Business

Civil Business

Housing & Building Business

Petrochemical Business

Sustainable DAELIM

Research & Development

Safety & Health Management

Environmental Management

Corporate Governance

Ethical Management

Risk Management

Social Contribution

Financial Review

Organization & Management

Contentsㆍ Korea’s representative enterprise group with 79 years of history

ㆍListed as one of the top 100 companies in Korea for the last 63 years

ㆍ The first Korean contractor to earn US dollar by overseas construction work

ㆍ Korea's first exporter of plant sector

ㆍLarge-scale projects being implemented in 36 countries worldwide

ㆍ Korea's representative construction & petrochemicals group

ㆍ18th-largest conglomerate in Korea

ㆍ Pursuing to be a Global Lead Developer providing total solutions

ㆍ�Covering the entire value chain including planning & investment,

construction and O&M in petrochemicals, power generation,

civil engineering and housing & building

ㆍ Achieving a great synergy with affiliates based on global top-tier

competitiveness and core competencies in Engineering & Construction and

Petrochemical units accumulated throughout its history

SINCE 1939

USD 22.2 BILLION IN ASSET SIZE WITH 13 AFFILIATES

GLOBAL LEAD DEVELOPER

Corporate Profile

As one of Korea’s representative enterprise groups founded in 1939 with 13 affiliates

covering power generation, trading, logistics, manufacturing and leisure, Daelim Group

is led by Daelim Industrial, a global EPC contractor and petrochemicals company.

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Corporate Profile

ㆍ Korea’s representative enterprise group with 79 years of history

ㆍListed as one of the top 100 companies in Korea for the last 63 years

ㆍ The first Korean contractor to earn US dollar by overseas construction work

ㆍ Korea's first exporter of plant sector

ㆍLarge-scale projects being implemented in 36 countries worldwide

ㆍ Korea's representative construction & petrochemicals group

ㆍ18th-largest conglomerate in Korea

ㆍ Pursuing to be a Global Lead Developer providing total solutions

ㆍ�Covering the entire value chain including planning & investment,

construction and O&M in petrochemicals, power generation,

civil engineering and housing & building

ㆍ Achieving a great synergy with affiliates based on global top-tier

competitiveness and core competencies in Engineering & Construction and

Petrochemical units accumulated throughout its history

SINCE 1939

USD 22.2 BILLION IN ASSET SIZE WITH 13 AFFILIATES

GLOBAL LEAD DEVELOPER

As one of Korea’s representative enterprise groups founded in 1939 with 13 affiliates

covering power generation, trading, logistics, manufacturing and leisure, Daelim Group

is led by Daelim Industrial, a global EPC contractor and petrochemicals company.

GR

OU

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IDE S

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Since its foundation in 1939, Daelim Group has created great synergies with 13 affiliatesin 7 different fields, based on competitiveness and core capabilities of Construction and Petrochemical units accumulated throughout its 79 years of history.

CREATING VALUES TOWARDSGLOBAL LEAD DEVELOPER

Top-class Petrochemical Corporation. Production of HDPE, Polybutene & BOPP Film. No. 1 in Polybutene market share in the world.

Daelim Industrial (Petrochemical Unit)Yeochun NCCPolyMirae

Specialized petrochemical marketing. Global Transportation & specialized manufacturer for steel frame structure.

Daelim Corportation (Trade Division)Daelim C&SDaelim MotorDaelim Motorcycle

Offering total solution in system integration (SI), system management (SM) and network consulting.

Daelim Corporation(IT Convergence Division)

Two art museums specializing in photography, design and fashion. Daelim University College for fostering professional experts.

Daelim MuseumDaelim Educational Foundation

The largest hotel on Jeju Island. Maison Glad Jeju, Ora Country Club & Glad Yeouido, Glad Live Gangnam,Glad Coex Center, Glad Mapo.

Ora Resort

Manufacturing & Trading

Education & Culture

Leisure

IT

Petrochemical

Developing, investing and operating power projects to provide energy to people around the world.

Daelim Energy

Energy

Daelim Industrial (E&C Unit)Samho International Korea Development

Leading the Korean construction industry by successfully executingcivil engineering, housing & building and plant.

Engineering & Construction

Sang Shin Park

Senior Executive Vice President

Message from the CEO

The global economy of year 2017 was full of uncertainties studded with the hike in the US interest rate, trade

friction and diplomatic disputes amongst major trading partners, and strained inter-Korean relations. In the

domestic market, the construction industry has encountered difficulties as China’s retaliatory action concerning

the domestic deployment of Terminal High Altitude Area Defense (THAAD) and the reinforcement of the Korean

Government's real estate regulations have shrunk domestic demand and real estate investment sentiment has

dropped sharply.

In this challenging environment, the Housing & Building Business Division have focused on profit-oriented

orders selectively, and sales and profits have improved significantly as the major projects progressed in earnest.

On the other hand, though new orders for Plant Business Division and Civil Business Division were sluggish,

we have concentrated on innovation activities to resolve current business issues and improve profitability. The

Petrochemical Unit has achieved sound results despite rising oil prices through cost innovation activities and

focused on finding new business opportunities.

In 2018, we anticipate the business environment to be more difficult than last year due to the continuous rise in

interest rates, the spread of global trade disputes and the strengthening of real estate regulations by the Korean

Government.

However, we will surely accomplish the management goal of this year and establish a foundation for sustainable

growth. Continuing from the previous year, we will push forward steadfastly the five major management tasks:

managing Zero Loss Risks, developing the best human resources, securing absolute competitiveness, pursuing

cash-flow concentrated management, and reforming awareness. In particular, we will concentrate not only on the

slogan but on the practical implementation of the five tasks.

In addition, Daelim Industrial will surely continue to pursue the relation of coexistence with our suppliers. We will

keep in mind that our business will only be successful if our suppliers do not suffer losses or fall into difficulties.

We will respect each suppliers as partners in our practices, listen to their ideas, and practice mutual coexistence

and shared growth.

This year, our employees will once again be faithful to the basics and be leaders in fundamental innovation,

transforming this company into one that will never be in the red.

Thank you.

Dear Respected Stakeholders of Daelim Industrial,

On behalf of all employees, I would like to convey our heartfelt gratitude and sincere appreciation to all of you

for having shown unwavering support for Daelim Industrial last year.

Business Highlights

Financial Highlights

New Contracts 7,024,627 5,293,586 7,526,185 5,671,548

Order Backlogs 23,020,252 25,807,478 24,663,898 27,650,132

Net Debt 1,141,245 1,167,220 1,222,730 1,250,559

Debt to Equity Ratio 135.4% 140.8% 135.4% 140.8%

Exchange Rate of USD / KRW 1,071.40 1,071.40

* K-IFRS Consolidated Basis

Classification

2017

2016USD in thousands

2017

2016KRW in millions

For the Year

Sales 11,513,474 9,197,097 12,335,536 9,853,770

Operating Profit 509,519 391,439 545,899 419,388

Net Income 474,145 273,656 507,999 293,195

Owners of the Parent Company 457,806 247,622 490,493 265,303

Non-Controlling Interests 16,339 26,034 17,506 27,892

At Year-End

Total Assets 12,509,291 11,565,717 13,402,455 12,391,509

Current Assets 6,279,349 6,063,042 6,727,694 6,495,943

Non Current Assets 6,229,942 5,502,675 6,674,761 5,895,566

Total Liabilities 7,194,464 6,763,240 7,708,149 7,246,135

Current Liabilities 4,576,442 4,468,403 4,903,200 4,787,447

Non Current Liabilities 2,618,022 2,294,837 2,804,949 2,458,688

Total Shareholder's Equity 5,314,827 4,802,477 5,694,306 5,145,374

Performance Overview

New Orders

$ 7,024,627 (￦ 7,526,185)

2017

Net Debt Debt to equity ratio

$ 1,141,245(￦ 1,222,730)

2017

USD in thousands (KRW in millions) USD in thousands (KRW in millions)

Operating ProfitSales

30.17 %Increased

$ 391,439(￦ 419,388)

$ 509,519(￦ 545,899)

2016 2017

25.19 %Increased

$ 9,197,097(￦ 9,853,770)

$ 11,513,474(￦ 12,335,536)

2016 2017

135.4 %

USD in thousands (KRW in millions)

$ 5,293,586 (￦ 5,671,548)

2016


$ 1,167,220(￦ 1,250,559)

2016 140.8 %

04 05

Market Review

Outlook for Sales

New Orders

Outlook forNew Orders

Business Streams

Daelim Group continually pursues to be a global developer that provides a total solution of project planning and investment, con-

struction and O&M in petrochemicals, power generation, civil engineering, rental housing and hotels, achieving a great synergy

with affiliates based on competitiveness and core capablilities of Construction and Petrochemial Units accumulated throughout

its history.

Operational Efficiency

Group-WideSynergies

Daelim establishes the best integrated

solutions within the budget, such as

guaranteeing the highest quality,

observing the construction schedule,

and securing the safety.

Project Identification & Planning

Daelim offers the operation &

maintenance service of the

world’s best level based on our

accumulated O&M experiences

in various areas such as power

plant, petrochemical plant, etc.

Operation & Maintenance

Daelim offers professional

services in petrochemical

marketing, logistics & shipping

and has outstanding material

procurement capability.

Trading

p.08

Business Overview





Ethical Management

Risk Management

Social Contribution

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TOWARDS TOTAL SERVICE PROVIDER

CorporateBusiness Model

Investment & Financing

Daelim presents customized

financial structure and

conditions through the cost

minimization and profit

maximization by conducting

a strict review.

Daelim provides optimized

design and engineering

solutions, efficient

procurement process,

and best quality construction.

Design & EPC

· NCC and other

petrochemical plants

· Specialty product

· Technology licensing

Petrochemicals

· Coal-fired

· Combined cycle

· LNG

· Land/offshore wind

· Hydro-electric

Power Generation

· Dams

· Bridges

· Ports

· Railways

Civil & Infra

· Mines & minefields

· Resources trading

· Resources transportation

Resources Development

· Hotels

· Rental houses

Hotel & Others

06 07

Business Overview

Looking at the construction market in 2018, the slowdown in

the domestic housing market is expected to accelerate due to

interest rates rise on household loans with the government's

continuous real estate regulations.

The orders in overseas markets are increasing due to the

rebound of oil prices. However, it is necessary to focus on

profit-oriented orders selectively because low-priced bidding

competition is likely to reoccur. In the petrochemical market,

burden on material price is likely to increase due to the oil

prices rise. However, it is predicted that we will maintain a

solid margins as last year, as the market is in good demand.

Market Review

The total amount of new orders received in 2017 is USD 7 billion

including achievements at overseas branches while the order

backlog is USD 23 billion. The Housing & Building Business

Division achieved USD 4.3 billion by winning orders for

profitable housing projects selectively, despite uncertainties

from strengthening Government real estate regulations. The

Civil Business Division recorded USD 1 billion by winning

orders including the private bridge project in Turkey. The Plant

Business Division recorded orders of USD 1.7 billion in spite of

the difficult overseas business.

New Orders

Daelim Industrial will make the best effort for its 2018 sales

target of USD 8.1 billion; the amount has been determined on

the assumption that efforts to secure the profitability of the

Housing & Building Business Division, and the solid records

maintaining by Petrochemical Unit and affiliates. Looking by

our units, the Engineering & Construction Unit, considering

the completions of major plant sites are approaching, is

targeting USD 7.1 billion, a 24% decrease from the previous

year. The Petrochemical Unit aims at USD 1 billion, similar to

the previous year.

Outlook for Sales

We have set the target for the new orders in 2018 to USD 6.5

billion pledging to overcome the difficult conditions with

prudence. Housing & Building Business Division has set a

target of USD 4.7 billion for orders by expanding participation

in public-private joint development projects and responding

to market changes preemptively. The Civil Business Division

has set a target of USD 0.9 billion for orders, focusing on areas

where it has competitiveness such as bridge, port and dam.

Plant Business Division has set a target of USD 0.9 billion for

orders by striving to win orders in countries and processes

where we have strong strength and profitability considering

the relationship with domestic and overseas clients and the

competitive composition.

Outlook for New Orders

Sales in Daelim New Orders in Daelim

(￦ 7,526,185)

Total New Orders in 2017

$ 7,024,627


Since its foundation in 1939, Daelim Industrial has been carrying out over 600 projects in 36 countries around the world for the

past 79 years and it is the only construction company in Korea that has maintained the top 10 Construction Capability Evaluation

Criteria for the past 55 years.

(￦ 12,335,536)

Total Sales in 2017

$ 11,513,474

USD in thousands (KRW in millions) * Others: Subsidiaries

(Daelim C&S, Daelim Motor,

Ora Resort, and etc.)

Engineering &

Construction Unit

87.0 %

Petrochemical

Unit 9.4 %

Others* 3.6 %

$ 10,013,806(￦ 10,728,792)

$ 1,084,522 (￦ 1,161,957)

$ 415,146 (￦ 444,787)

$ 1,719,123 (￦ 1,841,868)

$ 1,008,746 (￦ 1,080,771)

Plant Business

Division

24.5 %

Housing & Building

Business Division

61.2 %

$ 4,296,758 (￦ 4,603,546)

Civil Business

Division 14.3 %

08 09

Business at a Glance

Plant Business Division

Based on its top-notch technology, The Plant Business Di-

vision provides total service in various fields such as oil &

gas, petroleum refinery, petrochemical, and power plant in-

cluding not only engineering, procurement and construction

but also basic design, commissioning and O&M. Since our

expansion to the overseas plant market in 1973 as the first

among domestic construction companies, we have been suc-

cessfully executing more than 600 projects in the Middle East,

Southeast Asia, Africa and China.

· More than 600 projects completed or in progress in 30 countries

· Outstanding design competency accumulated over 40 years

(founded Daelim Engineering in 1974)

· Total service including Front End Engineering Design (FEED),

Engineering Procurement Construction (EPC), and Operation

and Maintenance (O&M)

· O&M competency acquired by operating petrochemical

plants (accumulated know-hows for more than 30 years)

Civil Business Division

The Civil Business Division has domestic top-level track re-

cords in various fields including bridge, dam, port, railway,

road, and water resource. In particular, we have secured

world-class technology capability to build suspension bridges

and cable-stayed bridges by our own. With our technology ca-

pability, we have implemented various overseas projects and

have advanced to be a global lead developer by providing a

total solution for project planning, financing, construction and

O&M.

· Achievement of self-reliant technology for suspension bridge

first in Korea and sixth in the world

· Winner of the Turkey Canakkale bridge project order, the

world’s longest suspension bridge

· No.1 performance of marine bridge in Korea

· Top-level of performance in all types of domestic civil works

Housing & Building Business Division

The Housing & Building Division has secured advanced tech-

nology and accumulated various experiences and data in the

housing and general building fields. Since the introduction

of the first apartment brand in Korea, Daelim Industrial has

accomplished the apartment sales of 160,000 households.

Moreover, we are leading diverse fields covering office build-

ing, hotel as well as medical, education, sports and logistics

facilities.

· Korea’s first apartment brand, e-PyunhanSaesang (launched in 2000)

· No. 1 construction record in hotel industry

· Korea’s largest-scale complex building and exhibition

construction performance

· Top-notch capability in technology proposal type projects in industry

· Cost competitiveness secured with specialized products

· Supplier of first New Stay, the first rental houses in Korea

· Largest apartment sales in Korea (e-PyunhanSaesang Hansup

City; 6,725 households)

Petrochemical Unit

The Petrochemical Unit has differentiated itself with its highly

competitive technology and production capacity in polyeth-

ylene, polybutene, and film sectors. It has been clearly demon-

strated by meaningful achievements: a superb metallocene

catalyst technology of the PE Business, the biggest market

share in the global PB market, the largest production capac-

ity of BOPP film in Korea. The Petrochemical Unit will solidify

its foothold in the market as a leading company based on the

existing competency, constantly developing new technology,

and enlarging our domination in the market.

· World’s largest PB production capacity

· Commercialization of Polyethylene first in Korea, and innova-

tive technology (World’s 3rd to commercialize HRPB (2009)

· Asia’s 4th largest NCC (Naphtha cracking center) (Joint Venture)

· Top-notch competencies in O&M (Maintains 95% or more of

annual NCC operation rate)

10

2,323,566

20.2 %

Financial Performances

Sales USD in thousands

Portion of Sales in Daelim

6,397,688

55.6 %Portion of Sales in Daelim

1,084,5221,292,552Portion of Sales in Daelim

11.2 % 9.4 %Portion of Sales in Daelim







10 11

Plant Business

Core Competence

Service Portfolio

EnergyRefinery / Gas Petrochemical Industrial Facilities Environment

Daelim Industrial, a globally recognized business entity, has in our 45 years of business accumulated experiences and world-class

technologies which we have applied advantageously to the various fields we have been involved in. In the field of oil and gas,

refinery, petrochemical, power generation and other related fields, we have become a truly global contractor with 600 projects in

36 countries worldwide providing total service including FEED, EPC and O&M since entering the overseas plant market for the first

time as a Korean construction company in 1973. With more than 30 years of experience in the operation of our Petrochemical Unit

we have developed quality management capabilities and differentiated expertise in both petrochemical and refinery industries.

Currently we are diversifying overseas business into the energy plant market to discover and venture into new growth engines.

Isocyanates, Saudi Arabia

600

Kayan PC, Saudi Arabia (2008-2011)Completed the world's largest PC plant

SABUCO Butanol & Syngas Project, Saudi Arabia (2013-2015)Completed the world's largest butanol plant

Sohar Refinery Improvement Project, Oman (2013-2017)Completed the Oman's largest refinery expansion project

www.daelim.co.kr/eng/acpt/plantsList.do

Business Overview

45 years

45 years of experience in plant design competence

TotalTotal service including

FEED, EPC, Q&M

30O&M capability secured through plant operation of Petrochemical Unit

for over 30 years

More than 600 projects in 36 countries all over the world

12 13

14

Figure

Portion of Sales in DaelimUSD 2.3 billion

New Order in Plant Works USD in thousands (KRW in millions)

Portion of New Order in DaelimUSD 7 billion

Sales in Plant Works USD in thousands (KRW in millions)

$ 2,234,261(￦ 2,393,787)

2016

$ 2,323,566 (￦ 2,489,469)

2017

$ 9,483(￦ 10,160)

2016

20.2 %Market Environment

Since 2014, three major factors have contributed towards the

rise in oil prices to which is expected to rise to USD 60/bbl

in 2017. These are the expectations that OPEC would extend

production cuts, the increase in oil demand from China, and

political unrest in Saudi Arabia and geopolitical risk in the

Middle East. Though stable growth of crude oil demand due

to the global economic recovery and production cuts by oil-

producing countries are positive factors for rising oil prices,

orders for new projects are expected to remain sluggish due

to deficit financing by these same oil producing countries.

In 2018, instability within Iran’s domestic and international

markets has made it difficult for new projects to be placed

and delays are expected in securing investment funds. These

factors have driven us to diversify our business into potential

markets based on natural resources in the Russian Republic

and Oman.

Performance Review 2017

In 2017, we focused on securing profitability by avoiding

bidding for expansion. In addition, in order to prevent further

loss of projects under execution, we focused on improving

the structure by focusing on each project. Sales were USD

1.3 billion in Korea and USD 1 billion in overseas markets,

total of USD 2.3 billion.

Plan and Outlook for 2018

The Plant Business Division is striving to create a company

that is ‘never-in-the-red’ by propelling profit-oriented mana-

gement thoroughly rather than on external scale such as

orders and sales.

In order to overcome and identify the causation of the plant

division's loss incurred for the past few years, we are focu-

sing on identifying innovation tasks and internalizing them

to actual work. In particular, we will continue to improve

the procedures and systems for winning profitable projects.

More attention will also be given to high-value-added dev-

eloper businesses and private contracts by avoiding com-

petitive composition. In addition, expansion opportunities

for project orders will be executed by establishing a close

network with licensors and clients by strengthening tech-

nology sales through preemptive sales activities.

New Order

- LCC H-NC3 PKG 1 (NCC Revamping), Korea

- YNCC # 2 Green-field Development Investment Project,

Korea (2017-2019)

- Replacement of steam generators

in Hanbit Nuclear Power Plant 5 & 6, Korea (2017-2020)

- YNCC SM Expansion, Korea

24.5 %

Market Leadership

Fast Track, Malaysia

$ 1,719,123 (￦ 1,841,868)

2017

1514

Featured ProjectOmsk Refinery Deep Conversion Complex Project, Russia

Daelim Industrial’s first refinery project in Russia

Russia's largest oil refinery with a capacity of about 400,000 BPSD

Project worth of EUR 69 million (EPs)

Relevant Projects

Project Overview

Daelim Industrial signed a contract on April 29, 2016 to provide engineering and procurement

services for upgrading facilities at Omsk Refinery Deep Conversion Complex. This Refinery is

Russia's largest oil refinery complex with capacities about 400,000 BPSD operated by Gazprom

Neft, Russia's main state-owned client. The EPC value is worth about EUR 600 Million. The

Omsk refinery plant upgrading works is a project to produce a more environmentally and highly

efficient fuel for the Euro Standard (Euro-5) through the modernization of the old oil refinery

built in the past Soviet Union, including facilities such as HCU, HPU and SRU. Daelim Industrial

has been successful in the project execution based on its previous experiences in world-ever

capacity of hydrocrackers such as SRIP in Oman, Yanbu PKG4 in Saudi Arabia. This project is

even more meaningful as we have not only ventured into our first business in Russia but also

pioneered into an unknown market.

Plan for Value Creation

The Russian market has characteristics that allows only those companies that have proven

mutual trust and achievement with major state-owned clients to participate in the project. We

have successfully entered this market given our proven years of experience of many large-scale

refineries in the Middle East and Asia. We aim to gradually establish our position in Russia,

a market that has the largest gas resources in the world and is highly likely to develop in the

future.

Oil

Sohar Refinery Improvement Project, Oman (2013-2017)Oman's largest refinery expansion project

Yanbu Refinery PKG 3,4, Saudi Arabia (2010-2014) Completion of the world's largest gasoline production

Jubail Refinery PKG 2B, Saudi Arabia (2009-2013)First EPC project ordered and executed by Saudi Aramco

Omsk Refinery Deep Conversion Complex, Russia

1 st

69 EUR in millions

400,000 BPSD

1716

S-OIL Residue Upgrading Complex Project, Korea

Relevant Projects

Project Overview

Daelim Industrial has signed a contract for S-OIL Residue Upgrading Complex Project, which

is the largest chemical plant in Korean history for a single project, with a total value of about

USD 3.3 billion in July 2015. The site is located in Onsan, about 20 km away from Ulsan and we

accomplished M/C in April 2018 with an agreement which includes the design and business

management with a Fixed Lump Sum contract, as well as material purchase and construction

with a Cost Plus Fee contract. This Project covers upgrading facilities consisting of RFCC

(76,000 BPSD) and RHDS (28,490 BPSD), as well as ODC which produces downstream products

of Polypropylene (405 KTA) and Polyoxide (300 KTA). RUC is a plant that produces various

petroleum and petrochemical products. This project is an important undertaking for S-OIL,

which plans to expand its product groups by diversifying its downstream products.


A modular construction method has been introduced in the S-OIL project to overcome the

narrow site conditions and a short construction period. The installed module is the largest

amongst the plant modules in Korea with 36 m in length, 16 m in width, and 46 m in height

and weighs about 3,400 ton. The height is equivalent to a 16-floor apartment building, and the

weight is equivalent to the sum of 2,300 medium-sized cars. We have successfully completed

the S-OIL project and secured technology and cost competitiveness in the construction field of

the modular construction method, and will expand and apply it to future domestic and overseas

plant projects.

76,000 barrels

3.3 USD in billions

3,400 ton

76,000 barrels per day increased following the construction of RFCC, an advanced facility

Expansion of the refinery worth USD 3.3 billion

Domestic largest plant module weight 3,400 ton

Featured Project

Oil

ton

Sohar Refinery Improvement Project, Oman (2013-2017) Completion of the largest refinery expansion project in Oman

Refinery Master Plan - II Project, Philippines (2011-2014) Construction of the largest oil refinery in the Philippines (provided process integra-tion service of Daelim Industrial & Axens)

Yanbu Export Refinery Project Package No. 3 & 4, Saudi Arabia (2011-2014) Completion of the world's largest gasoline production facility

S-OIL Residue Upgrading Complex Project, Korea

1918

Civil Business

Service Portfolio

Karun Dam Project, Iran (1994-2001)Completed the largest dam in Iran (H=177m x L=498m x W=750m)

Yi sun-sin Bridge, Korea (2007-2013) Completed the longest span bridge (L=1,545m) in Korea (100% self-reliance of suspension bridge technology independence achieved first in Korea)

TUAS Terminal Phase1, Singapore (2015-present) Currently constructing one of the largest port facility in the world (caissons of 15,000 ton for 221 ships)

No. 1

221ships

2,023 m

Total

Daelim Industrial has the highest level of performance and know-how in various fields of civil construction such as roads, bridges, dams, river works, ports,

railways and underground subway systems. Based on such expertise we stand strong as the leading contractor in the construction of social infrastructures.

Having completed the Yi Sun-sin Bridge using our very own technology, we have brought up Korea to become the sixth fully self-reliant suspension-bridge

technology provider in the world. This high-tech technology constitutes the use of cutting-edge civil engineering method and high-level structural mechanics,

and countries that are able to administer all relevant areas from design to construction and maintenance by themselves, limited to the United States, China,

Japan, the United Kingdom and Denmark. We are the No. 1 contractor in Korea in terms of performance of specialized maritime bridges and are currently

building the world's longest suspension bridge in Turkey. In addition, as a global developer, we have provided total solution covering investment, planning,

design, construction and O&M.

Railroads /Subways

Roads / Bridges Dams / Riverworks /

Ports

Environment

6 th

Core Competence

Gogunsan Bridge, Korea

www.daelim.co.kr/eng/acpt/civilList.do

Business Overview

The world’s longest suspension bridge (length of 2,023m)

Total solution provider covering business development, planning, design, construction,

and O&M

Achievement of self-reliant technology for suspension

bridge first in Korea and sixth in the world

One of the largest port facility in the world (caisson of 15,000 ton for

221 ships)

No. 1 performance of maritime special bridges in Korea

20 21

22

$ 1,363,683(￦ 1,461,050)

$ 1,292,552 (￦ 1,384,840)

2016

2017

$ 200,149(￦ 214,440)

$ 1,008,746 (￦ 1,080,771)

2017

2016

Figure

Portion of Sales in Daelim USD 1.3 billion

Portion of New Order in Daelim USD 1.6 billion

11.2 %

14.3 %

Market Environment

In 2018, the number of domestic civil market orders to be

placed is expected to decline year-on-year due to long-term

low growth trend. Difficulties are expected in securing profit-

ability through new projects owing to intensified competition.

Overseas, structural low growth trend is expected to continue,

but relatively high growth is anticipated in the infra-structure

compared to other sectors. Statistics shows that largescale

Infra-structure planning and ODA/MDB investments will be

active in the Southeast and South Asia region, but orders in

the Middle East region will be decreased due to the general

decline in financial stability in the region. The Civil Business

Division will continue to gain competitive advantage in the

domestic market while doing its best to manage profitability

through efficient execution and continuous cost innovation

activities through our technical expertise perfected in the

Korean market. In terms of overseas civil business, we will

continue to expand our business opportunities and hedge risk

through partnerships with global leading companies.


In 2017, despite the adverse market conditions we were rank-

ed first among domestic contractors in terms of securing

new contracts. Such success has landed us a total value of

USD 1 billion for new domestic projects in 2017, which was

made possible through our active participation in all forms of

projects such as technical proposal type bidding, competitive

EPC bidding and Social Overhead Capital (SOC) projects

among others. The Civil Business Division had a record

sales of USD 1.3 billion successfully completing 17 projects

including Dong Hongcheon-Yangyang Expressway Section

10, Deoksong-Naegak Expressway, Pohang New Port 1 pier

reconstruction, Southwest sewage heat heating BOT, Geum-

cheon-Cheongyang main pipe building 1.


In 2018, we will focus towards enhancing our on-site const-

ruction capacity through strict risk management in order to

prevent the occurrence of additional costs during the execu-

tion phase, while continuing to strengthen inspections for

risks in cost and schedule impacts at our key sites.

Furthermore, the Civil Business Division plans to achieve our

target of USD 0.9 billion by selecting projects based on our

competitive advantages, and securing contracts that can

ensure the profitability of Daelim Industrial while satisfying

our clients’ requirements.


Internationally, we plan to expand business opportunities

and hedge risk through partnership with global leading com-

panies. Domestically, we will secure operational business

through strengthening strategic partnerships with power

generation public enterprises, while also striving to pursue

new prominent and profitable business opportunities through

technical proposal type bidding.

Market Leadership

New Order in Civil Works USD in thousands (KRW in millions)

Sales in Civil Works USD in thousands (KRW in millions)

Sungai Brunei Bridge, Brunei

New Order

- Removal of sand island at Busan New Port (2017-2020)

- Saemangeum South-North 2-axes Road Construction Phase 1

Section 3 (2017-2022)

- Anseong-Seongnam Expressway line No. 29 Construction

Section 9 (2017-2022)

- Gangjin-Gwangju Expressway line No. 25 Construction

Section 7 (2017-2024)

- Paju-Yangju-Pocheon Expressway line No. 400 Construction

Section 1 (2017-2024)

2322

Canakkale BridgeProject, Turkey

Featured Project 2,023 m

The total project cost is USD 3 billion

The longest suspension bridgein the world with 2,023m of span length

3 USD in billions

Relevant Projects

Project Overview

Daelim Industrial was awarded by the Turkish Government to develop, construct, and operate

the Canakkale Bridge, the longest suspension bridge in the World, in March 2017. Canakkale

Bridge project is the first bridge project across the Dardanelles Strait connecting Europe and

Asia. It is indispensable for the revitalization of the southwestern region of Turkey and boosting

its economic development. It is a long awaited project of the Turkish Government and the current

president plans to commence the operation of the bridge by the 2023 for the commemoration

of the 100th anniversary of the founding of the Republic. The bridge span length will be 2,023m,

the longest suspension bridge in the World. This global landmark project is floated as BOT

(Built-Operate-Transfer) scheme under the PPP (Public Private Partnership). Daelim Industrial

is a lead member to involve in the investment, construction, operations of the project with the

construction and operation duration of 16 years and 2 months. The total project cost is USD 3.0

billion. Once the project is completed, it will be recognized as the World's longest suspension

bridge.


In completing this project, Daelim Industrial will have attained performances in design, cons-

truction and operation of the world’s longest bridge, proving once again our ability to perform

internationally with our world-class technology. At the same time, with the differentiated

technology, we will consolidate a firm foothold to lead in the high-value added global long-span

bridge market. Additionally, we will advance as a global developer by diversifying businesses

into the overseas transportation investment development in traffic infrastructure based on our

experiences in domestic transportation infrastructures investment development.

Yi Sun-sin Bridge, Korea (2007-2013) The longest span (length of 1,545m) bridge in Korea (Korean suspension bridge of 100% self-reliant technology)

Gogunsan Bridge, Korea (2009-2016) The first one-tower asymmetric suspension bridge in Korea, the landmark tourist attraction

Sungai Brunei Bridge, Brunei (2013-2017) Brunei's symbolic first cable-stayed bridge, shortened the distance of 40 km to 712 m

New Millenium Bridge, Korea

2524

Tuas Terminal Phase 1 Project, Singapore

Relevant Projects

Project Overview

The Singapore Tuas Port Development Project is a mega-scale port construction project that

will build 66 berths on a site of 1,337 ha with an annual trade volume of 65 million TEU. The

project will be developed in 4 phases, and the 1st and 2nd phases are under construction. We

have won the 2nd phase contract, the Tuas Terminal Phase 1 Project (TTP1), in February 2015 as

a consortium with Belgian Dredging International. The project which will build 20 berths (scale

of 2,000 TEU), was ordered by the Maritime and Port Authority (MPA) of Singapore with a total

project cost of SGD 2.4 billion. We will construct reclamation (300 ha), dredging, gravity type

wall (8.6km) by 2020.


The core process of caisson manufacturing is to continuously place caisson wall of 28 m height

by applying the slipform method. The slipform can be installed at 2.5 cm at one time, and about

22 cm per hour using a total of 36 hydraulic jacks (up to 42 ton of lifting capacity). This project is

a mega project of the Government of Singapore and has received a lot of attention both inside

and outside the country. Thus, it is a big challenge and opportunity for Daelim Industrial which

has been pushing forward its overseas construction. Through the successful implementation

of this project, we hope that it will become a major stepping stone for us to introduce our

maritime port construction technology widely and further expand our project in Singapore and

other overseas projects.

Featured Project

222 caissons

8.6 km

15,000 ton

No. of Caissons

8.6 km of Quay wall, the world's longest caisson quay wall structure

Caisson weight (15,000 ton)ton

Saemanguem, Korea (1992-2010) Breakwater (H=15.2m x L=2,693m x W=198m) / sluice gate (L=300m)

Jeju Naval Base Section 2, Korea (2010-2016)Mooring quay (L=2,400m) / Breakwater (L=652m)

Busan New Port West Container 2-5 Phase, Korea (2012-present) Caissons (4,880 ton for 27 ships) / quay wall (L=177m)

Singapore TTP1, Singapore

26 27

Service Portfolio

Daelim Industrial has secured advanced technology and accumulated various experiences and data in the housing and general

building fields. With dedication and enthusiasm, we have built major representative landmarks of Korea such as The National

Assembly, Sejong Center for the Performing Arts and Seoul Court Complex. In addition, we have opened a new era of premium

apartment brand for the first time in Korea with the launching of e-PyunhanSesang Apartments supplying a total of 160,000

household units. Furthermore, we are the leader in the corporate rental housing business starting with the supply of the first

‘New-Stay’ in Korea and have advanced to be a developer by creating group synergies through the launching of our new hotel

brand GLAD and O&M in D-Tower.

Commercial / Office

Housing Redevelopment / Reconstruction

Hotel / Resort Development Business

Business Overview


1st

Core Competence

C-house

6,725 households

AMC

ACRO RIVER PARK, Korea

KAU Hospital, Saudi Arabia (1985-1992) Middle East’s largest general hospital

e-PyunhanSesang Hansup City, Yongin, Korea (2015-2018)Korea’s largest-scale housing sales project

e-Pyeonhan Sesang Dohwa, Korea (2015-2018) Completed the first enterprise type rental housing project (New Stay) in Korea

www.daelim.co.kr/eng/acpt/constructionList.do

Launched year of the first brand apartment in Korea, e-PyunhanSesang

Cost competitiveness secured with specialized products

Supplier of Korea's Largest Single-Unit Sale of 6,725 Households,

e-PyunhanSesang Hansup City

Daelim AMC, the first asset management company among

domestic construction companies for a corporate rental housing business

28 29

30

$ 4,138,625(￦ 4,434,123)

$ 6,397,688 (￦ 6,854,483)

2016

2017

$ 5,083,954(￦ 5,446,948)

$ 4,296,758 (￦ 4,603,546)

2017

2016

Figure


Portion of New Order in DaelimUSD 4.3 billion

Market Leadership55.6 %

61.2 %

Market Environment

In 2017, domestic and overseas uncertainties expanded

into the real estate market due to increases in the US

interest rate and economic changes in Korea such as the

enhancement of household lending regulations and the rise

in loan interest rates. The number of apartment households

on sale was 340,000, a decrease of 140,000 households com-

pared to 2016. The orders for the private construction and

public construction market declined slightly compared

to the previous year. Due to the above market conditions,

the Housing & Building Business Division received lesser

orders year-on-year for all sectors including private housing,

redevelopment, reconstruction, public construction and

private construction in 2017.

New Order

- Jeju Shinhwa History Park Hotel 2-1 (2017)

- Amorepacific MC remodeling (2017-2018)

- Pyeongchang Olympic Temporary Athlete Village (2017-2018)

- Seogwipo Villa extension (2017-2018)

- Goyang Logistics Park (2017-2019)

- Suwon Deutsche Auto World New Construction (2017-2019)

- Busan Mandeok5 2BL (2017-2020)

- Uijeongbu Chu-dong Park 1 (2017-2020)

- Daejeon Yongun Housing Corporation (2017-2020)

- Guri Suta (2017-2020)

- Namdaemunno 5-ga Office (2017-2020)

- Daegu Cheongsu housing reconstruction (2017-2020)

- Happyhouse in front of Busan City Hall (2017-2020)

- Re-development of Uam 2-block housing (2018-2021)

- Yangju Okjeong 4th A-19 (1) (2018-2020)

- Donghae Danbong (2018-2020)

- Goyang Samsong efficiency apartment 4th (2018-2020)

- Uam 2nd district residential development New Stay (2019-2020)

- Samsung Hongsil Redevelopment (2019-2021)

- Busan Beomil 3rd District (2017-2022)

- Seocho Shindonga reconstruction (2018-2022)

- Incheon Woojin reconstruction (2020-2022)

- Gimpo North Side 5 Urban Environmental

Improvement Project (2020-2023)


In 2017, the Housing & Building Business Division received

new orders worth USD 4.3 billion, which decreased signi-

ficantly due to the difficult market environment. However,

sales have reached USD 6.4 billion, an increase of USD 2.4

billion year-on-year, centering on private housing, redeve-

lopment, reconstruction and public construction.


In 2018, the real estate market is expected to see an increase

in domestic and foreign uncertainties due to oversupply,

rise in interest rate, and enhancement of Government reg-

ulations while the volume of moving in is expected to be

the highest in the last 18 years. Therefore, the Housing &

Building Business Division will ensure stable occupancy

management by ensuring the quality of deadlines, resolving

defects promptly, and implementing moving-in marketing. In

addition, we will keep building our sustainable growth base

by strengthening competencies, securing competitiveness

in execution, and improving financial structure through

resolution of businesses not yet started.

New Order in Housing & Building Works USD in thousands (KRW in millions)

Sales in Housing & Building Works USD in thousands (KRW in millions)

Hankook Tire Technodome, Korea

3130

ACROTOWER SQUARE Project, Korea

Featured Project 3 times

1,221 households Total of 1,221 households, a first class large scale

apartment complex

60cm floor sound insulation material which minimizes floor noise

(3 times compared to conventional material of 20 cm)

Relevant Projects

Project Overview

In August 2017, Daelim Industrial completed ACROTOWER SQUARE, a first class large scale

apartment complex with seven buildings, a maximum of 35 floors and 1,221 household units.

It has European-style sensuous street mall linked to a big neighborhood park and a square as

well as community facilities including cafes and sports facilities all connected by bridges. Our

premium brand ‘ACRO’, which brings out images of comfort and high-quality living, is now a

landmark of Yeongdeungpo New Town, fronting the Han River and the life zone of Yeouido, one

of Seoul's three major business districts. In addition, it has played a big role in preoccupying the

premium apartment market by adding a sense of openness with the high-rise lobby finished

with quality materials.


With the success of ACROTOWER SQUARE following ACRO RIVER PARK, 'ACRO' as a luxury

residential brand by Daelim Industrial has been recognized by the general customers coun-

trywide. Based on this achievement, we have presented ACRO RIVER HEIM and ACRO RIVER

VIEW in succession and finished the sale with a high competition rate. Based on the ACRO

brand, we will continue to solidify our strong position in the premium apartment market by

improving competitiveness including enhancement of business management capabilities.

ACRO RIVER PARK, Korea (2013-2016)First-class apartment near the Han River in Korea

ACRO RIVER VIEW, Korea (2016-2018)Premium apartment with the highest rate of competition

Dokok Acrovill, Korea (1996-1999)First premium residential & commercial complex in Korea

ACROTOWER SQUARE, Korea

3332

Jeju Shinhwa History Park Hotel New Construction Project, Korea

Relevant Projects

Project Overview

Jeju Shinhwa History Park Project is a construction business to create 'Resort World Jeju', a

world-class complex resort with a total area of 3.98 million m2 including hotel, theme park,

water park, and condo in Seogwangri, Andeok-myeon, Seogwipo-si. It has been built with

a development cost of about USD 1.8 billion, building premium leisure and entertainment

facilities for domestic and foreign visitors. The Daelim Industrial Consortium has constructed

complex resort a total area of 195,273m² with 2 floors underground and 5 floors above ground

operating hotel, casino, MICE and duty free shops in the A district of the whole project since

January 15, 2016 and has hold the grand opening on August 22, 2018. The Jeju City Xinhua

Historical Park Hotel, operated by Marriott Hotel and Landing Jeju Development, is expected

to provide comfortable resting space and world-class entertainment facilities for domestic and

foreign tourists. Through this project, we have made a positive contribution to the revitalization

of the MICE industry and the development of Jeju Island tourism industry.


With the experience of the project, we have expanded the capacity of construction of large

hotels and large complexes. Daelim Industrial plans to position itself as a strong player in the

construction market such as luxury hotels and multi-resort hotels based on the experience of

numerous construction and hotel operations in hotels & resorts.

1.8 USD in billions

Featured Project

Project expenses totaling USD 1.8 billion

Four Seasons Hotel, Korea (2012-2015)A first-class hotel located in Gwanghwamun, the heart of Seoul

Conrad Seoul, Korea (2008-2012)Korea’s first Conrad hotel, the top brand of Hilton Hotels & Resorts

Grand Hyatt Incheon, Korea (2012-2014) Total of 1,024 guest rooms, certified as environment-friendly building (LEED Gold)

190,122 m2Total gross area of 190,122m2, Korea's largest complex resort

Jeju Shinhwa History Park Hotel, Korea

BIMEconomical and efficient construction through 3D BIM design

3534

Service Portfolio

Business Overview

Daelim Industrial has a leading position in the domestic petrochemical industry in terms of technology and production. We have

succeeded in the commercialization of metallocene polyethylene (mPE) based on our very own catalytic technology, developed

first in Korea. We developed a swing process that can produce general-purpose polybutene (conventional PB) and highly reactive

polybutene (HRPB) simultaneously, a first in Korea. In addition, we were recognized for our world-class technology capability

by becoming first amongst domestic petrochemical companies to succeed in selling technology in the US market. We also have

top-quality control capabilities based on our experience of operating petrochemical plants for more than 45 years. We continue to

strive to strengthen stability of business portfolios globally through active overseas investment.

Film BusinessPE (Polyethylene) Business

PB (Polybutene) Business

Petrochemical Business

Core Competence

PE1 Plant, Korea

PE (Polyethylene) BusinessEstablished a system to produce and sell 450,000 ton of PE per year

PB (Polybutene) BusinessTurned into the No. 1 PB producer in the world (capable for 185,000 tons per year)

Film BusinessGrown to be the No. 1 BOPP film maker in Korea

www.daelimchem.co.kr/eng/main.do

No. 4

45 years1st

Exported technology to the US for the first time as a domestic

petrochemical company

Securing Asian No. 4 NCC with annual ethylene output of 1.95

million tons (Joint Venture)

45 years of know-how in NCC-based petrochemical plant

operations

185 thousand

Polybutene production capacity of 185 thousand ton per year (Global No. 1 in the

open market)

36 37

38

$ 1,002,854(￦ 1,074,458)

$ 1,084,522 (￦ 1,161,957)

2016

2017

Figure


Sales in Petrochemical Works USD in thousands (KRW in millions)

Market Environment

Thanks to the competitiveness of NCC (Naphtha Cracking

Center)-based products due to the low oil price, profitability

of the Petrochemical Unit has been improved in 2017.

In particular, increased demand caused by the global eco-

nomic recovery and delayed investment in large-scale ECC

expansion in the US have contributed to improving pro-

fitability along with tight supply and demand conditions.

Despite this condition, however, the conventional product

market has become more competitive as the self-sufficiency

rate in China rises and the supply of low-cost products

increases.


The Petrochemical Unit has differentiated itself by con-

centrating its competency on manufacturing and sale of

specialized high quality & functional products. In 2017,

the Unit recorded a sale of USD 1.1 billion. Moreover, the

profitability improved significantly through market share

expansion, as it maintained the world’s No. 1 market share

in Polybutene and accomplished No. 1 market share in BOPP

domestic market. Although the competition in the general

petrochemical market has intensified in 2017, we focused

on sales expansion of highly profitable products based on

the thorough target market analysis and achieved a signi-

ficant performances through cost innovation activities in

manufacturing.

In 2018, the petrochemical industry is concerned about overall

decline of profitability due to raw material prices rising caused

by a decrease in raw material supply following the imple-

mentation of OPEC's decision to cut oil production and the

global economic recovery. Market competition becomes more

intense as the self-sufficiency of petrochemicals rises in China,

and the supply of low-cost conventional products shale-based

North America increases. Therefore, concentration in securing

cost competitiveness in the general-purpose bus-iness and

development and expansion of high-value added products are

necessary to maintain a sustained growth.

It is difficult to be optimistic about the market in 2018, con-

sidering oil price volatility and the contraction of the global

trade market due to the US protectionist measures. The

petrochemical division will strengthen its manufacturing

competitiveness through cost reductions and productivity

improvements in the existing businesses, and enhance pro-

duct competitiveness through high-value-added products

and sales expansion. In addition, we will actively respond to

the volatile raw material market by establishing a production

facility base with excellent raw material competitiveness in

low-cost regions and continue R&D and investment into the

specialty business based on accumulated assets. With these

strategies, the Petrochemical Unit will solidify its status as

the leading company in this high-value product market.

Plan and Outlook for 20189.4 %

Market Leadership

PB (Polybutene) Business USD in millions (KRW in billions)

Film Business USD in millions (KRW in billions)

Financial Performance by Services

PE (Polyethylene) Business USD in millions (KRW in billions)

$ 491(￦ 526)

2016 $ 579(￦ 620)

2017

$ 300(￦ 321)

2016 $ 344(￦ 369)

2017

$ 72(￦ 77)

2016 $ 95(￦ 102)

2017

PE2 Plant, Korea

3938

Petrochemical Joint Business Project, US

Featured Project

Joint venture with Thailand's largest state-owned petrochemical company

with nearly 40 years of experience

Total ethylene production (million) of US ECC (1.5 million ton) and

Yeocheon NCC (1.95 million ton)

Project Overview

In February 2018, Daelim Industrial entered into an investment agreement with PTT Global

Chemical (PTTGC), the largest petrochemical company in Thailand. Based on the agreement,

we will construct an ethylene cracking plant (ECC) which produces ethylene by cracking ethane

in Ohio, USA. Through this project, we will secure 1.5 million tons of ethylene and polyethylene

production facilities in the US, supported by an abundant domestic demand and cheap raw

material supply. It means we will be able to actively respond to changes in the external

environment such as fluctuations in oil prices by completing an optimized business portfolio

that simultaneously operates Yeochun NCC, the naphtha-based ethylene production facility

and ethane-based US ECC.


The location of the project in Ohio, USA, has logistical competitiveness because it is close to

the eastern part of the US market, which accounts for 70% of the US domestic polyethylene

market. In addition, it is advantageously positioned to procure raw materials as it is located

in the area of Marcellus and Utica Shale gas fields. Furthermore, this project will be a foothold

for us to take the lead in the petrochemical market by entering the North American market,

which has been practically impossible for Korean domestic petrochemical companies to enter

due to high entry barriers such as transportation costs.

Competitive Edge in PE Business

The PE Business is a representative area of Daelim Industrial’s Petrochemical Unit. Since

the adoption of Philips method in 1989 and Basell method in 1996, the PE Business

has established a system to produce and sell 450,000 tons of polyethylene per year by

continuously optimizing the operational efficiency, and has provided a range of products

to domestic and overseas manufacturers. In particular, with strong mechanical and

optical properties as well as low heat seal temperature, our mPE products were the first

to be commercialized in the industry and have been widely used for diverse purposes

including high-quality films. Also, HDPE products have been highly recognized for its

premium quality with the outstanding machinability and long term property in hollow

molding, such as large drums and pipe forming fields.JG summit NCC, Philippines

JV3.45 million ton

4140

Licensing90%+

The first export of manufacturing technology to the US among Korean petrochemical company.

Exporting more than 90% to global lubricant additive manufacturers

No. 1 Additional Polybutene Plant Project, Korea

Securing Polybutene production capacity of 185,000 ton per year (No. 1 in the world's open market)

Project Overview

Daelim Industrial Petrochemical Unit has invested a total of USD 69 billion in November, 2016,

and expanded the production capacity of highly reactive polybutene plant from 65,000 ton

to 100,000 ton. By completing this project, we have been able to produce polybutene with a

total production capacity of 185,000 ton including 85,000 ton of conventional general-purpose

polybutene and we have solidified the No. 1 production capacity in the world. In particular,

our technology and production capacity have been recognized through the independent

development of technologies that can produce general-purpose and highly reactive polybutene

in a single plant as well as the first export of polybutene manufacturing technology to the US

amongst domestic petrochemical company.


As global environmental regulations are strengthened, environment-friendly lubricant oil

additives and fuel detergent additive markets have expanded. The highly reactive polybutene

market is steadily increasing at an average annual rate of 4%, due to its characteristic that can

produce environment-friendly products with no chlorine content. Daelim Industrial's polybutene

products have been exported to more than 90% of global lubricant additive manufacturers

such as Lubrizol, Chevron and Infineum, all credited for their high quality. As a result of

this project, we are leading the market and have strengthened our position to be the global

No. 1 polybutene manufacturer.

Featured Project

Competitive Edge in PB Business

Daelim Polybutene was established in December 1993 with a capacity of producing 12,000

ton per year and after a series of expansions under the stabilized operation, it has turned

into the world’s largest PB producer capable of producing 185,000 ton per year. In particular,

we have succeeded in exporting our technology to the US market, a first among Korean

petrochemical companies. Thus, we have expanded the business area from production

to technology sales and have secured a leading position in the global polybutene market.

PB technology of Daelim Industrial has advantages of being able to provide customized

products successfully meeting customer needs by its swing process capable of producing

both conventional PB and HRPB in one factory while providing the highest quality products

based on our competency in the stable factory operation technology.

1

Daelim Industrial Petrochemical Unit, Korea

4342

44 45

http://www.daelim.co.kr/eng/rnd/center/Rnd01.do

SUSTAINABLEDAELIM

Daelim Industrial seeks to achieve superior competitiveness in technology by establishing the R&D Roadmap which corresponds to its

business strategies and by continuously investing in R&D. We strive to secure new growth engines through the technology commercializa-

tion and expansion to new markets with our future construction technology products.

Our Core Value


R&D Activity

Research and Development

We are constantly identifying new technical ideas in various

fields of construction such as architectural structure, mate-

rials, environment, facilities and civil works, special bridges,

environment, etc. We are continuously securing new techno-

logies through systematic research and development and im-

proving the technology through steady management. Daelim

Industrial will lead the construction sector by improving the

level of construction technology and engineering as well as

focusing on the fields of smart and convergence(IoT, ICT) for

the 4th industrial revolution.

R&D Vision

Global Technology Leader & Value Creator

Daelim Industrial leads the world’s construction technology by

developing future-oriented technology and creating new va-

lues through the technology commercialization.

Identifying construction technology, which meets

business division strategy and the needs at sites1

Commercializing developed technology and

increasing productivity through technology sales2

Securing absolute competitiveness through future-

oriented mid- to long-term technology development3





Ethical Management

Risk Management

Social Contribution

45

48

50

52

54

56

58

46 47

R&D Activity

Technical Support

Based on our unique safety and quality assurance processes,

we are striving to ensure safety and quality through periodic

site inspections preventing related problems in advance. For

the problems that have occurred, our experts simulate various

alternatives and provide optimized solutions according to site

characteristics to secure safety and quality, and to enhance

the value of construction products. In addition, we are provid-

ing integrated technology support solutions throughout the

entire lifecycle of the construction, from pre-construction to

defects support, reflecting increasing customer needs.

R&D Achievements

In 2017, we have focused on developing proprietary technolo-

gies that can secure technological and price competitiveness

as well as commercialize of the technologies. In addition, we

have conducted systematic R&D activities to cope with new

market environment and policy changes.

In 2017, technology development activities such as drone-re-

lated technology, localization of seawater processing technol-

ogy, health house specialized technology, and improvement

of building materials will create high added value through site

application and commercialization. We have reflected techni-

cal needs from sites with the mid-to long term perspectives

and constantly strived to achieve immediate result from the

short-term perspectives which can be immediately carried

out.

As a consequence of our continuous efforts, we were certified

2 new technologies as proprietary technology in 2017. In ad-

dition, we have applied 17 domestic patents as well as have

registered 11 patents and 1 overseas patents, achieving 263

domestic and overseas patents overall. We are focusing on

identifying future technology products that can secure abso-

lute competitiveness.

In order to form a professional group as an R&D profession-

al organization, we have continuously developed the human

resources training programs of existing Technology R&D In-

stitute and have nurtured global talents with excellent engi-

neering and communication capabilities both domestically

and overseas. In addition, we are strategically organizing and

managing employees efficiently to cope with changing envi-

ronments.

Technology Planning

For the future-oriented technology development, Daelim In-

dustrial provides support for the development of cutting-edge

construction technology through systematic planning and

management from the establishment of mid-to long-term

strategies to the performance management. Especially, spe-

cialists in each field gather to understand the advanced tech-

nology trends at home and abroad preparing for the 4th indus-

trial revolution, and plan the development of differentiated

technology products by predicting future technologies from

the mid- to long-term perspective.

Number of new technologies secured

Number of green technology secured

Number of effective technology agreements

Number of domestic and foreign patent secured

Amount of development technology royalty collected (6 cases)

6 cases 7 cases 42 cases 263 cases 3.3 USD million

Research Projects In 2017

Polyethylene Polybutene

· Improvement of HRPB quality· mPE for low temperature sealing· High Stiffness PERT Type II· mPE for Roto-molding

· EVA(EGM)· Synthetic paper (DSU, DSV, DYT) products

BOPP FilmPETROCHEMICAL

R&D GROUP

Structure & Material

Eco & Smart Housing

BUILDING R&D GROUP

Bridge

Dam & Harbor & Tunnel

CIVIL R&D GROUP

· Development of a model for marketable Korea-Passive House· Development of high performance dry floor system· Development of commercial geothermal energy slab system· Development of commercial smoke damper system· Development of design optimizing program for hydronic system based on BIM· Development of multi-function smart windows and doors product technology

· Development of technology for improving apartment frame process · Development of ALC block with reduced absorption rate and complete dry construction technology· Development of One-way Ribbed Slab System for reducing construction duration· Development of low-cost, high-efficiency remodeling technology for vertical expansion of old housing· Verification of PC slab performance for cold storage· Development on concrete technology promoted chloride durability

· Development of optimal pipeline construction technologies considering cold region environments· Development of earthwork volume management technology using a rotary-wing drone· A study for construction management techniques of driven piles in deep sedimentary layers· Development of tunnel blasting excavation technology for minimizing overbreak· Development of desander design method for run-of-river type hydropower project· Development of transient pressure analysis technic for dam waterway · Development of check-list for optimum design and construction of concrete dam

· Development of construction methods for superstructure of cable stayed bridge using super concrete· Development of optimal design and construction methods for cable stayed suspension bridge· Development of low cement self-compacting concrete technology· Development of PC shell construction method using Bracketless Support System· Development of new construction method for foundation of marine bridge

· Development of pre-treatment system for wastewater reclamation· Development of RO concentrate treatment system for wastewater reclamation· Development of seawater desalination system responding to red tide event· Establishment of the global network in the field of organic waste to energy

· Development of precast windmill tower using SUPER concrete

· Development of dedicated process simulator for KOSOL solvent developed in CO2 capture technology· Development of Basic Design Package· Technical Consultation of the detail design, construction and operation for CO2 capture plant

CCS (Carbon Capture

& Storage)

Water & Environment

Power Plant

PLANT / ENVIRONMENT

R&D GROUP

Specialty Products

Major Achievements in 2017


48 49

Activities for Zero Accident

Daelim Industrial is actively implementing various accident pre-

vention activities such as establishing Safety Management Plan

in yearly basis, operating safety & health management system,

conducting real-time safety warning activities via smart phone,

and providing constant trainings and inspections.

Each and every employee at Daelim Industrial strives to realize the zero accident and create a safe and pleasant working environ-

ment under the management principle to respect human. Strongly believing that the safety is not a choice but a requirement, we

have considered the safety as our top priority in executing all construction works.


Safety Management Plan

We have established a Safety Management Plan by analyzing

accident cases within our company as well as in the construc-

tion industry over the past five years.

Under the slogan of ‘We can make ZERO accident', the 2017

top agendas of the policy have been set as following: ‘manage-

ment for 5 high-risk works,’ ‘employee management’ and ‘risk

assessment & strengthening safety checking activities.’ The

selected policies have been applied to all business divisions

and have served as a driving force for achieving zero accident.

OHSAS 18001 Oversite Evaluation for Sustainability

Management

In 2009, Daelim Industrial acquired OHSAS 18001, which is an

international safety & health management system for the ac-

cident prevention and continuous improvement of the safe-

ty and health level. Also, the adequacy of our safety & health

management system has been verified on an annual basis by

verification holders.

Activities for Zero Accident

Safety Checking Activities via Smart Phone

Safety checking via smart phone help find and eliminate risk

factors regardless of time and place. Consequently, it contrib-

utes to the protection of workers from danger by minimizing

the exposure time to risks.

Accident Rate

The accident rate of Daelim Industrial has been in the range

of less than 0.2%, which is outstanding performance com-

pared to industry average, represents a high level of safety

and health management of our company.

www.daelim.co.kr/eng/sustain/Safety.do

Zero accident at Oman SRIP site

5,585 million hours

Zero accident at e-PyunhanSaesang Yong-in Hansup City site

7.54 million hours KOSHA18001

Propelling to acquire safety and health management system certification from the Korea Occupational Safety and Health Agency(KOSHA) (targeting in the second half of 2018)

2,535 times

Total safety and health training time

27,237 hours

Number of real-time safety checking via smart phone

250,437 cases

Number of occupational health and safety inspections (corporate-wide, HQ, equipment, electricity, technology)

Low accident rate compared to the construction industry average (0.57%)

0.2 %

Our Core Value

0.51

0.13

0.57

0.18

20162015

Daelim Industrial

Industry Average

0.57

0.20

Status of Industrial Accident Rate for the Past 3 Years

2017(expected)


50 51

Sites involved voluntary scattering dust agreement (120 out of 145 sites)

Construction waste recycling rate Environmental education hours per person

Energy savings energy consumption: 4,472TJ in 2016, 4,150TJ in 2017

83 % 89 % 3.41 hours 322 TJ

25,215

49,567

218,501

(Unit : ton CO2

-e)

Direct emissions (Scope 1)

Indirect emissions (Scope 2)

Other indirect emssions (Scope 3)

293,284Total

Environmental Management Activity

Daelim Industrial has been endeavoring to fulfill its social re-

sponsibilities in environmental field such as efforts to reduce the

GHGs and dust scattering and "Cleaning and Caring One Moun-

tain, One River and One Street" Campaign.

Daelim Industrial deeply sympathizes with the social impact of the environmental aspect caused by management activities and is

fully committed to environmental management activities in order to create a rich and comfortable living space on the basis of the

"Hansup Spirit," which is our management philosophy. These efforts have been accomplished through various activities including

aggressive response to one of the most serious social issues in Korea, fine dust reduction.


Continuous Efforts to Reduce Fine Dust

We have been working to protect the public health and to

eliminate social side effects caused by fine dust. In order to

feel the necessity of fine dust reduction activity, we educate

not only our employees but also suppliers and their workers.

We provide them with education and information on hazards

of fine dusts while establishing a dust scattering reduction

plan considering the characteristics of each site and keep fol-

lowing the plan. This achievement can be confirmed in the

fact that the largest number of sites are involved among com-

panies signed voluntary scattering dust agreement with the

Ministry of Environment.

Environmental Management through Risk Analysis

Daelim Industrial has proved its leadership of global standard

by acquiring the certification in accordance with the latest

requirements of ISO 14001: 2015 in 2016. We are doing our

best to raise the level of environmental management through

continuous review and improvement activities for the require-

ments. In addition, we have established a Risk Management

Team for preemptive and active environmental management

activities, and have conducted risk analysis on all activities

including environmental aspects and reflected them in es-

tablishing management strategies. These activities are cor-

nerstone of sustainable management by not only preventing

environmental accidents, but also leading to environmental

performance in various aspects such as environment-friendly

construction methods, green technology development, and

new business development.

Our Core Value www.daelim.co.kr/eng/sustain/Env.do Greenhouse Gas Emissions Management

Korea Cap and Trade Scheme and GHG Independent

Assurance

Since 2010, Daelim Industrial has established a GHG invento-

ry voluntarily and has calculated and reduced its emissions

from before the implementation of the GHG & Energy Target

Scheme Guidelines. Since 2015, we have been included in the

Korea Cap and Trade Scheme and have established a moni-

toring plan for HQ, resorts and corporate building and submit

KAU(Korean Allowance Units) to the Government through ex-

ternal verification.

In addition, in order to fulfill our social responsibilities, con-

struction sites and construction equipment suppliers not in-

cluded in the Korea Cap and Trade Scheme are doing volun-

tary third-party verification to calculate and reduce emissions.

The emissions in 2016 are as follows (2017 data to be assured).

Environmental Management Activity

Social Responsibility in Environmental sector

We are contributing to the preservation of the environment

and creating a comfortable living space by constantly con-

ducting activities for the purpose of cultivating "Cleaning and

Caring One Mountain, One River and One Street" Campaign

all over Korea. Besides, we are working in various fields to do

our social responsibilities such as finding and spreading best

practices of environmental management through internal and

external competition, fulfilling voluntary agreement to reduce

scattering dust, and purchasing environmentally certified

products. In addition, we are actively preventing environmen-

tal complaints by operating a noise prediction program which

scientifically analyze the noise impact from construction work

and planning to establish effective mitigation measures.


52 53

www.daelim.co.kr/invest/govern/GovernInfo.do

Daelim Industrial has pursued the sustainability management through the establishment of sound and transparent governance

and responsible management. We will continue devoting our best to protect the shareholder interests and create shared value of

stakeholders through the sustainability management.


Committee Functions Compositions

Finance Committee · Deliberation and decision-making on major financial issues

· 2 internal directors· 1 external director

Audit Commitee · Accounting audit· Operational audit· Appointment of external auditors

· 3 external directors

External DirectorNominationCommittee

· Recommendation for external director candidates

· 1 internal director· 2 external directors

CompensationCommittee

· Establishment of the compensation plan for registered board members

· Deliberation on the compensation level

· 1 internal director· 2 external directors

Board of Directors

Name Major Responsibilities

Sangwoo Kim CEO,Chairman of the Finance CommitteeMember of the Compensation Committee

Sangshin Park CEO, Member of the Finance Committee,Member of the External Director Nomination Committee

Haewook Lee Vice Chairman

Yong Nam Chairman of the Board of Directors, Adviser

Internal Directors

Name Major Responsibilities

Daljoong Chang Chairman of the Compensation Committee, Chairman of the External Director Nomination Committee

Hansang Lee Chairman of the Audit Committee

Chunghoon Lee Member of the Audit Committee ,Member of the Finance Committee

Joonho Han Member of the External Director Nomination Committee,Member of the Compensation Committee

Chanhee Park Member of the Audit Committee

External Directors

Organization of the Board of Directors

The Board of Directors of Daelim Industrial consists of 9 mem-

bers: 4 internal and 5 external directors. Daelim Industrial main-

tains the chairman of the board and CEO seperatedly according

to the board regulations; directors and members of the Audit

Committee are appointed at the General Meeting of Sharehold-

ers. With qualified experts appointed to the Board as the result

of the election, the Board of Directors can make practical contri-

butions to the corporate management. In particular, the External

Director Nomination Committee recommends external director

candidates who can make independent decisions from the com-

pany, the management and significant shareholders; external

directors are appointed by the resolution of the General Meeting

of Shareholders.

External directors should own expertise and experiences in

management, economy, accounting, law and related skills.

Therefore, a skill mapping is used for the candidate evaluation

by analyzing the relevance in respect of the diversity and com-

plementarity of duties of the Board of Directors.

Operation of the Boardof Directors

The Board of Directors has a comprehensive authority over

the corporate management, including rights in key decision-

making, management monitoring, and business execution.

The board shares its awareness about the corporate respon-

sibility with the entire company for the consumer protection

and environmental preservation. It also endeavors to under-

stand the influence of economic, environmental, and social ar-

eas. Making decisions on the corporate vision and goals, the

Board of Directors applies its decisions to the business being

responsible for the performance management. The Board of

Directors holds a regular meeting on a quarterly basis while a

special meeting is held on an ad hoc basis.

Daelim Industrial makes every effort to incorporate all opi-

nions of stakeholders including shareholders and employees

into the management process. Besides, minor shareholders

are entitled to call for the General Meeting of Shareholders

in accordance with the proper standards and procedures and

can also suggest agendas to be discussed at the meeting. In

addition, we operate a labor-management council (Hansup

Council), which contributes to the efficient communication

and information sharing between the employees and the

management.

Committees in the Board of Directors

The Finance Committee is consisted of 2 internal directors

and 1 external director, responsible for deliberation and deci-

sion-making on major financial issues and other issues dele-

gated by the Board of Directors.

The Audit Committee is consisted of 3 external directors, re-

sponsible for accounting audit, operational audit and appoint-

ment of external auditors.

The External Director Nomination Committee is consisted of

1 internal director and 2 external directors, responsible for

recommendation for external director candidates.

The Compensation Committee is consisted of 1 internal direc-

tor and 2 external directors, responsible for establishment of

the compensation plan of the registered board members as

well as consideration and decision the annual compensation

limit to be presented to the General Meeting of Shareholders.

Our Core Value

54 55

Ethical Management

Integrity management is a core value for Daelim Industrial to implement sustainability management and practice disclosure manage-

ment, ethical management and social responsibilities based on the foundation philosophy, the ‘honesty and trust’.

Ethical Management System

Since the foundation, Daelim Industrial has implemented in-

tegrity management based on the foundation philosophy of

the ‘honesty and trust’, and after clarification of its ethical

management, Daelim Industrial has established and operated

the global level of ethical management standards.

Ethical Management Roadmap

www.daelim.co.kr/eng/sustain/Intro.do

· Establish the Code of Ethics, Guidance, Cyber Shinmungo and Secretary

· Office for Ethical Management- Introduce Compliance Program (2004)

Declare new corporate philosophy based on ethical management (2000)

· Implement our guiding principles "Hansup" for improving the quality of life

Build the foundation for ethical management and promote corporate culture

· Listed in the DJSI World Index (Construction & Engineering in 2013)

· Promote voluntary compliance, sharing, and anti-corruption campaigns

Define Sustainable Management System

Settlement

Phase 2

Introduction

Phase 1

Innovation

Phase 3

CP Operation

Daelim Industrial operates Cyber Shinmungo to allow stake-

holders, such as employees, customers and suppliers, to re-

port unethical behaviors in a more convenient way regardless

of time and place; examples of unethical behaviors include un-

fair trades and corruption. Cyber Shinmungo helps to detect

and resolve employee's violation against ethical codes at an

early stage while handling public complaints as well. For all

cases reported through Cyber Shinmungo, the anonymity is

strictly protected and a thorough investigation and appropri-

ate subsequent measures are guaranteed.

Human Rights Policy

As a global company, we respect cultural rights, diversifica-

tion, belief and human rights. Hence, strict standards are in

place regarding social corruptions and human rights issues.

We faithfully comply with the standards required by the Uni-

versal Declaration of Human Rights, ILO, OECD and Ruggie

Framework, the corporate responsibilities to respect human

rights. Therefore, we do not allow any action that breaches

or restricts on human dignity. Moreover, we make effort to

disseminate and practice regarding the complicity of human

rights breaches and due diligence. As a result of increase in

overseas expansion, it became necessary to strengthen edu-

cation and auditing activities in order to prevent breach or

damage to the rights of local stakeholders.

Within its organization, respecting human rights of each sin-

gle employee is a basic principle for the entire business activi-

ties, and we carry out various programs. For instance, we op-

erate confidential grievance counselling services, and provide

breast feeding facilities for maternity protection. In addition,

in order to protect working environment for female labours

and to create healthy organizational cultures, we annually ca-

rry out preventing sexual harassment training subjected to all

employees. Every single employee of Daelim Industrial strives

to create human rights friendly corporate culture through job

training concerning human rights and manner to security

managers. Lastly, we do not employ any kind of child or forced

labour, in domestic or overseas sites, we do not employ any

person below the minimum legal age.

Organizational System of Ethical Management

· Legal guideline· Compliance supervision

· Prevention of corruption· Regular inspection· Investigation of report

Legal Support

Auditing & Monitoring

CEO

Ethical Management OfficeCompliance Council

Auditing & Legal Office

Operating System of Ethical Management

Training /Campaign

· Conducting employee training; providing manuals and guidelines for each compliance category

· Promoting campaign against gift exchanges during traditional holidays

· Pledging to practice Code of ethics by all employees

· Making resolutions for autonomous practice for all teams/sites

ComplianceOffice

Manager

· Spreading the basic guideline for compliance throughout the company

· Sharing cases of inspection results and striving for prevention of recurrence

SharingLessons

Inspection /Feedback

· Conducting regular & non-regular monitoring by the responsible organization (corporate ethics, fair trade, compliance of business laws)

· Identifying the fundamental causes of problems through the analysis of inspection results and conducting improvement activities

· Conducting Q&A and exchanging advices on issues on ethics & fair trade

· Sharing policies on competition within the organization

Q&A /Advice

GLOBAL BEST

Our Core Value

56 57

Risk Management

In the midst of the complicated business environment, the risk management is necessary for the stable business as well as for

both the growth and profit. Therefore, Daelim Industrial has been comprehensively managing risks in order to increase the corpo-

rate value and maximize the stakeholder benefit despite the growing uncertainty of the business environment.

www.daelim.co.kr/eng/sustain/Quality.do

Order risk

Key Risk 01.

Excution risk

Key Risk 02.

Ethical risk

Key Risk 05.

Safety risk

Key Risk 04.

Financial risk

Key Risk 03.

Risk ManagementBased on

Five Key Risks

We manage order risks by the three-step feasibility review as follows.

Preview by each business division → Review by relevant team leaders → Review by RMC

(Risk Management Committee), the highest decision-making organization

The Business Audit Office has taken charge of an overall management system for risks

(cost and construction period) of the company; the Building & Housing Business Division

has authorized the six committees to manage development projects and costs.

The integrated ethical risk management at the corporate level is in place throughout

the entire areas of the ethical management such as fair trade issues; we carry out reg-

ular and frequent assessments, assessment on execution, and CP (Compliance Pro-

gram) assessment while operating Cyber Shinmungo.

Through the Safety Operation Module & Risk Assessment (SORA), a risk evaluation

system developed by Daelim Industrial, we are implementing diverse accident preven-

tion activities. Moreover, we have conducted practical safety management activities

such as immediately eliminating dangerous factors using smart phone and introduc-

ing the employee suggestion system.

Financial risks are managed in three ways: market environment analysis, KRI (Key Risk

Indicator) management, and Group financial risk management.

- Market environment analysis: Macro economy, financial market, policy environment,

business environment (country, region)

- KRI management: Liquidity, working capital (accounts receivable/loan receivable),

financial exposure (net debt+PF), debt financing structure.

Order Risk

Key Risk 01.

Excution Risk

Key Risk 02.

Ethical Risk

Key Risk 05.

Safety Risk

Key Risk 04.

Financial Risk

Key Risk 03.

Risk Management

Daelim Industrial is fully aware of the importance of the risk

management to respond to the business environment that

is becoming diverse and intricate due to the diversified work

types and geographical regions. Accordingly, we have es-

tablished a thorough response system at the corporate level

through the integrated risk management framework. Also,

the monitoring system for key risk factors has been operated.

Risk Management System

Daelim Industrial has an efficient risk management system for

five key risks that impose significant influences on the busi-

ness.

Our Core Value

58 59

Social Contribution

We pursue a variety of social contribution activities based on our Hansup spirit (foundation philosophy), ‘to create a comfortable and

affluent way of life,’ in order to achieve the sustainable growth together with local communities.

www.daelim.co.kr/eng/sustain/ActVideoList.doOur Core Value

Social Contribution Activities

Sharing of Hope

A Series of Activities to Support the Physically Disabled and Reaserch in Relevant Fields and Students

Through Sharing of Hope activities, Daelim Industrial has delivered donations and financial supports to the physically disabled and

socially underprivileged who need rehabilitation. We support university students through our scholarship foundations. Since 2004, in

addition, Daelim Industrial has donated our electronic devices to its partnering rehabilitation facilities; some of the donated devices

are shipped overseas for the education in underdeveloped countries. Besides, we have established the Suam Scholarship Founda-

tion, a non-profit foundation, to support tuition for university students in commemoration of 50th anniversary in 1989.

Sharing of Love

A Series of Volunteering Activities, Partnering with Local Communities

For regular and constant volunteering activities, Daelim Industrial's employees are teaming up with welfare facilities delivering helps

to the underprivileged at every corner of the society. Employees are visiting these facilities on a weekly-basis to bake breads for

undernourished children and seniors, make bags and solar lanterns for children in underdeveloped countries, and take care of aban-

doned animals. A significant number of special interest groups are making their contribution as well by harnessing their knowledge

and skills. Throughout the country, on-site employees are also participating in the volunteering activity under the name of Hansup

Volunteer Group for local communities.

Sharing of Happiness

Residential Environment Improvement Activities for Ordinary Non-Housing Owners

Through our proficiency as a construction company, we have been carrying out Happiness Sharing activities to improve the worn-out

residential environment of the underprivileged since 2005. In 2017, besides, Daelim Industrial repaired old housing-clustered areas

and welfare facilities in Seoul and capital area by cooperating with the Group affiliates relevant to the construction industry: Samho

International and Korea Development Corporation. Thanks to outstanding talents of our employees, the activities are being conduct-

ed to enhance insulation and energy efficiency, such as the replacement of wall paper, floor paper and light bulbs with LED lights.

Sharing of Culture

A Series of Activities to Provide Opportunities for the Underprivileged to Explore Cultural Activities

By operating museums, we are providing modern art and design exhibition to the public as well as supporting young artists in Korea.

Daelim Museum, opened in 2002, has paved a path for the public to easily access and understand art under the vision of ‘In Everyday

Life’. In 2015, D MUSEUM was newly opened last year further expanding the contact point with the public. D Project Space, on the

other hand, opened in 2012 to support creative and experimental art works by introducing young Korean creators in various fields.

In addition to operating the museums, Daelim Industrial has been sponsoring art education and other relevant programs providing

opportunities for underprivileged children and teenagers to experience cultural activities. Since 1994, moreover we have promoted

cultural and artistic social contribution programs, such as exhibition visits and creating activities; the programs are being conducted

more than 10 times a year for approximately 400 children and teenagers.

Sharing of Nature

A Series of Activities for the Purpose of Environment Protection

To preserve and maintain a clean environment for the future generations, Daelim Industrial has carried out environment cleanup

activities. As part of the efforts, we have launched Clean Sharing Volunteer Group mainly consisting of Daelim Industrial employees.

The Clean Sharing Volunteer Group is working closely with local Governments in ten regions across Korea to conduct campaigns

such as Cleaning and Caring One Mountain, One River and One Street. Since 2005, in addition, employees and their families have

taken a part in cleanup activities at Namsan Mountain and have been continuing relevant activities on a regular basis.

Helping neighbors in need of more abundant lives, Daelim Industrial has been promoting five sharing campaigns: Sharing of Culture,

Sharing of Happiness, Sharing of Friendship, Sharing of Clarity, and Sharing of Hope. Especially, by operating the museum, we pro-

vide various cultural contents which can be easily accessed by the public and the cultural minority groups through characteristics

of the construction company, we actively deliver practical helps cooperating with communities in numerous sites throughout the

country, including the HQ.

Annual number of visitors to Daelim Museum, the largest number of private museums in Korea

13 years of activities to repair the house since 2005

Annual Volunteer Service hours

Annual numbers of employees participated volunteer service

Number of PCs, printers and other equipments donated to facilities for the handicapped

100 million 13 years 44,569 hours 4,971 persons 1,203

Daelim Museum Sharing of Culture Sharing of Nature Sharing of Hope Sharing of Love Sharing of Happiness


60 61

Independent Auditors’ Report

To the Shareholders and the Board of Directors of Daelim Industrial Co., Ltd.:

We have audited the accompanying consolidated financial statements of Daelim Industrial Co., Ltd. (the “Company”) and its subsidiaries

(collectively, the “Group”), which comprise the consolidated statements of financial position as of

December 31, 2017 and 2016, respectively, and the related consolidated statements of income, consolidated

statements of comprehensive income, consolidated statements of changes in shareholders’ equity and consolidated

statements of cash flows, all expressed in Korean won, for the years ended December 31, 2017 and 2016, respectively,

and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in

accordance with Korean International Financial Reporting Standards (“K-IFRS”) and for such internal control as management determines

is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud

or error.

Auditors’ Responsibility

Our responsibility is to express an audit opinion on these consolidated financial statements based on our audits. We conducted our

audits in accordance with Korean Standards on Auditing(“KSAs”). Those standards require that we comply with ethical requirements and

plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free from material

misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial

statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement

of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal

control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit

procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s

internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting

estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of

the Group as of December 31, 2017 and 2016, respectively, and its financial performance and its cash flows for the

years ended December 31, 2017 and 2016, respectively, in accordance with K-IFRS.

Emphasis of matter

Emphasis of matter does not affect the opinion in the independent auditors’ report, but users need to draw attention

to following matters:

(1) Independent auditors’ emphasis of matters on Key Audit Matters for engineering-to-order industry

We determined, in the independent auditors’ professional judgment and from the matters communicated with those charged with

governance, Key Audit Matters that required independent auditors’ significant attention in performing the audit of the consolidated

financial statements of the current period in accordance with ‘Auditing Practice Guidance 2016-1’ in the Republic of Korea. These matters

were addressed in the content of our audits of the consolidated financial statements taken as a whole, and we do not provide a separate

opinion on these matters.

We have reflected results of the audit procedures on Key Audit Matters described below, in expressing an audit opinion on the

consolidated financial statements of the Group.

FINANCIALREVIEW

61

65

66

68

69

70

72

Independent Auditors’ Report

Selected Financial Data

Consolidated Statements of Financial Position

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income

Consolidated Statements of Changes in Stockholders’ Equity

Consolidated Statements of Cash Flows

62 63

A. The accounting policy of input-method revenue recognition

As described in Note 2 ( Standards affecting presentation and disclosure and significant accounting policies) and Note 3 (Critical

accounting judgments and key sources of estimation uncertainty), the total revenue of the construction contract is measured based on

initially agreed contract amount. Meanwhile, the measurement of the contract revenue is affected by diverse uncertainties associated with

results of the future events. The total contract revenue is susceptible to the stage of completion calculated by the ratio of accumulated

construction costs to estimated total construction costs, and the total contract cost is estimated by reference to the expected future

figures, such as the material costs, the labor costs and the contract period.

As mentioned in Note 6 (Construction contracts), the change in the estimated total contract revenue and the estimated total contract cost

of the current period are ￦845,643 million and ￦1,258,953 million, respectively. Referring to these changes in estimation, the gain of the

current period is decreased by ￦355,435 million and the gain of the subsequent period is estimated to decrease by ￦57,875 million. Since

the possibilities of changes in the total contract revenue and total contract cost estimation exist, we identified the accounting policy of

input-method revenue recognition as a significant risk.

The major audit procedures performed regarding the input-method revenue recognition are as follows:

- Review the adequacy of the accounting policy of revenue recognition

- Analytical procedures and inquiries of the state of progress and significant change of the major projects as of December 31, 2017

- Analytical procedures of major financial indicators, such as the contract amount and estimated total contract cost, contract cost

ratio and ratio of progress billings due from customer

- Inquiries and document inspection about whether all conditions that the outcome of a construction contract can be estimated

reliably are satisfactory for the major contracts

- Analytical procedures and inquiries about whether the measuring method for the stage of completion that the Group used is able

to measure reliably the work performed

B. Uncertainty of estimate of the total contract cost

As explained in Note 3 (Critical accounting judgments and key sources of estimation uncertainty), the total contract cost is estimated by

reference to the expected future figures, such as the material costs, the labor costs and the contract period.

Furthermore, as the construction gain of the current period (or gain of the subsequent period) and progress billings due from customer

disclosed in Note 6 (Construction contracts) are affected by changes in the total estimated contract cost, we identified the uncertainty of

estimate of the total contract cost as a significant risk.

The major audit procedures performed regarding the impact of uncertainty of estimate of the total contract cost on the consolidated

financial statements are as follows:

- Analytical procedures of the changes in major items of the total contract cost compared to prior year

- Confirming the accounting policy of the Company regarding assessment and change in the estimated total contract cost, and

understanding and evaluating the internal control

- Inquiries and document inspection about contracts changed significantly by comparing the ratio of estimated total contract cost

to total contract amount as of December 31, 2017 and 2016

- Inquiries and document inspection about the estimated total contract cost as of December 31, 2017, changed significantly

compared to December 31, 2016

- Inquiries and performing additional audit procedures on significant change in the estimated total contract cost of ending contract

compared to prior year

C. Adequacy of the stage of completion

As a result of reviewing segment operating income disclosed in Note 4 (Segment information), the construction cost compared to total

contract cost is increased in overall by the impact of unpredictable change order and process delay due to the nature of construction

contract.

As measuring the stage of completion is affected by the uncertainty of measuring the total contract cost due to the nature of construction

contract, we identified the adequacy of the stage of completion as a significant risk.

The major audit procedures performed regarding the total contract cost and accumulated contract cost affecting measurement of the

stage of completion are as follows:

- Recalculation of the stage of completion

- Confirming whether only the contract costs reflecting fulfilled construction were included in the accumulated construction costs

and the related accounting policy of the Company

- Inquiries about reasons for stagnation of the stage of completion

- Document inspection of major sites with significant difference between the stage of completion and the construction progress rate

- Substantive test of adequacy of costs sampled from costs accrued in the current year including occurrence, cutoff and allocation

of construction contracts

D. Collectability of progress billing due from customers

As described in Note 6 (Construction contract), the amount of progress billing due from customers is ￦1,101,263

million as of December 31, 2017, and 8.22% of total assets. Considering the current state of contract

construction industry, we identified the collectability of progress billing due from customers as significant risks.

The major audit procedures performed regarding the project of which progress billing due from customers is

significantly increased are as follows:

- Analytical procedures of ratio of progress billing due from customers to accumulated contract revenue of each project

- Inquiries and document inspection of billing and payment conditions, liquidated damages, completion date, etc., according to

the contracts

- Confirm the contractee’s credit situation by checking business status and searching public announcement and news articles

- Inquiries about possibilities of impairment loss of progress billing due from customers and evaluation of recoverable amount,

and confirm the contract conditions

- Inquiries about billing delay and collectibility of the projects of which differences between billing ratio and the stage of

completion are significant

64 65

Notice to Readers This report is effective as of March 14, 2018, the auditors’ report date. Certain subsequent events or circumstances may have occurred between the auditors’ report date and the time the auditors’ report is read. Such events or circumstances could significantly affect the consolidated financial state-ments and may result in modifications to the auditors’ report.

March 14, 2018

Selected Financial Data

USD in thousands

2017

KRW in millions USD in thousands

2016

KRW in millions

Operating Results

Sales 11,513,474 12,335,536 9,197,097 9,853,770

Gross Profit 1,116,359 1,196,067 910,876 975,913

Operating Profit 509,519 545,899 391,439 419,388

Income Before Income Tax 630,323 675,329 407,322 436,404

Net Income 474,145 507,999 273,656 293,195

Financial Position

Current Assets 6,279,349 6,727,694 6,063,042 6,495,943

Non-current Assets 6,229,942 6,674,761 5,502,675 5,895,566

Total Assets 12,509,291 13,402,455 11,565,717 12,391,509

Current liabilities 4,576,442 4,903,200 4,468,403 4,787,447

Non-current liabilities 2,618,022 2,804,949 2,294,837 2,458,688


Capital stock 203,939 218,500 203,939 218,500

Other paid-in-capital 503,264 539,197 502,930 538,839

Retained earnings 4,105,534 4,398,669 3,657,350 3,918,484

Other equity (85,976) (92,114) (60,564) (64,888)

Non-controlling interests 588,066 630,054 498,822 534,439

Total Shareholder's Equity 5,314,827 5,694,306 4,802,477 5,145,374

Exchange Rate of USD / KRW 1,071.40 1,071.40

* K-IFRS Consolidated Basis v

E. Adequacy of accounting treatment of variations in contract work

As described in Note 6 (Construction contracts), the changes in estimated total contract revenue and estimated total contract cost in the

current year affect the gain (loss) directly. Furthermore, as the possibilities of variations in contract work regarding change orders agreed

with contractees after initial contracts are existed, we identified the adequacy of accounting treatment of variations in contract work as a

significant risk.

The major audit procedures performed regarding the accounting treatment of variations in contract work

are as follows:

- Confirm accounting policies related to the accounting treatment of variations in contract work and liquidated damages

- Understand and evaluate internal controls regarding review and approval of changed contract conditions by the adequate

authorities

- Inquiries and document inspection on reasons of significant change of the total contract amount

- Confirm adequacy of disclosures reflected variations in contract work in accordance with the amendment contract

- Confirm adequacy of the estimated total contract cost and the stage of completion, including additional contract costs related to

variations in contract work

Others

Our audits also comprehended the translation of Korean won amounts into U.S. dollar amounts and, in our opinion,

such translation has been made using the base rates announced by Seoul Money Brokerage Services, Ltd. on the date

of reporting period-end. Such U.S. dollar amounts are presented solely for the convenience of readers.

66 67

Consolidated Statements of Financial PositionAs of December 31, 2017 and December 31, 2016

USD in thousands

2017


2016

KRW in millions

Assets

Current Assets

Cash and cash equivalents 1,803,038 1,931,775 1,472,071 1,577,177

Short-term financial instruments 123,200 131,997 44,781 47,979

Trade and other accounts receivables 2,356,014 2,524,233 2,284,234 2,447,328

Progress billing due from customers 1,027,873 1,101,263 923,918 989,886

Inventories 670,221 718,075 841,838 901,946

Available-for-sale financial assets 1,363 1,460 1 1

Derivative assets 2,172 2,327 2,865 3,069

Income tax receivable 4,573 4,899 6,066 6,499

Other current assets 249,827 267,665 478,700 512,879

Non-current assets held for sale 41,068 44,000 8,568 9,179

6,279,349 6,727,694 6,063,042 6,495,943

Non-Current Assets

Long-term financial instruments 23,958 25,669 8,560 9,172

Long-term trade and other accounts receivables 1,266,557 1,356,989 1,093,443 1,171,515

Investments in associates and joint ventures 1,199,326 1,284,958 1,056,992 1,132,462

Available-for-sale financial assets 332,525 356,267 433,561 464,517

Property, plant and equipment 1,932,994 2,071,010 1,833,345 1,964,246

Investment property 968,573 1,037,729 771,619 826,713

Intangible assets 65,504 70,181 57,277 61,366

Derivative assets 173 185 1,784 1,912

Deferred tax assets 378,346 405,360 183,172 196,250

Other non-current assets 61,986 66,413 62,922 67,413

6,229,942 6,674,761 5,502,675 5,895,566

Total Assets 12,509,291 13,402,455 11,565,717 12,391,509


USD in thousands

2017


2016

KRW in millions

Liabilities

Current Liabilities

Trade and other accounts payable 1,897,839 2,033,345 1,799,271 1,927,739

Progress billing due to customers 1,049,877 1,124,838 1,177,669 1,261,754

Short-term borrowings and current portions of long-term liabilities

894,110 957,950 838,864 898,759

Income tax payable 141,123 151,199 104,868 112,356

Other current provisions 211,408 226,503 117,623 126,021

Derivative liabilities 11,926 12,778 12,506 13,398

Other current liabilities 370,159 396,587 417,602 447,420

4,576,442 4,903,200 4,468,403 4,787,447

Non-Current Liabilities

Long-term trade and other accounts payable 110,962 118,885 151,252 162,052

Borrowings and corporate bond 2,050,173 2,196,555 1,800,427 1,928,977

Net defined benefit liabilities 22,649 24,266 32,606 34,934

Provision for construction warranties 136,422 146,163 84,892 90,954

Other non-current provisions 38,941 41,721 38,791 41,560

Financial guarantee contract liabilities 84,764 90,816 59,794 64,064

Derivative liabilities 2,935 3,145 1,352 1,449

Deferred tax liabilities 151,996 162,848 103,167 110,533

Other non-current liabilities 19,180 20,550 22,556 24,165

2,618,022 2,804,949 2,294,837 2,458,688


Shareholders’ Equity

Capital stock 203,939 218,500 203,939 218,500

Other paid-in-capital 503,264 539,197 502,930 538,839

Retained earnings 4,105,534 4,398,669 3,657,350 3,918,484

Other equity (85,976) (92,114) (60,564) (64,888)


Total Shareholders’ Equity 5,314,827 5,694,306 4,802,477 5,145,374

Total Liabilities and Shareholders’ Equity 12,509,291 13,402,455 11,565,717 12,391,509


68 69

Consolidated Statements of IncomeFor the Years Ended December 31, 2017 and 2016

USD in thousands

2017


2016

KRW in millions

Sales 11,513,474 12,335,536 9,197,097 9,853,770

Cost of Sales 10,397,115 11,139,469 8,286,221 8,877,857

Gross Profit 1,116,359 1,196,067 910,876 975,913

Selling and administrative expenses 606,840 650,168 519,437 556,525

Opertating Income 509,519 545,899 391,439 419,388

Other income 281,424 301,518 103,381 110,763

Other expense 450,526 482,693 301,629 323,165

Financial income 58,194 62,349 80,359 86,096

Financial expense 175,964 188,527 105,700 113,247

Share of profits of associates and joint ventures 407,676 436,784 239,472 256,570

Income Before Income Tax Expense 630,323 675,329 407,322 436,404

Income Tax Expense 156,178 167,330 133,666 143,209

Net Income 474,145 507,999 273,656 293,195

Owners of the group 457,806 490,493 247,622 265,303


Net Earnings Per Share

Basic and Diluted earnings per share of common stock 12 12,702 6 6,868

Basic and Diluted earnings per share of preferred stock 12 12,752 6 6,918


Consolidated Statements of Comprehensive IncomeFor the Years Ended December 31, 2017 and 2016

USD in thousands

2017


2016

KRW in millions

Net Income 474,145 507,999 273,656 293,195

Other Comprehensive Income (Loss) (22,114) (23,694) (24,317) (26,053)

Items to not be reclassified

Remeasurement of defined benefit plan (138) (148) (11,278) (12,083)

Changes in retained earnings of associates and joint ventures

(10) (11) 2 2

Tax effects on the items to be not reclassified to profit or loss

1,666 1,785 2,732 2,927

Items to be reclassified

Gain (loss) on valuation ofavailable-for-sale financial assets

(793) (850) 6,596 7,067

Gain (loss) on overseas operations translation 1,864 1,997 (12,337) (13,218)

Positive changes in other comprehensive income of associates and joint ventures

(30,645) (32,833) 960 1,029

Negative changes in other comprehensive income of associates and joint ventures

9,428 10,101 (11,750) (12,589)

Tax effects on the items to be reclassified to profit or loss

(3,486) (3,735) 758 812

Comprehensive Income (Loss) 452,031 484,305 249,339 267,142

Owners of the group 433,759 464,729 226,146 242,292



70 71

Consolidated Statements of Changes in Stockholders’ EquityFor the Years Ended December 31, 2017 and 2016

(in USD thousands) Capital stock

Other paid-in-capital

Retainedearnings

Other equity

NCI Totalshareholders’

equity

Balances as of January 1, 2016 203,939 471,244 3,427,842 (47,780) 430,259 4,485,504

Dividends - - (10,985) - (13,668) (24,653)

Comprehensive Income - - 239,100 (12,955) 23,193 249,338

Net income (loss) - - 247,622 - 26,034 273,656

Gain (loss) on valuation of available-for-sale financial instruments

- - - 4,971 (4) 4,967

Gain (loss) on overseas operations translation - - - (12,337) - (12,337)

Positive equity changes in other comprehensive gain on associates and joint ventures

- - - 729 - 729

Negative equity changes in other comprehensive loss on associates and joint ventures

- - - (6,318) (2,815) (9,133)


- - 2 - - 2

Remeasurement of defined benefit plan - - (8,524) - (22) (8,546)

Realization of unrecognized retained earnings of associates and joint ventures and others

- - 1,393 - - 1,393

Changes due to subsidiary’s equity changes - 30,724 - - 58,953 89,677

Changes in scope of consolidation - 962 - 171 85 1,218

Changes in shareholders’ equity - 31,686 229,508 (12,784) 68,563 316,973

Balances as of December 31, 2016 203,939 502,930 3,657,350 (60,564) 498,822 4,802,477


Dividends - - (10,986) - (12,619) (23,605)


Net income - - 457,806 - 16,339 474,145

Gain (loss) on valuation of AFS financial instruments - - - (903) 62 (841)

Gain (loss) on overseas operations translation - - - 1,864 - 1,864


- - - (30,498) - (30,498)


- - - 4,126 1,717 5,843


- - (7) - (3) (10)

Remeasurement of defined benefit plan - - 1,371 - 157 1,528

Changes due to subsidiary's equity changes - (66) - - 5,572 5,506

Changes in scope of consolidation - 400 - - 78,019 78,419

Changes in shareholders’ eaquity - 334 448,184 (25,411) 89,244 512,351



(in KRW millions) Capital stock

Other paid-in-capital

Retainedearnings

Other equity

NCI Totalshareholders’

equity


Dividends - - (11,770) - (14,643) (26,413)


Net income (loss) - - 265,303 - 27,892 293,195

Gain (loss) on valuation of available-for-sale financial instruments

- - - 5,326 (4) 5,322

Gain (loss) on overseas operations translation - - - (13,218) - (13,218)


- - - 781 - 781


- - - (6,769) (3,016) (9,785)


- - 2 - - 2

Remeasurement of defined benefit plan - - (9,133) - (23) (9,156)

Realization of unrecognized retained earnings of associates and joint ventures and others

- - 1,492 - - 1,492

Changes due to subsidiary’s equity changes - 32,918 - - 63,162 96,080

Changes in scope of consolidation - 1,031 - 183 91 1,305

Changes in shareholders’ equity - 33,949 245,894 (13,697) 73,459 339,605



Dividends - - (11,770) - (13,520) (25,290)


Net income (loss) - - 490,493 - 17,506 507,999

Gain (loss) on valuation of AFS financial instruments - - - (968) 66 (902)

Gain (loss) on overseas operations translation - - - 1,997 - 1,997


- - - (32,675) - (32,675)


- - - 4,421 1,839 6,260


- - (8) - (3) (11)

Remeasurement of defined benefit plan - - 1,469 - 168 1,637

Changes due to subsidiary's equity changes - (70) - - 5,969 5,899

Changes in scope of consolidation - 428 - - 83,590 84,018

Changes in shareholders’ eaquity - 358 480,184 (27,225) 95,615 548,932



72 73

Consolidated Statements of Cash Flows For the Years Ended December 31, 2017 and 2016

USD in thousands

2017


2016

KRW in millions

Cash Flows from Operating Activities

Cash generated from operating activities

Net income (loss) 474,145 507,999 273,656 293,195

Adjustments 426,145 456,572 391,029 418,949

Changes in assets and liabilities from operating activities

(434,471) (465,492) (509,434) (545,808)

Interest income received 40,734 43,643 34,050 36,481

Interest expense paid (105,381) (112,905) (89,751) (96,159)

Dividend income received 250,021 267,872 194,217 208,084

Income taxes paid (242,718) (260,049) (156,567) (167,746)

Net Cash Provided by Operating Activities 408,475 437,640 137,200 146,996

Cash Flows from Operating Activities

Decrease in short-term financial instruments 222,578 238,470 35,980 38,548

Decrease in short-term loans 257,122 275,480 33,171 35,539

Decrease in long-term financial instruments 4,776 5,117 315 337

Decrease in long-term loans 96,005 102,860 202,524 216,985

Reduction in capital stock of associates - - 14,560 15,600

Decrease in available-for-sale financial assets 146,018 156,445 447 479

Disposal of property, plant and equipment 2,186 2,342 5,510 5,903

Increase in government grants 236 252 339 364

Disposal of investment property 294 315 - -

Disposal of intangible assets 656 702 1,644 1,761

Decrease in non-current assets held for sale 39,536 42,359 - -

Net cash flow due to gain of control over a subsidiary 107,538 115,216 - -

Increase in short-term financial instruments (310,986) (333,190) (42,593) (45,634)

Increase in short-term loans (146,856) (157,342) (285,425) (305,805)

Increase in long-term financial instruments (7,043) (7,546) (10,043) (10,760)

Increase in long-term loans (344,991) (369,622) (158,430) (169,742)

Acquisition of investments in associates and joint ventures

(49,356) (52,880) (85,758) (91,881)

Increase in available-for-sale financial assets (15,500) (16,607) (115,389) (123,627)

Acquisition of property, plant and equipment (220,257) (235,983) (237,122) (254,053)

Decrease in government grants (17) (18) - -

USD in thousands

2017


2016

KRW in millions

Acquisition of investment property (29) (31) (1,692) (1,813)

Acquisition of intangible assets (3,512) (3,763) (10,695) (11,458)

Net cash flow due to loss of control over a subsidiary - - (157) (168)

Net cash used in investing activities (221,602) (237,424) (652,814) (699,425)

Cash Flows from Financing Activities

Proceeds from short-term borrowings 1,461,331 1,565,671 1,463,672 1,568,178

Proceeds from long-term borrowings 336,556 360,586 434,496 465,519

Proceeds from long-term debenture 385,477 413,000 412,544 442,000

Proceeds from subsidiary's paid in capital 5,504 5,897 48,588 52,058

Disposal of investments in subsidiaries - - 64,835 69,464

Repayment of short-term borrowings (1,602,596) (1,717,022) (1,626,831) (1,742,987)

Repayment of current portion of long-term liabilities (417,635) (447,454) (739,726) (792,542)

Repayment of long-term liabilities - - (73,116) (78,337)

Debenture issue costs (1,421) (1,523) (1,419) (1,520)

Payment of dividends (23,605) (25,290) (26,220) (28,093)

Acquisition of investments in subsidiaries - - (9) (10)

Net cash provided by Financing activities 143,611 153,865 (43,186) (46,270)

Net Increase (Decrease) in Cash and Cash Equivalents 330,484 354,081 (558,800) (598,699)

Changes in Cash and Cash Equivalents due to Foreign Currency Translation

482 517 7,426 7,956

Cash and Cash Equivalents, Beginning of the Year 1,472,071 1,577,177 2,023,446 2,167,920

Cash and Cash Equivalents, End of the Year 1,803,037 1,931,775 1,472,072 1,577,177


74

Plant Business

Oil & Gas Plant

KOC Installation of Telemetry System, Kuwait (2012-2018)

Petroleum Refinery

Omsk Refinery Modernization Program, Russia (2015-2018)

S-OIL RUCP, Korea (2015-2018)

Chemical & Petrochemical Projects

Sulphur Handling Facilities Project, Kuwait (2013-2018)

Saudi SEP sSBR Project, Saudi Arabia (2016-2018)

LCC HNC3 PKG 1, Korea (2017-2018)

YNCC # 2 Green-field Development Investment Project, Korea (2017-2019)

YNCC SM Expansion, Korea (2017-2019)

Power Plants & Others

Thai Binh II CFPP Project, Vietnam (2012-2018)

Kais Combined Cycle Power Plant, Algeria (2014-2018)

Poseung Biomass Project, Korea (2015-2018)

San Buenaventura 500MW Coal Fired Power Plant, Philippines (2014-2019)

Shinseocheon 1,000MW CFPP Boiler PKG Project, Korea (2015-2020)

Replacement of steam generators in Hanbit Nuclear Power Plant 5 & 6,

Korea (2017-2020)

Civil Business

Road Projects

Gwangyang City Detour, Korea (2006-2017)

Byeollae Surrounding Road, Namyangju, Korea (2010-2017)

Yeosu Hwayang-Najin Road, Korea (2009-2018)

Ulreung Island Round Road, Korea (2011-2018)

Woongdong-Jangyu National Highway Expansion, Korea (2006-2019)

Sanseong Tunnel Connection Road Section 1, Korea (2013-2019)

Seoul Jemulpo Tunnel Section 2, Korea (2013-2021)

Milyang-Ulsan Expressway Section 7, Korea (2014-2021)

Ulreung Island Round Road 2, Korea (2015-2021)

Iksan General Industrial Complex entrance road, Korea (2012-2022)

Anseong-Seongnam Expressway Section 9, Korea (2017-2022)

Changwon Detour, Korea (2016-2023)

Pohang-Youngdeok Expressway Section 2, Korea (2016-2023)

Ansung-Guri Expressway Section 11, Korea (2017-2023)

Gimhae City Detour, Korea (2008-2024)

Gangjin-Gwangju Expressway Section 7, Korea (2017-2024)

Paju-Pocheon Expressway Section 4, Korea (2017-2024)

Railway Projects

Seoul Subway Section 923, Korea (2010-2018)

Gimpo Urban Railway Section 3, Korea (2014-2018)

Donghae Line Pohang-Samcheok Rail Section 10, Korea, (2015-2019)

Ulsan-Pohang Subway Section 2, Korea (2009-2020)

Daegu Line Daegu-Yeongcheon Subway Section 4, Korea (2011-2020)

Hongseong-Songsan Subway Section 5, Seohae Line, Korea, (2013-2020)

Dodam-Yeongcheon Subway Section 3, Korea (2015-2020)

Hongseong-Songsan Subway Section 8, Seohae Line, Korea (2015-2020)

HANAM lines (Sangil-Geomdansan) Construction of Double Track Railway Section 4

(Seoul Metro 5 Extension Line), Korea (2015-2020)

Samsung-Dongtan Metropolitan Express Railway 2 Tool Site, Korea (2016-2021)

Sillim LRT (Light Rail Transit), Korea (2017-2022)

Bridge Projects

Trans Pyeongtaek Lake Road Section 2, Korea (2014-2018)

Aphae-Amtae National Highway Section 2, Korea (2010-2019)

Yeongam-Haenam Tourism and Leisure Enterprise Cities Access Road Construction Work

Section 1, Korea (2015-2020)

Gwangju R&D Special Zone Access Road Site, Korea (2018-2020)

Saemangeum South-North Road Section 3, Korea (2017-2022)

Dam & Other Projects

Gagok District Reservoir, Korea (2002-2018)

Peace Dam Flood Control Capability Enhancement, Korea (2012-2018)

Hanam Misa Area Section 2, Korea (2012-2018)

Godeok Sandan Wastewater Treatment Plant Phase 1, Korea (2013-2018)

Sihwa MTV Phase 1 Landscaping, Korea (2013-2018)

Saemangeum Agricultural Biotechnology Lot Section 2, Korea (2015-2018)

Noryeokdo Bridge, Korea (2000-2019)

Sihwa Section 3, Korea (2007-2019)

Busan New Port West Container CY Site, Korea (2012-2019)

Taean Thermal Power Plant Units 9 and 10 Civil Works and Construction, Korea (2012-2019)

Busan New Port West Container Phase 2-5, Korea (2012-2019)

Shiheung Janghyeon District Section 1, Korea (2013-2019)

Sludge Recyling System in the Metropolitan Landfill Area phase 3, Korea (2017-2019)

Donghae Port Phase 3 North Breakwater Section 1, Korea (2016-2020)

Sand Island Destruction at Busan New Port, Korea (2017-2020)

Sihwa Sewage Treatment Plant, Korea (2018-2020)

Seonam Sewage Treatment Plant, Korea (2009-2021)

Echo Delta City Section 2-1, Korea (2016-2021)

Oryukdo Breakwater, Korea (2016-2021)

Chungju Dam Flood Control Capability Enhancement, Korea (2014-2023)

Overseas

Tirshuli Hydroelectric Power Plant, Nepal (2013-2018)

Hanoi Light-rail Line No. 3, Vietnam (2014-2019)

Gulpur Water Plant, Pakistan (2014-2019)

Temburong CC2 Bridge, Brunei (2015-2019)

Temdurong CC3 Bridge, Brunei (2015-2019)

Karian Dam, Indonesia (2015-2019)

Thomson Line T222 Subway, Singapore (2014-2020)

TTP1 Port, Singapore (2015-2020)

Canakkale Bridge, Turkey (2018-2022)

Cisokan pumped pumping-up Power households Plant, Indonesia (2016-2025)


Residential Project

e-Pyeonhan Sesang Sekyo, Osan (2015-2018) 2,050 households

e-Pyeonhan Sesang Samsong City (2015-2018) 588 households

ACRO RIVER VIEW Sinbanpo, Korea (2015-2018) 595 households

Dasan, e-Pyeonhan Sesang S1, Korea (2015-2018) 1,685 households

e-Pyeonhan Sesang Yongin Hansup City, Korea (2015-2018) 6,800 households

e-Pyeonhan Sesang Samcheok Gyodong, Korea (2015-2018) 723 households

e-Pyeonhan Sesang Sejong River Park, Korea (2015-2018) 849 households

e-Pyeonhan Sesang Misa, Korea (2015-2018) 652 households

Pyeongchang Olympic Village, Korea (2015-2018) 600 householdss

e-Pyeonhan Sesang Yangju New Town Phase 2, Korea (2016-2018) 1160 households

e-Pyeonhan Sesang Terrace Opo, Korea (2016-2018) 573 households

e-Pyeonhan Sesang Songdo, Korea (2016-2018) 2,708 households

ACRO RIVER HEIM, Korea (2016-2018) 1,073 households

e-Pyeonhan Sesang Taejae, Korea (2016-2018) 624 householdss

e-Pyeonhan Saesang Youngjong Sky City, Korea (2016-2018) 1,520 households

Changwon Jaeun Apartment, Korea (2016-2018) 867 households

e-Pyeonhan Sesang Sangdo Nobility, Korea (2016-2018) 893 householdss

e-Pyeonhan Sesang Wonju Taejang , Korea (2016-2018) 893 householdss

e-Pyeonhan Sesang City Han-gang new city site, Korea (2016-2018) 748 households

e-Pyeonhan Sesang Youngjong Sky City Phase 2, Korea (2016-2019), 1,520 households

e-Pyeonhan Sesang Chudong Park, Korea (2016-2019) 1,561 households

e-Pyeonhan Sesang Seoul Nat’l Univ. (2016-2019) 1,531 households

e-Pyeonhan Sesang Myeongjang, Dongnae, Korea (2016-2019) 1,384 households

e-Pyeonhan Sesang Sejong Phase 2, Korea (2016-2019) 1,258 households

e-Pyeonhan Sesang Hansup City, Chuncheon (2016-2019) 2,835 households

e-Pyeonhan Sesang Samsong City Phase 2, Korea (2016-2019) 1,430 households

e-Pyeonhan Sesang Myeongji, Korea (2016-2019) 377 households

e-Pyeonhan Sesang Yeomchang, Korea (2016-2019) 499 households

e-Pyeonhan Sesang Milyang River, Korea (2016-2019) 441 households

e-Pyeonhan Sesang City Misa, Korea (2016-2019) 554 households

e-Pyeonhan Sesang Busan Port, Korea (2016-2019) 939 households

e-Pyeonhan Sesang Doksan, Korea (2016-2019) 859 households

e-Pyeonhan Sesang Sangrok, Korea (2016-2019) 597 households

e-Pyeonhan Sesang Yangju New City Phase 3, Korea (2017-2019) 1,556 households

e-Pyeonhan Sesang Samsong City Phase 3, Korea (2017-2019) 1,430 households

Dasan e-Pyeonhan Sesang, Korea (2017-2019) 491 households

e-Pyeonhan Sesang Siheung, Korea (2017-2019) 659 households

e-Pyeonhan Sesang Nohyeong, Korea (2017-2019) 418 households

Dasan Public Apartment A2, Korea (2017-2019) 973 households

e-Pyeonhan Sesang Ilgwang, Korea (2017-2019) 913 households

Daelime Apartment, Godeok (2017-2020) 4,066 households

e-Pyeonhan Sesang Chudong Park, Korea (2017-2020) 1,733 households

e-Pyeonhan Sesang Guri Sutaek, Korea (2017-2020) 733 households

e-Pyeonhan Sesang Nokbeon Station, Korea (2017-2020) 2,441 households

e-Pyeonhan Sesang Dongnae Oncheon, Korea (2017-2020) 439 households

e-Pyeonhan Sesang Songpa, Korea (2017-2020) 1,199 households

ACRO Seoul Forest, Korea (2017-2020) 280 households

e-Pyeonhan Sesang Bongmyeong, Korea (2018-2020) 459 households

e-Pyeonhan Sesang Boramae Phase 2, Korea (2018-2020) 859 households

Goyang Samsong 4th Efficiency Apartment Site, Korea (2018-2020) 1555 households

e-Pyeonhan Sesang Seonbugwangjang, Korea (2018-2020) 719 households

Commercial & Mixed Use Project

Ewha Womans University Magok Medical Center, Korea (2015-2018)

BIFC Phase 2, Korea (2015-2018)

PyeongChang 2018 OLYMPIC PLAZA & CEREMONIES VENUE, Korea (2015-2018)

Ulsan Knowledge Industry Center, Korea (2016-2018)

Gwanggyo Dentium New Company Building, Korea (2016-2018)

Dongtan Logistics Center, Korea (2016-2018)

AmorePacific Daejeon Remodelling, Korea (2017-2018)

Goyang Logistics Park, Korea (2017-2019)

Hanam Knowledge Industry Center Phase 2, Korea (2015-2018)

The National Sejong Arboretum, Korea (2016-2020)

Namdaemun Office, Korea (2017-2020)

Project in Progress

Daejeon R&D Center

Executive Vice President : Kisoon Park

Yeosu Plant

Vice President : Sungtae Joo

Film Business

Senior Vice President : Nowoong Park

PB Business

Vice President : Keunchang Park

PE Business

Vice President : Yoong Huh

Business Support

Vice President : Seunghyun Son

Jeonju Plant

Plant General Manager: Yongchan Kim

PETROCHEMICAL UNIT President & CEO : Sangwoo Kim

ENGINEERING & CONSTRUCTION UNIT

Business Division Business Office

Human Resource Management Office

Vice President :Yunho Kang

Safety & Quality Office

Vice President : Younghyuk Kang

Finance Management Office

Senior Executive Vice President : Sungwoo Park

Business Support Office

Vice President : Youngkwang Yoo

Corporate Planning & Management Office

Executive Vice President : Beomlack Hong

Plant Proposal Office

Plant Project Execution Office

Plant Engineering Office

Plant Procurement Management Office

D-Innovation Center Office

Housing Business Office

Building Business Office

Building Business Management Office

Customer Satisfaction Office

Overseas Marketing & Sales Office

Vice President : Jaedeuk Ha

Technology Research & Development Institute

Vice President : Chiyong Song

Legal & Compliance Office

Executive Vice President : Samsup Choi

Subcontract & Procurement Office

Senior Executive Vice President : Seungtae Jung


Senior Executive Vice President : Heonjae Yim


Senior Executive Vice President :Sangshin Park


Senior Executive Vice President : Taeseob Yoon

Civil Domestic Business Office

Civil Overseas Business Office

Civil Proposal Support Office

Civil Project Management & Execution Office


Plant Business

Oil & Gas Plant

KOC Installation of Telemetry System, Kuwait (2012-2018)

Petroleum Refinery

Omsk Refinery Modernization Program, Russia (2015-2018)

S-OIL RUCP, Korea (2015-2018)

Chemical & Petrochemical Projects

Sulphur Handling Facilities Project, Kuwait (2013-2018)

Saudi SEP sSBR Project, Saudi Arabia (2016-2018)

LCC HNC3 PKG 1, Korea (2017-2018)

YNCC # 2 Green-field Development Investment Project, Korea (2017-2019)

YNCC SM Expansion, Korea (2017-2019)

Power Plants & Others

Thai Binh II CFPP Project, Vietnam (2012-2018)

Kais Combined Cycle Power Plant, Algeria (2014-2018)

Poseung Biomass Project, Korea (2015-2018)

San Buenaventura 500MW Coal Fired Power Plant, Philippines (2014-2019)

Shinseocheon 1,000MW CFPP Boiler PKG Project, Korea (2015-2020)

Replacement of steam generators in Hanbit Nuclear Power Plant 5 & 6,

Korea (2017-2020)

Civil Business

Road Projects

Gwangyang City Detour, Korea (2006-2017)

Byeollae Surrounding Road, Namyangju, Korea (2010-2017)

Yeosu Hwayang-Najin Road, Korea (2009-2018)

Ulreung Island Round Road, Korea (2011-2018)

Woongdong-Jangyu National Highway Expansion, Korea (2006-2019)

Sanseong Tunnel Connection Road Section 1, Korea (2013-2019)

Seoul Jemulpo Tunnel Section 2, Korea (2013-2021)

Milyang-Ulsan Expressway Section 7, Korea (2014-2021)

Ulreung Island Round Road 2, Korea (2015-2021)

Iksan General Industrial Complex entrance road, Korea (2012-2022)

Anseong-Seongnam Expressway Section 9, Korea (2017-2022)

Changwon Detour, Korea (2016-2023)

Pohang-Youngdeok Expressway Section 2, Korea (2016-2023)

Ansung-Guri Expressway Section 11, Korea (2017-2023)

Gimhae City Detour, Korea (2008-2024)

Gangjin-Gwangju Expressway Section 7, Korea (2017-2024)

Paju-Pocheon Expressway Section 4, Korea (2017-2024)

Railway Projects

Seoul Subway Section 923, Korea (2010-2018)

Gimpo Urban Railway Section 3, Korea (2014-2018)

Donghae Line Pohang-Samcheok Rail Section 10, Korea, (2015-2019)

Ulsan-Pohang Subway Section 2, Korea (2009-2020)

Daegu Line Daegu-Yeongcheon Subway Section 4, Korea (2011-2020)

Hongseong-Songsan Subway Section 5, Seohae Line, Korea, (2013-2020)

Dodam-Yeongcheon Subway Section 3, Korea (2015-2020)

Hongseong-Songsan Subway Section 8, Seohae Line, Korea (2015-2020)

HANAM lines (Sangil-Geomdansan) Construction of Double Track Railway Section 4

(Seoul Metro 5 Extension Line), Korea (2015-2020)

74

Daejeon R&D Center

Executive Vice President : Kisoon Park

Yeosu Plant

Vice President : Sungtae Joo

Film Business

Senior Vice President : Nowoong Park

PB Business

Vice President : Keunchang Park

PE Business

Vice President : Yoong Huh

Business Support

Vice President : Seunghyun Son

Jeonju Plant

Plant General Manager: Yongchan Kim

PETROCHEMICAL UNIT President & CEO : Sangwoo Kim

ENGINEERING & CONSTRUCTION UNIT

Business Division Business Office

Human Resource Management Office

Vice President :Yunho Kang

Safety & Quality Office

Vice President : Younghyuk Kang

Finance Management Office

Senior Executive Vice President : Sungwoo Park

Business Support Office

Vice President : Youngkwang Yoo

Corporate Planning & Management Office

Executive Vice President : Beomlack Hong

Plant Proposal Office

Plant Project Execution Office

Plant Engineering Office

Plant Procurement Management Office

D-Innovation Center Office

Housing Business Office

Building Business Office

Building Business Management Office

Customer Satisfaction Office

Overseas Marketing & Sales Office

Vice President : Jaedeuk Ha

Technology Research & Development Institute

Vice President : Chiyong Song

Legal & Compliance Office

Executive Vice President : Samsup Choi

Subcontract & Procurement Office

Senior Executive Vice President : Seungtae Jung


Senior Executive Vice President : Heonjae Yim


Senior Executive Vice President :Sangshin Park


Senior Executive Vice President : Taeseob Yoon

Civil Domestic Business Office

Civil Overseas Business Office

Civil Proposal Support Office

Civil Project Management & Execution Office

Project in Progress

DAELIM Milestones

Key Accomplishments

∙ 18th-largest conglomerate in Korean industry

∙ Projects being implemented in 36 countries worldwide

∙ Ranked the 54th in Top International Contractors from Engineering News Record in 2017

∙ The 4th on Korea Construction Capability Evaluation Criteria in 2017

∙ Participation to the Carbon Disclosure Project (CDP)


Documents

DAELIM 2018 Corporate Report