DSME AR Final Web

PASSION

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DSME CorporatE IDEntIty Blue Whale

World leaderin ocean Technology2013 AnnuAl report

0012 2013 DSME Annual Report

World leader in ocean technology

We develop customer-oriented solutions,

provide more competitive products,

and select and concentrate on services

laying a foundation for becoming a

market-leading general contractor.

Contents

002

004

006

008

010

012

018

032

128

130

Company Profile

CEO Message

Board of Directors

2013 Major Performance

Operation Highlight

Prologue

Performance Narrative

Financial Review

Outstanding Vessels in 2013

Corporate History &

Global Network


CompAny profileSince the ground breaking in 1973 at Okpo Bay, Geoje Island, Korea, DSME has created numerous success stories and epoch-making records in the industry for the past 4 decades and consequently leapfrogged into the worlds top 3 largest shipbuilder. In 2013, the Company made a great step forward to become the World Leader in Ocean Technology and an enterprise to ensure sustainable growth for the next 100 years.

1. Achieved stable sales growth

DSME accomplished sales of KRW 14.08 trillion, an increase

of 12% year-on-year, on a non-consolidated basis in 2013,

recording stable growth of 12% CAGR (compound annual growth

rate) since 2005. In particular, the proportion of total sales from

our offshore business has increased from 36% in 2010 to 54%

in 2013, signifying that this sector has become a significant

focus for in our business portfolio. As for commercial ships, our

leadership was further solidified with the successful delivery of

the worlds largest containership of the 18,270 TEU class. This

vessels economics, environmental design, and energy efficiency

are a good fit with the values of DSME and AP Mller-Maersk

of Denmark. In addition, we have worked on strictly managing

construction works, optimizing planning, procurement, and

our production processes, developing optimized construction

methods, and reorganizing our shipyard layout and materials in

order to meet increasing new orders and ensuring profitability.

These concerted efforts allowed us to achieve KRW 424.2 billion

in operating income that exceeded our annual goal for 2013.

2. Won over $10 billion in new orders for 4 consecutive years

New orders in 2013 amounted to USD 13.6 billion, surpassing

our annual goal for 3 consecutive years. We also became the

only shipbuilding company to win USD 10 billion in new orders

for 4 consecutive years. Particularly notable achievements were

the receipt of new orders for 5 high efficiency and eco-friendly

LNG carriers in addition to orders for 7 drillships, the largest

number in the domestic industry, despite unfavorable drillship

market conditions.

With a new order for large jack-up rig awarded to us (the first

in 30 years), DSME can boast of being the only company to

produce the entire array of offshore products covering drillship,

semisubmersible drilling rig, fixed platform, and FPSO/FPU.

Furthermore, we demonstrated our competitiveness not only in

commercial ships and offshore plants but also in naval ships by

receiving new orders for a frigate with capability to attack and

defend submarines, aircrafts, and battleships from the Thailand

Navy. As well, we secured an order for a logistics ship from the

Norwegian Navy.

3. Strengthened core competency in EPCIC

DSME has signed a contract to construct its R&D Engineering

Center in the Magok district of Seoul after establishing

engineering centers in Houston, Jakarta and Busan which

focus on engineering work for the offshore business. DSME

has committed to strengthening its engineering capability by

capitalizing on global networks. This effort will be coordinated

by the R&D Engineering Center in Magok.

Other activities to strengthen core competency in EPCIC also included

building strategic partnerships with major vendors, efficiently

managing overseas procurement to keep delivery dates, localizing

equipment, improving share growth with suppliers, and so forth.

4. Promoted new businesses and restructuring

DSME signed an MOU for the Barge Mounted Power Plant

(BMPP) construction projects with Korea Southern Power.

Through this contract, both companies are expecting to

create synergy by integrating shipbuilding know-how and

onshore power plant operational abilities with the end goal of

successfully making inroads into the overseas market.

DMHI (Daewoo Mangalia Heavy Industry) demonstrated

competitiveness in building large ships by successfully delivering

3 high-quality 8,600 TEU class containerships, the largest class

commercial ship manufactured in Europe. It also won new

orders of USD 960 million and secured order backlogs of USD 1.28

billion, paving the way for management normalization.

DSEC, which is engaged in providing engineering services for

shipbuilding, offshore, and power businesses, made a contract

to supply engineering technology and materials for eco-friendly

MR tankers to US-based NASSCO shipyard, and promoted

various engineering, manufacturing, and logistics services for

major shipbuilding and offshore projects.

Our energy business has enjoyed the improvement of

management efficiency and synergy effect since the acquisition

of DSME E&R at the end of 2012. Meanwhile, in 2013, we sold

DSME SMC Inc., the largest gold mining company in Korea, for

the purpose of restructuring our unprofitable businesses.

5. Enhanced sustainability management and shared growth

We transferred some of our patented technologies to Small

and medium enterprises (SMEs) to practice shared growth with

them. In particular, the conclusion to transfer the HiVAR-FGSS

technology to 5 domestic mid-sized materials suppliers was

considered as an exemplary model of mutual growth through

sharing new technologies in the shipbuilding industry.

Our sustainability management has also been highly recognized

by winning the AAA level from a sustainability management

evaluation company Eco Frontier for 2 years in a row since 2011.

In addition, the Company proclaimed the DSMEs Anti-

Corruption Principle to build a new ethical culture and placed

the Audit Team under Audit Committee to monitor and check

practices independently and impartially.

6. Plans for 2014

In 2014, it is expected that the global economy will slightly

recover in advanced countries and interest rates in the

global financial market will increase due to the reduction of

quantitative easing of the US. We anticipate gradual recovery

in the global commercial ship market and continuous growth

in offshore market. In line with these expectations, we set our

sales and new order targets in 2014 at KRW 15.15 trillion and

USD 14.5 billion, increases of 8% and 7% from the previous year,

respectively. To achieve these, DSME will focus on promoting

10 key tasks for management renovation such as increasing

profitability, innovatively improving management efficiency, and

securing sustainable growth.


Dear shareholders,

The year 2013 was a difficult one in and out of the company. But

despite this situation, we at DSME established a grand vision

to become the World Leader in Ocean Technology. Concerted

efforts were made to improve financial soundness, cultivate

technical professionals, and upgrade our management system.

As the result, our sales and operating income stood at KRW

14.08 trillion and KRW 424.2 billion on a non-consolidated basis

in 2013, respectively. New orders were USD 13.6 billion. We are

proud to say we are the only one in the industry to achieve over

USD 10 billion in new orders for 4 consecutive years.

Business conditions for 2014 are by no means favorable.

Despite expectations on a slight recovery in commercial ship

market and the status quo in offshore market, the competition

will be further intensified due to the prolonged low growth trend

around the globe. Also, the recent stronger Korean currency

will weaken our competitiveness in exports.

However, the Company has set higher management goals for

2014 - more than KRW 15 trillion in sales and USD 14.5 billion

in new orders - to outplay competitors and secure sustainable

growth and stable profit sources. We are fully prepared to

realize these goals and gain greater trust from the market.

The year 2014 will be a very important period for our Company.

To achieve actual progress in evolving into the worlds best

EPCIC player in the fields of shipbuilding and offshore plants,

we will devote ourselves to securing higher engineering

capabilities and developing new markets in the world.

With those in mind, DSME will promote the following tasks for

the year.

First, we will strictly implement ethical management.

To raise our status as a global leader to a higher level, we

are committed to arranging strict ethical standards and

exterminating corruption and unethical practices through a

zero-tolerance principle. We will also ensure our company is

clean not only on ethics but also in safety and environment by

thoroughly complying with principles and regulations.

Second, we will continue to lead in technology and enhance

our core capabilities.

The progress we made in 2013 has provided the foundation for

our progression to becoming an EPCIC player in the fields of

shipbuilding and offshore plant. The challenge before us this

year is to unleash the full potential of the Company to deliver

on our promises. We will enhance our product competitiveness

through technological superiority and lead our company in its

growth for many years to come.

Third, we will focus on creative innovation and cost

competitiveness improvement.

Our company has remained competitive and has won new

orders thanks in large part to our solid relationships with our

major clients, despite difficult financial times. All employees at

DSME will make a concerted effort to continuously improve the

ways we work and think, and stimulate creative thinking and

innovation to minimize cost and maximize profit.

Last, we will put an emphasis on creating sustainable value

for stakeholders.

When everyone wants to join our company, employees want to

work together until retirement, shareholders are satisfied with

the companys value, and suppliers and local communities enjoy

shared success, we can take pride in where we work. In this

regard, we are committed to building an advanced corporate

culture in which all employees can communicate and respect

each other, and consequently, deliver hope and happiness to all

stakeholders. Harmony between labor and management and

shared growth with suppliers must be promoted.

Our company will continue to concentrate on leading

technological innovation and reinforcing our core capabilities

in the long-term just beyond generating short-term results,

through which we will increase our corporate value and deliver

returns to shareholders.

In 2014, we will steer DSME with an emphasis on evolving into

the World Leader in Ocean Technology.

In closing, let me sincerely thank you again for your support.

I hope you and your families enjoy good fortune and health in

the days ahead.

Thank you.

March 28, 2014

President & CEO Jaeho Ko

Ceo messAge


Youngjae LeeGeneral Manager of Corporate Banking Dept. IV, Korea Development Bank

Ph.D in Business Administration, Hannam University

BoArd of direCtors

The DSME Board of Directors comprises of two internal

directors, five outside directors and one non-standing director

with vast expertise in their respective areas.

The board is responsible for overall corporate management and operates within

a governance framework to ensure its complete independence and transparency.

Outside DirectorsInternal Directors

Non-Standing Director

Sanggeun LeeBusiness Administration Professor at Sogang University

Ph.D in Management Information System , University of Nebraska-Lincoln

Jeonhyeok JoBangmok College of General Education Professor at MyongJi University

Ph.D in Economics, University of Wisconsin-Madison

Gyeongtaek HanVisiting Professor at Seoul National University of Science & Technology

Ph.D in Economics, The University of Hawaii

Gabjoong KimSenior Executive Vice-President & CFO

The degree of Bachelor of Laws, Korea University

Sanggon KoAuditor at Korea Public Relations Association

Master of Journalism and Mass Communication, Sungkyunkwan University

Gwangsik ShinVisiting Researcher at Korea Development Institute

Ph.D in Economics, Ohio State University

Jaeho KoPresident & CEO

Master of Business Administration, KAIST


6. Accomplished Excellent Results in Naval Ship Business

DSME is proud of its 30 year history in the defense industry. Especially, to improve competitiveness

in the defense industry, we have integrated related groups under sale, planning, and production

divisions and newly established the Special Ship Business HQ to engage in businesses

independently. As a result, we succeeded in winning new orders to build foreign submarines for

the first time in Korea and battleships of the UK and Norway, proving our competitiveness and

technological prowess once again.

7. Strengthening Shared Growth.

With the conclusion of the Fair Trade and Shared Growth Agreement with suppliers, we are proactive in

supporting them and spreading the culture of win-win partnership. Major activities include contributing to

suppliers financial stability by making payments with 100% cash, extending payment period, and providing

financial assistances through the Shared Growth Fund. Technology transfer, talent cultivation, and other

aids are also conducted.

8. Various Social Contribution Activities

DSME is implementing various sharing activities to fulfill social responsibility and boost employees devotion and

pride in the company. Blood, organ, and cash donation programs are conducted throughout the company and, in

particularly, a variety of social contribution programs named as Loving My Town Project, One Love One Town

Project, and DSME Daddy-Long-Legs are being operated to support local communities in Geoje where our shipyard

is located.

9. Established the C Type Talents Model to Lead Our Future

We seek for C Type Talent that matches our vision to become the worlds best EPCIC Company. The

C Type Talent represents a person who is armed with creativity, challenging spirit, and collaborative

mindset. To this end, we are performing systematic education and training programs to cultivate talents

with basic capability, professional competency, and global leadership.

10. Harmony between Labor and Management at DSME

Labor and management at DSME strive to mutually raise the awareness of management

status and worksite environment in order to ensure win-win partnerships. For instance,

they jointly participate in signing new order contracts and pledge to successfully build ships

to clients through the harmony between labor and management. As a result, there has

been no dispute between labor and management at DSME for the past 23 years.

1. Won over USD 10 billion in new orders for 4 consecutive years

DSME won USD 13.6 billion in new orders for commercial vessels, offshore plants, and naval ships

becoming the only shipbuilder to achieve over USD 10 billion for 4 consecutive years in the industry.

Especially, DSME has demonstrated the largest performance among the domestic shipbuilders

in drillship sector by winning new orders for 7 deep sea drillships and shown remarkable

achievements in all business areas including offshore plant, commercial ship, and naval ship.

2. Laid the Foundation for Leapfrogging into the Worlds Best EPCIC Company

With the start of an education for PM (Project Management) position, DSME has been running systematical

education programs to cultivate specialized talents such as EM (Engineering Management) and MM

(Material Management) positions. The Company also signed a formal contract to build its R&D Engineering

Center in Magok district, Seoul, and completed the construction of engineering centers in the US,

Indonesia, and Busan to engage in basic design, detailed design, and production design of offshore plants.

Our global engineering network centered on Magok R&D Center will play a role in enhancing our global

competitiveness and contribute to our advancement into the worlds best EPCIC player.

3. Only Company to Build All Kinds of Offshore Products

DSME has been recognizing as the only company that can build all kinds of offshore products such as jack-

up rig, drillship, semisubmersible drilling rig, fixed platform, FPSO, and so on. Our knowhow, experiences, and

technological prowess in building crude oil and gas exploration and production facilities are second to none. The

proportion of offshore plant business in total sales has increased from 36% in 2010 to 54% in 2013.

4. Leader in Eco-friendly Ship Market

In 2013, DSME won new orders for all of the 5 high-efficient eco-friendly LNG carriers which were placed

in the world and successfully delivered the worlds largest containership with 18,270 TEU class to Maersk

Group. In particular, this containership is recognized as the worlds best ship that satisfies Economy

of scale, Energy efficiency, and Environmentally improved. We are confident that DSME is way ahead of

competitors in building eco-friendly ships.

5. Celebrated 40th Anniversary and Pledged to Become a Company that Can Last a

Century

Based on the strengths of the past 40 years of history, DSME began a challenge to become

the world leader in ocean technology and grow into a company that can last a century.

We selected the blue whale as the official character to symbolize our new vision and

commitment.

2013 mAjor performAnCe

2013 issueDetermined the vision title World Leader in Ocean Technology

2013. 04 2013. 07 2013. 08

Delivered the worlds largest containership Mc-Kinney Mller with 18,270 TEU class to Mrsk

Proclaimed DSMEs Anti-Corruption Principle

2013. 09 2013. 11 2013. 12 2013. 12

Sold DSME SMC Inc. Recognized with an award at the Korea Technology Awards (Deep Sea Pipe-laying Vessel)

Selected as the worlds best product (VLOC)

9 ships selected as World Outstanding Vessel in 2013


operAtion HigHligHt

1. Financial Highlight

2. Shareholder Structure

As of Dec 31, 2013 As of Dec. 31, 2012

KDB 31.46 31.26

Korea Asset Management Corporation 19.11

Financial Services Commission 12.15

Foreigner Ownership 17.88 19.21

Treasury Stock 1.22 1.22

Others 37.29 29.20

(Unit : %)

2013 2012

Sales 15,305.3 14,057.8

Gross Profit 1,028.0 1,135.9

Operating Income 440.9 486.3

Net Income 241.9 175.9

Total Assets 18,488.9 16,122.2

Current Asset 10,063.3 7,160.5

Non-current Assets 8,425.6 8,961.7

Total Liabilities 13,709.5 11,568.0

Current Liabilities 9,299.6 8,172.7

Non-current Liabilities 4,409.9 3,395.3

Equity 4,779.4 4,554.3

Cash Flow From Operating Activities -1,197.9 -996.1

Cash Flow From Investing Activities -157.0 -413.4

Cash Flow From Financing Activities 1,462.5 1,135.8

Net increase (decrease) in cash and cash equivalents 107.6 -273.7

(Unit : KRW BN)

Based on K-IFRS consolidated financial statements

3. Sales Breakdown

2006 2007 2008 2009 2010 2011 2012 2013

Sales Operating Income Total Assets

4. Order Backlog Breakdown

2006

22.33

2007

37.55

2008

43.56

2009

34.92

2010

32.76

2011

36.54

2012

37.84

2013

45.43

63

11

4

14

8

(Unit : %)

5. New Order Breakdown

(Unit : %)OffshoreLNGCContainershipTankerOthers

(Unit : USD BN)OffshoreLNGCContainershipTankerOthers

OffshoreLNGCContainershipTankerOthers

(Unit : USD BN)

2006

11.01

2007

19.47

2008

11.58

2009

3.59

2010 2011 2012 2013

9.25

14.29 14.2713.61

8

60

7

15

10

(Unit : %)

18,488.9

16,122.2

440.9

486.315,305.3

14,057.8

2012 20132012 2013 2012 2013

2013 DSME Annual Report

We are building products to

not just compete, but to win

in the marketplace and were

aggressively pursuing growth

opportunities around the world.

Our progress is driven by a

commitment to developing

worlds leading technologies and

cultivating professionals. We will

continue to leverage our global

capabilities to accelerate growth

in the world.

DSME has always been labeled

a worlds first, worlds largest,

and worlds best in the global

shipbuilding industry. Dreams

are turning into reality through

our advanced technologies

and the future of global

shipbuilding industry is being

shaped by our frontier spirit.

Our competitiveness on the

world stage has reached new

levels, especially in the high

value products for the offshore

business.


The history of DSME tells about

the passion, perseverance, and

strong will of all employees

who are never afraid of failing.

Were very proud of our past,

but even more excited about

our future. With positive attitude

and an ownership mind, we are

dedicated to finding the best way

to pull through any obstacle and

become one of the worlds largest

and best-performing shipbuilders.


DSME has achieved outstanding operating performances every

year. In 2013, despite tough business environments, we won

new orders of USD 13.6 billion, which exceeded our annual

goal, and turned out 9 worlds best ships. DSME is committed

to leading the global shipbuilding industry and delivering

more values to customers, subsidiaries, suppliers, and other

stakeholders.

performAnCe nArrAtive

020

022

024

026

028

030

Shipbuilding Business

Offshore Plant Business

Naval Ship Business

Power Plant Business

Research & Development

HSE



slump due to declining oil prices and oversupply of ships.

In 2013, we won new orders for a total of 43 ships including 5

VLCCs. In particular, we succeeded in continuously winning

new orders for LNG carriers equipped with the new concept

engine technology, ME-GI engine. In addition, our patent

for high-pressure LNG supply devices was exported to the

worlds largest marine diesel engine maker MAN Diesel &

Turbo. These results have proved our unrivaled technological

prowess and shipbuilding capability for LNG carriers and

other high value-added ships.

Furthermore, 9 of the ships we built in 2013 were selected

as Best Ships of the Year by world renowned shipbuilding

and marine journals, of which, in particular, the 18,270

TEU class containership was awarded the Best Ship

simultaneously by 3 major journals of the UK and US.

These splendid achievements confirmed our worlds top

shipbuilding technology and product quality.



LNGC(+FSRU) LPGC Containership Tanker

2013

43

36

2012

9

2011

Total

Total

Total

6

3

19

9

15

27

5

4

2013 New Order Performance

Commercial Ship Order Status(Unit : Vessel)

DSME demonstrates its worlds best technology and

competitiveness in all kinds of commercial ships as well as

LNG carriers and containerships.

The global shipbuilding market condition in 2013 was

unfavorable mainly due to prolonged global economic slump

since 2009 and the ensuing financial crisis in euro zone.

To cope with such tough market environment, DSME has

concentrated its resources on sharpening our market insight

and demand-forecasting ability for the year.

As a result, we were able to win a new order for the worlds

biggest LNG-FSRU that can stably supply gas in any weather

and harbor condition. As well, we received an order for

the newest eco-friendly and highly energy-efficient VLCC.

These remarkable achievements were possible because the

Company had continued to take the initiative in developing

technologies to construct eco-friendly and high energy-

efficiency ships in line with changing market trends even

though the global shipbuilding market had experienced a

20 Shipbuilding Business

22 Offshore Plant Business

24 Naval Ship Business

26 Power Plant Business

28 Research & Development

30 Health, Safety & Environment

USD bn 4.50

43Vessels

LNG Carrier, Woodside Rogers

Class :DNV

Dimension(m):294.2(L)44.0(B)26.0(D)

Capacity :159.8KCBM

MainEngine :Wartsila9L50DF






















2013

43

36

2012

9

2011

Total

Total

Total

6

3

19

9

15

27

5

4



























USD bn 4.50

43Vessels

Crude Oil Tanker, Eagle Vancouver

Class :ABS

Dimension(m):333.0(L)60.0(B)30.5(D)

Capacity :320,000DWT

MainEngine :B&W7S80ME-C8

Containership, Maersk Mc-Kinney Moller

Class :ABS

Dimension(m):396(L)59(B)30.3(D)

Capacity :18,270TEU























2013

43

36

2012

9

2011

Total

Total

Total

6

3

19

9

15

27

5

4



























USD bn 4.50

43Vessels

Bulk Carrier, Vale Brasil

Class :DNV

Dimension(m):362.0(L)65.0(B)30.4(D)

Capacity :400,000DWT


023022 2013 DSME Annual Report2013 DSME Annual Report


national oil corporation of Norway. These platforms required

compliance with strict conditions and regulations because

they will be operated in harsh climates and weather

conditions of the North Sea upon the completion. Therefore,

we believe our extensive experiences of building over 30

fixed platforms contributed decisively to winning these

orders.

Despite tough market conditions, we made great progress in

2013 by achieving the 1st place in new orders for drillships

and winning meaningful new orders for various offshore

plants. Our capability in this business has also been

enhanced through continuously developing new business

categories in the global offshore plant market where

competition is being intensified. By capitalizing on our

superb competitiveness, we will concentrate our concerted

efforts on winning new products such as LNG-FPSO as well

as existing flagship products in the coming year.

have been receiving new orders for drillships from existing

clients consistently, which shows how strong their trust in

our technological prowess and capability is.

Furthermore, DSMEs order for a large jack-up rig was

the first in 30 years which really stood out in 2013. This

project, ordered from Mearsk Drilling, is to be a state-of-

the-art facility that can drill down to a maximum of 12km

in water up to 150m in depth and can be operated in the

severe weather and intense cold of the North Sea where the

temperature falls down below 20 degrees Celsius in winter.

By entering emerging high value-added jack-up rig market,

we were able to enhance our superb competitiveness in

offshore business once again.

As for production facilities, we succeeded in winning a new

order for onshore module from ZADCO of UAE through the

consortium with Petrofac Emirates, which paved the way for

entering the plant market in the Middle East. Additionally,

2 large fixed platforms were ordered from Statoil, the

As for offshore business in 2013, DSME won 11 new orders

including a drillship, jack-up rig, fixed platform, and

module plant, which enabled us to present our superb

technologies to construct various kinds of offshore plants

to the world. New orders for the year amounted to USD 8.1

billion. In particular, winning the order for a large jack-up

rig contributed to the diversification of product portfolio. In

2014, the Company will also focus on winning new orders

for diverse offshore production and drilling facilities to

accelerate our advance toward the worlds best offshore

plant builder.

By product, a total of 7 drillships were ordered for the

year, presenting the largest number in the global drillship

market. Atwood, Transocean, and Vantage each ordered 1

drillship and Seadrill ordered 2 drillships. The remaining 2

drillships to be built through our self-developed cutting edge

engineering technology were ordered from an African client.

This formidable performance enabled us to solidify our

dominance in the global drillship market. In particular, we







Offshore Plant Order Status


USD bn 8.10

11Vessels

Onshore Plants & Others Offshore Production Unit Offshore Drilling Unit

201320122011

11 Total

2

1

8

11 Total1

2

8

14 Total2

5

7

(Unit : Vessel)

CLOV FPSO

Storage :1,781,000BBLs

Dimension(m):Hull305(L)61(B)32(D)

Production :Oil160,000BBL

Gas6.5MS/DAY

Weight :Hull76,600MT

Topside31,800MT

Delivery :2Q2014(1stOil)

ScopeofWork:EPCIC

Client :TotalE&PAngola(Block17)









orders.







































plant builder.

















USD bn 8.10

11Vessels


201320122011

11 Total

2

1

8

11 Total1

2

8

14 Total2

5

7

(Unit : Vessel)

Transocean Deepwater Asgard Drillship

Design :DSME12000

Dimension(m):238(L)42(W)19(D)

Capacity :DrillingDepth40,000FEET

WaterDepth12,000FEET

VDL23,000MT

ScopeofWork:EPCC

Client :Transocean

Exxon Arkutun-Dagi GBS Topside

Dimension(M) :107(L)x70(W)

Capacity :Oil250,000BOPD

Gas140MMSCFD

Client :ExxonNeftegasLTD









orders.







































plant builder.

















USD bn 8.10

11Vessels


201320122011

11 Total

2

1

8

11 Total1

2

8

14 Total2

5

7

(Unit : Vessel)

Grupo R, La Muralla 4 Semi-rig

Design :GVA7500

Dimension(m):119.2(L)x96.7(B)

Capacity :DrillingDepth35,000FEET

WaterDepth10,000FEET

Scopeofwork:EPC

Client :GrupoR


Naval Ship Orders


Naval Ship Business

New orders from our naval ship business amounted to

more than USD 1 billion in 2013 and order backlogs also

surpassed USD 4.9 billion, a record high in our history, at

the end of the year. We will continue to increase our market

share in the global naval ship market with our world class

technologies and products.

After obtaining an order for fleet oilers from the Royal Fleet

Auxiliary in 2012, DSME succeeded in winning new orders for

Norway Navys first logistics ship in June 2013, which proved

our competitiveness in the international naval ship market.

Also, in August, we won an USD 500 million worth order for a

latest battleship from the Thailand Navy. This amount is the

highest expenditure throughout the history of the Thai Navy.

Consequently, our reach in naval ship business has been

extended to logistics ships, battle ships, and submarines.

In the domestic market, we obtained an order to build a

next generation frigate that we conducted basic engineering

for the Batch-II in December 2013. In 2012, we had won

an order to build Koreas first self-developed 3,000 ton

class submarines. These results presented our leadership

capabilities and technological prowess in constructing

naval ships to the world and enabled us to accelerate the

penetration into the global naval ship market.







Submarine Battleship & Others

7

2012

TotalTotal 33

20132011

Total

(Unit : Vessel)

1

6


USD bn 1.02

3Vessels

214-Type Submarine, Kim Jwa-jin


Naval Ship Orders


Naval Ship Business

New orders from our naval ship business amounted to

more than USD 1 billion in 2013 and order backlogs also

surpassed USD 4.9 billion, a record high in our history, at

the end of the year. We will continue to increase our market

share in the global naval ship market with our world class

technologies and products.

After obtaining an order for fleet oilers from the Royal Fleet

Auxiliary in 2012, DSME succeeded in winning new orders for

Norway Navys first logistics ship in June 2013, which proved

our competitiveness in the international naval ship market.

Also, in August, we won an USD 500 million worth order for a

latest battleship from the Thailand Navy. This amount is the

highest expenditure throughout the history of the Thai Navy.

Consequently, our reach in naval ship business has been

extended to logistics ships, battle ships, and submarines.

In the domestic market, we obtained an order to build a

next generation frigate that we conducted basic engineering

for the Batch-II in December 2013. In 2012, we had won

an order to build Koreas first self-developed 3,000 ton

class submarines. These results presented our leadership

capabilities and technological prowess in constructing

naval ships to the world and enabled us to accelerate the

penetration into the global naval ship market.







Submarine Battleship & Others

7

2012

TotalTotal 33

20132011

Total

(Unit : Vessel)

1

6


USD bn 1.02

3Vessels

DW 10000D Destroyer (Aegis Class), Yolgok Yi Yi


Floating Power Plant BusinessDSME has been exploring its business to Energy and Plant

area. DSMEs strong will to support remote areas where

have been suffered from power shortage can make the world

more brighten.

Now, DSME introduces two types of innovative products,

FSPP and BMPP.

Both products must be best solutions to the clients who plan

power projects in the area having constraints with obtaining

land for the plants. Moreover, FSPP is an All-in-One solution

which can supply natural gas to the local infrastructure at

the same time with feeding electric power to a power grid.







Wind Turbine

20

2011

20

2010

130

2012

20

2013

power plant Business

Wind Power BusinessIn 2009, DSME acquired DeWind Inc., an American wind

turbine engineering and manufacturing company based on

German technology. DSME has been strongly promoting

its wind power business by integrating its world class

capabilities in the marine sphere with DeWinds technology

and experience.

Standing on its over 1,700MW track record throughout the

world, DSMEs wind turbines allow customers to open-up

new business opportunities by their strong availability as

well as high performance. DSME is now advancing to supply

substructures of offshore wind turbines with its unparalleled

shipbuilding expertise.

(Unit : MW)

D9 SeriesD8 Series

40

150 Total

190


463 people

Energy Efficient & Environment Friendly ShipDSME has developed and patented energy saving devices that

have significantly improved vessel fuel efficiency. Further, it has

introduced lineup of energy saving devices such as PSS (Pre-Swirl

Stator), DUCT/Ducted PSS and Integrated ESDs (PSS/Duct and

Rudder bulb).

DSMEs LNG fueled large commercial ships such as container

ships and oil carriers, the first of these types in the world boasts

a 2-stroke dual fuel main engine, HiVAR fuel gas supplies system

and prismatic ACTIB independent LNG fuel tank. DSMEs HiVAR

FGS system supply highly pressurized fuel gas to the main engine

with outstanding efficiency and reliability. Notably DSMEs LNG

fueled ships have granted AIPs (Approval in Principle) from major

classification societies.

7.4

2011

19.5

2012

53.4

2013

2013 DSME Annual Report028

ICE/Arctic LNG CarrierDSME has become the worlds first shipbuilder to construct

icebreaking Arc-7 ice class carrier, capable of sailing through

2.1-meter-thick arctic ice. After several attempts, DSME

succeeded in developing the optimized ship model which has the

capability of surviving extreme temperatures of as low as minus

52 degrees. For two-way ice-breaking, it also has POD Propulsor

which can rotate 360 degrees allowing for changes in thrust

direction.

Our Central Research Institute has been newly organized into 3

research institutes and 3 teams, and will fall under the Strategic

Planning Office. The Central Research Institute will greatly

contribute to our leapfrogging into an EPCIC specialty company

in the future.







Drilling UnitsDSME has successfully designed, built, and delivered several

drillings, majority of which are drillships and semi-submersible

drilling rigs. Based on the experience, DSME has developed its

own design.

By incorporating feedbacks from drilling contractors, DSME has

developed the latest DSME e-SMART drillship design featuring

cozy accommodation, optimized mud/bulk system arrangement,

increased deck, and drill floor spaces. DSME e-SMART drillship

is capable of operating in water of 12,000 feet deep and in drilling

depths of 40,000 feet. DSME has also developed its own design

of semi-submersible rig which is capable of drilling up to 40,000

feet while operating in dynamic positioning mode in ultra-deep

waters of up to 10,000 feet.

FLNGBased on the experiences of developing DSME FLNG model and

conducting various Pre-FEED, early EPCIC and EPCIC contracts,

DSME offers competitive and safe solution to offshore gas

development based on industry-leading experience in Pre-FEED,

FEED and EPCIC of FLNG. DSME has designed the two-row LNG

Cargo Containment System (CCS) utilizing GTT No.96 membrane

technology to be utilized in FLNG. The two-row design minimizes

the impact of liquid sloshing and strengthens the hull structure,

thereby enhancing the support for the Topsides modules

weight. In our efforts to validate the effectiveness of the design,

DSME conducted sloshing model tests and Computational Fluid

Dynamics (CFD), as a partner of Joint Industry Project (JIP). JIP

participants include ABS, BV, DNV, LR, Chevron, Exmar, Knutsen,

Human Energy, Excelerate, DSME and others.

research & development

IT and R&D Investment(Unit : KRW billion)

2013 IT and R&D Investment

BillionKRW 53.4

Arctic LNGC

Two-Row LNG CCS

DSME Energy Saving Device

ME-GI Engine Dual Fuel Diesel Generator Engine

ACTIB LNG Tank

HIVAR Fuel Gas Supply Sys.

More than 400 experienced researchers are working at the

Central Research Institute of DSME. Recently, the institute

has come under the control of the Strategic Planning Office

and has been playing a leading role to ensure our future

competitiveness by conducting R&D tasks in accordance

with the Companys management strategy.

DSME-9000 Semi-submersible Drill RIG

DSME e-SMART Drillship


HSE (Health, Safety, and Environment) is top priority at

DSME which aims to become the World Leader in Ocean

Technology. A concerted effort is underway to build safe,

healthy, and pleasant workplace by equipping with Koreas

top class HSE-related facilities, equipment, and personnel.

DSME is managing an integrated HSE system in compliance

with OHSAS 18001 and ISO 14001. The Company also

obtained the KOSHA18001 certification in 2011 for the first

time among large shipbuilders in Korea. The practices of

the integrated HSE system are monitored and evaluated

monthly and quarterly by internal and external audits,

and the results are reported to the CEO for continuous

improvement.

Health, safety & environment

meeting career development stages and positions of each employee

from their joining the Company and experiential safety training

programs such as experimental morning meeting and safety play.

These efforts has led us to win the highest score at the 2013

Shipbuilding Industry Safety and Health Performance Evaluation

hosted by the Ministry of Employment and Labor and also

be selected as the best safe workplace by a major French oil

company TOTAL.

EnvironmentWith 3 key strategies of building pollution-free workplace,

implementing global green management, and leading eco-

friendly products, DSME is dedicated to realizing its vision to be a

global leader in environment.

To build pollution-free workplace, we evaluate and manage

environmental management performance index and apply

internal environmental standards which require 30% higher than

legal standards in controlling pollutants. Intensive trainings and

campaigns are also conducted to preemptively prevent air, water,

and marine pollutions. Our concerted efforts to reduce GHG

emissions resulted in selecting as an excellent company in the

pilot project for emissions trading in 2013.

After acquiring an international environmental certification

ISO140001, we have built an advanced environmental system

and it has been applied to all production processes. In addition,

our eco-friendly energy management has been step ahead by

acquiring the ISO50001 certification on the strength of our IT-

based EMS (Energy Management System).

As for eco-friendly products, DSME has secured competitiveness

by winning orders for fuel supply devices for worlds first LNG-

fueled 3,100 TEU class containership of TOTE and completing the

development of gas fuel supply devices for ME-GI engines that

use eco-friendly and economical LNG as fuel.

Like this, DSME has been taking the lead in developing eco-

friendly technologies and products and transparently opening its

environmental information to the public under the strong will of

the management. As a result, our environmental management

has received the highest rating in corporate sustainability

evaluation by EFC, a specialized sustainability evaluation agency,

for 3 consecutive years.

purchasing. Noxious chemical substances are prohibited in the

site and thoroughly treated in accordance with regulations.

SafetyIn order to accomplish its IIF (Incident & Injury Free) goals, DSME

undertakes various and systematic accident prevention activities.

Those include regular safety inspection, trainings on safety, accident

recurrence prevention program, implementation of HSE management

program, and HSE activities based on human engineering. And the

HSE Management Reward System which shows real time safety

management status of each organization in index is being operated

in order to encourage HSE activities. Furthermore, we established

the 12 Major Safety Rule, essential factors stipulated to prevent

serious disasters after analyzing accident cases during the past

20 years. To ensure a safe work environment for all employees, we

are implementing IIF-focused instruction, TBM (Tool Box Meeting),

continuous inspection on safety, and so forth.

In addition, the Company has been developing and operating a variety

of safety training programs, which include customized programs

HealthDSME is running various activities to improve employees health

and preemptively prevent their serious health conditions. To

prevent brain cardiovascular disease which is the No.1 cause

of death in single disease, we have selected and continuously

managed employees with potential brain cardiovascular disease

based on medical check results. Consequently, the number

of employees with potential brain cardiovascular disease has

decreased by 24% annually. In addition, we are cooperating with

major government agencies in monitoring health issues and

conducting preemptive prevention activities such as vaccination

and distribution of educational data.

Diverse medical check programs are provided to identify

employees health conditions and those who are diagnosed

with diseases are proactively treated and managed through

the Companys health management office. In addition, to

prevent health risks from chemical substances, we have

established chemical substances management system, through

which chemical components are monitored from the stage of







In 2013, DSME recorded KRW 15.31 trillion in sales and

KRW 241.9 billion in net profit, on a consolidated basis.

In addition, DSME won over USD 10 billion in new orders for

4 consecutive years. DSME will continue to make a concerted

effort to increase profits and lay the foundation for

sustainable growth.

finAnCiAl revieW

034

037

038

045

046

047

048

056

Managements Discussion & Analysis

Independent Auditors Report

Separate Financial Statements

Independent Auditor's Report on Internal Accounting Control System (IACS)

Report on the Assessment of Internal Accounting Control System (IACS)

Independent Auditors Report

Consolidated Financial Statements

Notes to Consolidated Financial Statements



managements discussion & Analysis

New order breakdown

Order backlogs breakdown

Profitability

Gross profit in 2013 was KRW 928.8 billion, down 14.4% from the previous year. Selling and administrative expenses decreased

25.6% year-on-year to KRW 410.3 billion mainly due to the decline of bad debt expenses and administrative service fees.

Meanwhile, R&D expenses rose by 15% year-on-year to KRW 94.3 billion. As the result, operating profit fell by 6.1% to KRW

424.2 billion. Finance income and finance costs also dwindled 23.1% and 10.7% from the previous year respectively. Losses from

investments in subsidiaries sharply reduced from KRW 154.9 billion in 2012 to KRW 30.8 billion in 2013. Meanwhile, the Company

makes a concerted effort to minimize exchange rate risk by capitalizing on various financial techniques such as exchange hedge

to ensure stable management activities and profits. In 2013, foreign exchange gains increased 46.3% over the previous year and

foreign exchange losses decreased 27.3%. Other non-operating income and costs fell by 47.2% and 25.6%, respectively, mainly

due to the decreases in gain on valuation of firm commitments and loss on valuation of firm commitments. As a result, profit

before income tax expense recorded KRW 321.5 billion, an increase of 44.6% year-on-year and net profit soared 83.7% to KRW

251.7 billion in 2013.

(KRW in millions, except earnings per share) 2013 2012

Sales 14,080,037 12,565,402

Cost of sales 13,151,246 11,480,459

Gross profit 928,791 1,084,943

Operating profit 424,225 451,614

Profit before income tax expense 321,510 222,373

Net profit 251,718 137,025

Basic and diluted earnings per share 1,332 725

Overview

According to Clarkson Research, a global shipbuilding and offshore market intelligence provider of the UK, new orders for

commercial vessels in 2013 increased 165.5% year-on-year as of deadweight tons and used-ship trade also rose by 60.9%

year-on-year. Despite remaining oversupply of vessels in the world, recent increasing new orders have shown a positive signal

for DSME which demonstrates unrivaled competitiveness in building LNG carriers and large containerships that require

highly advanced technologies. The global offshore plant market has enjoyed sharp growth of new orders since 2005 thanks to

continuously strong oil prices and the vitalization of deep sea resources development. It has been recognized as a new promising

market for large shipbuilders with comprehensive competitive advantages ranging from designing and producing to managing

projects. DSME has worlds best technologies and competitiveness in the fields of all commercial vessels as well as LNG carriers

including LNG-FSRU. In addition, DSME has succeeded in winning new orders by capitalizing on accurate demand prediction even

in tough market conditions derived from the financial crisis of Europe in 2011 and ensuing global economic recession in 2012.

Sales

In 2013, DSMEs non-consolidated sales amounted to KRW 14.08 trillion, an increase of 12.1% from the previous year, of which offshore

plants, LNG carriers, and containerships accounted for 54%, 11%, and 25%, respectively. Remaining 8% and 2% were generated from

tankers and special vessels & others, respectively. Sales proportion of offshore plants and LNG carriers has increased from the previous

year, while that of other commercial vessels excluding containerships decreased. In particular, sales proportion of offshore plants has

continuously increased and passed the 50% mark for the first time, which represents that DSMEs product portfolio is being reshaped

into high value-added lineup centered on offshore plants. The CAGR of our sales marked 12% since 2005.

Sales breakdown

New Order and Oder Backlogs

In 2013, DSME won USD 13.6 billion in new orders and became the only shipbuilder to achieve over USD 10.0 billion in new orders for

4 consecutive years. In the commercial vessels and special vessels businesses, we achieved a total of USD 5.5 billion by winning new

orders for 15 tankers, 19 containerships, 6 LNG carriers, 3 LPG carriers, 2 aviation logistics support ships, and 1 frigate. In the offshore

plants business, we had become the first shipbuilder to win more than USD 10 billion in the world in 2012 and succeeded in winning new

orders of USD 8.1 billion, the biggest amount in the industry, in 2013 despite tough market conditions. New orders in 2013 included 11

offshore plants such as drillship, jack-up rig, and fixed platform, which proved our top-notch offshore plant construction capabilities

throughout the world. In particular, the new order for a jack-up rig has led to the diversification of products. As a result, offshore plants

accounted for 60% of the Companys total new orders for the year, followed by commercial vessels with 33% and special vessels with 7%.

Order backlogs at the end of 2013 increased 20% from the previous year to USD 45.4 billion. This figure can be broken down to 63% for

offshore plants, 26% for commercial vessels, and 11% for special vessels.

Offshore plantLNG carrierContainershipTankerSpecial vessels & others

Offshore plantsCommercial vesselsSpecial vessels

Offshore plantsCommercial vesselsSpecial vessels

47%

10%

11%

25%

7%

2012KRW12.57trillion

54%

2%

8%

25%

11%

2013KRW14.08trillion

74%

17% 7%

9% 60%33%2012USD14.28billion

2013USD13.61billion

56%

11% 11%

33% 63%26%2012USD37.84billion

2013USD45.43billion


independent Auditors reportEnglish Translation of a Report Originally Issued in Korean

To the Shareholders and the Board of Directors of

Daewoo Shipbuilding & Marine Engineering Co., Ltd.:

We have audited the accompanying separate financial statements of Daewoo Shipbuilding & Marine Engineering Co., Ltd. (the

Company). The separate financial statements consist of the separate statements of financial position as of December 31,

2013 and 2012, respectively, and the related separate statements of income, separate statements of comprehensive income,

separate statements of changes in shareholders equity and separate statements of cash flows, all expressed in Korean won, for

the years ended December 31, 2013 and 2012, respectively. The Companys management is responsible for the preparation and

fair presentation of the separate financial statements, and our responsibility is to express an opinion on these separate financial

statements based on our audits.

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

require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free

of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in

the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by

management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable

basis for our opinion.

In our opinion, the separate financial statements referred to above present fairly, in all material respects, the financial position

of the Company as of December 31, 2013 and 2012, respectively, and the results of its operations and its cash flows for the years

ended December 31, 2013 and 2012, respectively, in conformity with Korean International Financial Reporting Standards (K-IFRS).

Accounting principles and auditing standards and their application in practice vary among countries. The accompanying separate

financial statements are not intended to present the financial position, results of operations and cash flows in accordance with

accounting principles and practices generally accepted in countries other than the Republic of Korea. In addition, the procedures

and practices utilized in the Republic of Korea to audit such financial statements may differ from those generally accepted and

applied in other countries. Accordingly, this report and the accompanying separate financial statements are for use by those

knowledgeable about Korean accounting principles and auditing standards and their application in practice.

March 13, 2014

Notice to Readers

This report is effective as of March 13, 2014, 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 accompanying separate financial statements and may result in modifications to the auditors report.

managements discussion & Analysis

Financial Status

Assets As of the end of 2013, DSMEs non-consolidated total assets stood at KRW 16.5 trillion, a 16% increase from the previous year.

Non-current assets went down 6.8% but current assets grew by 44.6% to KRW 9.1 trillion, which was mainly driven by an increase

of 74.8% in amounts due from customers under construction contracts and a decrease of 22.9% in non-current trade and other

receivables.

Liabilities and EquityOur total liabilities at the end of 2013 were KRW 11.7 trillion, up 21.1% from the previous year. Current liabilities and non-current

liabilities rose by 12.8% and 46.5%, respectively, which were mainly attributable to the increases in trade and other payables,

trade and other payables, amount due to customers under construction contracts, debentures, and long-term borrowings. There

was no change in share capital during the period and an increase of 6.2% in retained earnings contributed to growing total equity

by 5.1% to KRW 4.8 trillion.

(KRW in millions) 2013 2012

Current assets 9,109,534 6,300,835

Non-current assets 7,348,706 7,882,637

Total assets 16,458,240 14,183,472

Current liabilities 8,202,000 7,269,563

Non-current liabilities 3,497,467 2,388,048

Total liabilities 11,699,467 9,657,611

Share capital 961,954 961,954

Other contributed capital -35,930 -35,959

Components of other capital 43,277 30,941

Retained earnings 3,789,472 3,568,925

Total equity 4,758,773 4,525,861

Market Outlook and Future PlansIn 2014, the global economy seems to gradually recover. In particular, new orders for LNG carriers are expected to increase

thanks to growing shale gas production in the US. The vitalization of gas development projects in Russia, Northern Australia,

and East Africa will also boost new orders for LNG carriers in the long term. In addition, strong oil prices for vessels will unleash

demands for eco-friendly and high energy-efficiency large vessels, which will provide opportunities to lead high value-added

vessel markets to DSME that demonstrates worlds top-class technologies and track records in this area. As for special vessel

business, by capitalizing on globally recognized our technological prowess in building submarines and aviation logistics support

ship, we will spur the entrance into overseas special vessel markets to gain momentum for future growth. Based on these

forecasts and plans, we set up non-consolidated sales and new order targets for 2014 at KRW 15.15 trillion, up 8% year-on-year,

and USD 14.5 billion, up 7%, respectively. Other focuses will be on solidifying technological prowess through continuous R&D

efforts, maximizing operational efficiency, reducing costs, and improving profitability through management innovation.


separate statements of financial positionAS OF DECEMBER 31, 2013 AND 2012

(KRW million) (KRW million)

December 31, 2013 December 31, 2012

LIABILITIES AND SHAREHOLDERS EQUITY

CURRENT LIABILITIES:

Short-term borrowings 2,025,922 1,884,330

Financial liabilities designated at FVTPL 878 53

Trade and other payables 1,774,454 1,402,022

Income tax payable 74,071 29,563

Current portion of debentures 299,624 160,665

Current portion of long-term borrowings 444,761 437,193

Current financial guarantee liabilities 3,111 1,397

Current firm commitment liabilities 154,446 218,889

Current portion of currency forward liabilities 381 1,241

Amount due to customers under construction contracts 3,256,814 3,053,891

Other current liabilities 167,538 80,319

Total current liabilities 8,202,000 7,269,563

NON-CURRENT LIABILITIES:

Debentures 1,820,004 1,295,517

Long-term borrowings 883,035 300,347

Long-term financial liabilities designated at FVTPL 126 95

Non-current trade and other payables 142,287 156,606

Retirement benefit obligation 126,640 94,013

Provisions 72,358 80,522

Financial guarantee liabilities 29,745 37,208

Firm commitment liabilities 167,694 147,437

Currency forward liabilities 19,750 5,044

Deferred tax liabilities 235,828 271,259

Total non-current liabilities 3,497,467 2,388,048

Total liabilities 11,699,467 9,657,611

EQUITY:

Share capital 961,954 961,954

Other contributed capital (35,930) (35,959)

Components of other capital 43,277 30,941

Retained earnings 3,789,472 3,568,925

Total equity 4,758,773 4,525,861

Total liabilities and equity 16,458,240 14,183,472

See accompanying notes to separate financial statements.

(Continued)

December 31, 2013 December 31, 2012

ASSETS

CURRENT ASSETS:

Cash and cash equivalents 225,672 167,360

Short-term financial assets 25,907 47,929

Financial assets designated at FVTPL 16,076 10,233

Short-term HTM financial assets 17 496

Trade and other receivables 542,357 541,072

Amounts due from customers under construction contracts 5,583,009 3,193,524

Current firm commitment assets 11,634 52,137

Current portion of currency forward assets 194,761 298,230

Inventories 827,521 664,985

Other current assets 1,682,580 1,324,869

Total current assets 9,109,534 6,300,835

NON-CURRENT ASSETS:

Non-current financial assets 30 30

Non-current financial assets designated at FVTPL 64,388 65,649

HTM financial assets 55 5,572

AFS financial assets 223,722 227,633

Investment in subsidiaries 551,972 670,767

Investment in associates and joint ventures 65,035 27,537

Non-current trade and other receivables 1,785,168 2,316,529

Firm commitment assets 19,750 5,044

Currency forward assets 177,295 150,262

Property, plant and equipment 4,216,639 4,160,031

Investment properties 9,809 10,097

Intangible assets 66,665 61,901

Other non-current assets 168,178 181,585

Total non-current assets 7,348,706 7,882,637

Total assets 16,458,240 14,183,472


separate statements of income separate statements of Comprehensive incomeFOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012

(KRW million, except earnings per share)

2013 2012

Sales 14,080,037 12,565,402

Cost of sales 13,151,246 11,480,459

Gross profit 928,791 1,084,943

Selling expenses 146,913 215,866

Administrative expenses 263,388 335,465

Research and development expenses 94,265 81,998

Profit from operating activities 424,225 451,614

Finance income 99,982 130,063

Finance costs 92,498 103,571

Losses from investment in subsidiaries (30,768) (154,859)

Foreign exchange gains 371,078 253,673

Foreign exchange losses 312,190 429,239

Other non-operating income 474,721 899,030

Other non-operating expenses 613,040 824,339

Profit before income tax expense 321,510 222,372

Income tax expense 69,792 85,347

Profit for the period 251,718 137,025

Basic and diluted earnings per share 1,332 725



(KRW million)

2013 2012


Other comprehensive income (loss):

Items that will not be reclassified subsequently to income (loss)

Remeasurement on defined benefit plan 16,091 (21,820)

Items that may be reclassified subsequently to income (loss)

Net changes in fair value of AFS financial assets 8,341 (16,982)

Effective portion of changes in fair value of cash flow hedges 3,995 1,091

28,427 (37,711)

Comprehensive income for the period 280,145 99,314


separate statements of Changes in shareholders equity separate statements of Cash flowsFOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012

(KRW million) (KRW million)


Share capitalOther contributed

capitalComponents of

other capital Retained earnings Total

Balance at January 1, 2012 961,954 (30,000) 46,832 3,548,243 4,527,029

Dividends paid - - - (94,523) (94,523)

Change by merge - (5,959) - - (5,959)

Profit for the period - - - 137,025 137,025

Other comprehensive loss - - (15,891) (21,820) (37,711)

Balance at December 31, 2012 961,954 (35,959) 30,941 3,568,925 4,525,861

Balance at January 1, 2013 961,954 (35,959) 30,941 3,568,925 4,525,861

Others - 29 - - 29

Dividends paid - - - (47,262) (47,262)

Profit for the period - - - 251,718 251,718

Other comprehensive income - - 12,336 16,091 28,427

Balance at December 31, 2013 961,954 (35,930) 43,277 3,789,472 4,758,773

2013 2012

CASH FLOWS FROM OPERATING ACTIVITIES

Cash generated from operating activities (Note 39):


Adjustments 417,688 844,032

Change in working capital (1,788,966) (1,479,621)

(1,119,560) (498,564)

Dividends received 1,942 1,702

Interest received 89,792 98,063

Interest paid (170,435) (131,219)

Income tax paid (69,790) (244,680)

Net cash used in operating activities (1,268,051) (774,698)

CASH FLOWS FROM INVESTING ACTIVITIES

Cash inflows from investing activities:

Acceptance of governments grants 2,656 4,078

Net decrease in short-term financial assets 22,022 -

Net decrease in short-term loans receivables 47 89

Disposal of HTM financial assets 6,000 76

Disposal of AFS financial assets 16,184 48,616

Decrease of investment in subsidiaries 92,946 280

Net cash inflow on merger of subsidiaries - 10,637

Decrease in long-term loans receivables 8,698 3,707

Disposal of property, plant and equipment 7,161 14,331

Disposal of investment property - 15,768

Disposal of intangible assets 6 -

Disposal of other investment assets - 1

155,720 97,583

Cash outflows from investing activities:

Redemption of governments grants 2,391 424

Net increase in short-term financial assets - 22,026

Acquisition of HTM financial assets 27 7

Acquisition of AFS financial assets 21,293 121,383

Acquisition of investment in subsidiaries 4,919 177,950

(Continued)


separate statements of Cash flows independent Accountants review report on internal Accounting Control system (iACs)FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012English Translation of a Report Originally Issued in Korean

(KRW million)

2013 2012

Acquisition of investment in associates and joint ventures 8,368 -

Increase in long-term loans receivable 22,200 32,908

Acquisition of property, plant and equipment 198,286 219,064

Acquisition of intangible assets 10,958 16,505

Acquisition of other investment assets 918 1,839

269,360 592,106

Net cash used in investing activities (113,640) (494,523)

CASH FLOWS FROM FINANCING ACTIVITIES

Cash inflows from financing activities:

Proceeds from issue of debentures 600,000 350,000

Proceeds from short-term borrowings 218,859 574,687

Proceeds from issue of debentures 808,524 996,000

Proceeds from long-term borrowings 1,059,661 352,594

2,687,044 2,273,281

Cash outflows from financing activities:

Redemption of short-term debentures 600,000 350,000

Redemption of current portion of long-term debentures 160,665 500,000

Redemption of current portion of long-term borrowings 438,566 206,240

Redemption of current portion of finance lease liabilities - 3,068

Payment of dividends 47,262 94,523

1,246,493 1,153,831

Net cash provided by financing activities 1,440,551 1,119,450

Net increase (decrease) in cash and cash equivalents 58,860 (149,771)

Cash and cash equivalents:

Beginning of the period 167,360 319,547

Effects of foreign exchange rate changes on the balance of cash held in foreign currencies (548) (2,416)

End of the period (Notes 6 and 40) 225,672 167,360


To the Representative Director of


We have reviewed the accompanying Report on the Managements Assessment of IACS (the Managements Report) of Daewoo

Shipbuilding & Marine Engineering Co., Ltd. (the Company) as of December 31, 2013. The Managements Report, and the design

and operation of IACS are the responsibility of the Companys management. Our responsibility is to review the Managements

Report and issue a review report based on our procedures. The Companys management stated in the accompanying

Managements Report that based on the assessment of the IACS, the Companys IACS has been effectively designed and is

operating as of December 31, 2013, in all material respects, in accordance with the IACS standards.

We conducted our review in accordance with the IACS Review Standards established by the Korean Institute of Certified Public

Accountants. Those standards require that we plan and perform a review, objective of which is to obtain a lower level of assurance

than an audit, of the Managements Report in all material respects. A review includes obtaining an understanding of a companys

IACS and making inquiries regarding the Managements Report and, when deemed necessary, performing a limited inspection of

underlying documents and other limited procedures.

A companys IACS represents internal accounting policies and a system to manage and operate such policies to provide

reasonable assurance regarding the reliability of financial statements prepared, in accordance with accounting principles

generally accepted in the Republic of Korea, for the purpose of preparing and disclosing reliable accounting information. Because

of its inherent limitations, IACS may not prevent or detect a material misstatement of the financial statements. Also, projections

of any evaluation of effectiveness of IACS to future periods are subject to the risk that controls may become inadequate because of

changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Based on our review, nothing has come to our attention that causes us to believe that the Managements Report referred to above

is not fairly stated, in all material respects, in accordance with the IACS Framework established by the Korea Listed Companies

Association.

Our review is based on the Companys IACS as of December 31, 2013, and we did not review its IACS subsequent to December 31,

2012. This report has been prepared pursuant to the Act on External Audit for Stock Companies in the Republic of Korea and may

not be appropriate for other purposes or for other users.

March 13, 2014

Notice to Readers

This report is annexed in relation to the audit of the financial statements as of December 31, 2013, and the review of management report on the assessment of the operations of IACS pursuant to Article 2-3 of the Act on External Audit for Stock Companies of the Republic of Korea.


To the Board of Directors and Audit Committee of


I, as the Internal Accounting Control Officer (IACO) of Daewoo Shipbuilding & Marine Engineering Co., Ltd (the Company),

assessed the status of the design and operation of the Company`s IACS for the year ended December 31, 2013.

The Company`s management including IACO is responsible for designing and operating IACS.

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