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<TITLE>Hanarotelecom Incorporated</TITLE>
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">






<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>As filed with the Securities and Exchange Commission on June&nbsp;29, 2006</B>
</DIV>


<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>




<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>WASHINGTON, D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 14pt; margin-top: 0pt"><B>___________________</B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>FORM 20-F</B>
</DIV>

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    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)&nbsp;OF THE SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>OR</B>
</DIV>

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    <TD align="center"><FONT face="Wingdings">&#254;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>For the fiscal year ended December&nbsp;31, 2005</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>OR</B>
</DIV>

<DIV align="center">
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    <TD width="7%">&nbsp;</TD>
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    <TD width="88%">&nbsp;</TD>
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<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>For the transition period from&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>OR</B>
</DIV>

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<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
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<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Date of event requiring this shell company report</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Commission file number 001-15012</B>
</DIV>


<DIV align="center">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>



<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B>hanarotelecomChushikHoesa</B>
</DIV>

<DIV align="center" style="font-size: 10pt">(Exact name of Registrant as specified in its charter)</DIV>


<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B>hanarotelecom incorporated</B>
</DIV>

<DIV align="center" style="font-size: 10pt"><B>(Translation of Registrant&#146;s name into English)</B></DIV>



<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>The Republic of Korea<BR>
(Jurisdiction of incorporation or organization)</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>17-7 Yeouido-dong<BR>
Yeongdeungpo-gu, Seoul 150-874<BR>
Korea<BR>
(Address of principal executive offices)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Securities registered or to be registered pursuant to Section 12(b) of the Act: None
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Securities registered or to be registered pursuant to Section 12(g) of the Act:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
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<TR valign="bottom">
    <TD width="58%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Title of each class</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Name of each exchange on which registered</B></TD>
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<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Common shares, par value Won 5,000 per share
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">The KRX KOSDAQ Market</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" nowrap><DIV style="margin-left:0px; text-indent:-0px">American depositary shares, each of which represents one common share
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">The NASDAQ National Market</TD>
</TR>
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</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Securities for which there is a reporting obligation pursuant to Section 15(d) of the
Act: None
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate the number of outstanding shares of each of the issuer&#146;s classes of capital or common
stock as of the close of the period covered by the annual report:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2005, 462,135,180 common shares were issued and outstanding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Yes <FONT style="font-family: Wingdings">&#254;</FONT> No <FONT style="font-family: Wingdings">&#168;</FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this report is an annual or transition report, indicate by check mark if the registrant is
not required to file reports pursuant to Section&nbsp;13 or 15(d) of the Securities Exchange Act of
1934.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Yes <FONT style="font-family: Wingdings">&#168;</FONT> No <FONT style="font-family: Wingdings">&#254;</FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Note &#151; Checking the box above will not relieve any registrant required to file reports
pursuant to Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under
those Sections.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark whether the registrant (1)&nbsp;has filed all reports required to be filed
by Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12&nbsp;months (or
for such short period that the registrant was required to file such reports), and (2)&nbsp;has been
subject to such filing requirements for the past 90&nbsp;days:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt">Yes <FONT style="font-family: Wingdings">&#254;</FONT> No <FONT style="font-family: Wingdings">&#168;</FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of &#147;accelerated filer and large accelerated
filer&#148; in Rule&nbsp;12b-2 of the Exchange Act. (Check one):
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Large
accelerated filer
<FONT style="font-family: Wingdings">&#254;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accelerated filer <FONT style="font-family: Wingdings">&#168;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-accelerated filer <FONT style="font-family: Wingdings">&#168;</FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark which financial statement item the registrant has elected to follow:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt">Item&nbsp;17 <FONT style="font-family: Wingdings">&#168;</FONT> Item&nbsp;18 <FONT style="font-family: Wingdings">&#254;</FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this is an annual report, indicate by check mark whether the registrant is a shell
company (as defined in Rule&nbsp;12b-2 of the Exchange Act):
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt">Yes <FONT style="font-family: Wingdings">&#168;</FONT> No <FONT style="font-family: Wingdings">&#254;</FONT>
</DIV>


<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>





<P align="center" style="font-size: 10pt">&nbsp;
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<DIV align="left">
<A name="tocpage"></A>
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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TABLE OF CONTENTS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
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<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
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    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
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<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Page</B></TD>
    <TD>&nbsp;</TD>
</TR>

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<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#101">Forward-Looking Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#102">Item&nbsp;1. Identity of Directors, Senior Management and Advisers</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#103">Item&nbsp;2. Offer Statistics and Expected Timetable</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#104">Item&nbsp;3. Key Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#105">Item&nbsp;4. Information on the Company</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#106">Item&nbsp;4A. Unresolved Staff Comments</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#107">Item&nbsp;5. Operating and Financial Review and Prospects</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#108">Item&nbsp;6. Directors, Senior Management and Employees</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#109">Item&nbsp;7. Major Shareholders and Related Party Transactions</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#110">Item&nbsp;8. Financial Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#111">Item&nbsp;9. The Offer and Listing</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#112">Item&nbsp;10. Additional Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#113">Item&nbsp;11. Quantitative and Qualitative Disclosures about Market Risk</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#114">Item&nbsp;12. Description of Securities Other Than Equity Securities</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#115">Item&nbsp;13. Defaults, Dividend Arrearages and Delinquencies</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#116">Item&nbsp;14. Material Modifications of the Rights of Security Holders and Use of Proceeds</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#117">Item&nbsp;15. Controls and Procedures</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#118">Item&nbsp;16. &#091;Reserved&#093;</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#119">Item&nbsp;16A. Audit Committee Financial Expert</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#120">Item&nbsp;16B. Code of Ethics</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#121">Item&nbsp;16C. Principal Accountant Fees and Services</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#122">Item&nbsp;16D. Exemptions from the Listing Standards for Audit Committees</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#123">Item&nbsp;16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#124">Item&nbsp;17. Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#125">Item&nbsp;18. Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#126">Item&nbsp;19. Exhibits</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#127">Glossary</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">98</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#128">Consolidated Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-1</TD>
    <TD>&nbsp;</TD>
</TR>
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<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h00609exv1w1.htm">EX-1.1 Articles of Incorporation</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h00609exv4w1.htm">EX-4.1 Memorandum dated Feb 6, 2006</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h00609exv4w2.htm">EX-4.2 Business Cooperation Agreement</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h00609exv11w1.htm">EX-11.1 Code of Ethics</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h00609exv12w1.htm">EX-12.1 Section 302 Certification of CEO</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h00609exv12w2.htm">EX-12.2 Section 302 Certification of CFO</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h00609exv13w1.htm">EX-13.1 Section 906 Certifications of Sec 1350</A></FONT></TD></TR>
</TABLE>
</DIV>

<DIV align="left">
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</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless the context otherwise requires, when we refer in this Annual Report to &#147;hanarotelecom,&#148;
&#147;we,&#148; &#147;us&#148; and &#147;our,&#148; we mean hanarotelecom incorporated and its consolidated subsidiaries. All
references to &#147;Korea&#148; and the &#147;Republic&#148; contained in this Annual Report shall mean The Republic of
Korea. All references to the &#147;Government&#148; shall mean the government of The Republic of Korea. All
references to the &#147;MIC&#148; shall mean the Ministry of Information and Communication of Korea. All
other capitalized terms used but not defined in this Annual Report have the meanings given to them
in the &#147;Glossary.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We publish our financial statements in Korean Won. In this Annual Report, references to
&#147;Korean Won,&#148; &#147;Won&#148; or &#147;W&#148; are to the currency of Korea, and references to &#147;U.S. dollars,&#148; &#147;U.S.$&#148;
or &#147;$&#148; are to the currency of the United States. This Annual Report contains translations of
Korean Won amounts into U.S. dollar amounts, solely for your convenience. You should not construe
these translations as representations that the Korean Won amounts actually represent such U.S.
dollar amounts or could have been or could be converted into U.S. dollars at the rates indicated or
at any other rates.
</DIV>

<P align="center" style="font-size: 10pt">2
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="101"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Forward-Looking Statements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may from time to time make written or oral forward-looking statements. Written
forward-looking statements may appear in documents filed with the SEC, including this Annual
Report, and other reports to shareholders and other communications.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The U.S. Private Securities Litigation Reform Act of 1995 provides a &#147;safe harbor&#148; for
forward-looking information to encourage companies to provide prospective information about
themselves without fear of litigation so long as the information is identified as forward looking
and is accompanied by meaningful cautionary statements identifying important factors that could
cause actual results to differ materially from those projected in the information. We rely on this
safe harbor in making these disclosures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Forward-looking statements appear in a number of places in this Annual Report and include
statements regarding our intent, belief and current expectations and the current belief or current
expectations of our management with respect to our future results of operations and financial
condition. In many, but not all cases, we use words such as &#147;anticipate,&#148; &#147;aim,&#148; &#147;believe,&#148;
&#147;estimate,&#148; &#147;expect,&#148; &#147;intend,&#148; &#147;plan,&#148; &#147;probability,&#148; &#147;risk&#148; and similar expressions, as they
relate to us or our management, to identify forward-looking statements. These statements reflect
our current views with respect to future events and are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those which are anticipated,
believed, estimated, expected, intended or planned. We do not intend to update these
forward-looking statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our forward-looking statements are not guarantees of future performance and involve risks and
uncertainties. Actual results may differ from those in the forward-looking statements as a result
of various factors. We identify in this Annual Report, in &#147;Item&nbsp;3.D. Risk Factors,&#148; &#147;Item&nbsp;4.B.
Business Overview,&#148; &#147;Item&nbsp;5. Operating and Financial Review and Prospects&#148; and elsewhere some, but
not necessarily all, of the important factors that could cause these differences.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are under no obligation, and disclaim any obligation, to update or alter our
forward-looking statements, whether as a result of new information, future events or otherwise.
</DIV>

<P align="center" style="font-size: 10pt">3
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART I</B>
</DIV>

<DIV align="left">
<A name="102"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;1. Identity of Directors, Senior Management and Advisers.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>
<DIV align="left">
<A name="103"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;2. Offer Statistics and Expected Timetable.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>
<DIV align="left">
<A name="104"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;3. Key Information.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>A. Selected Financial Data</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our selected consolidated financial data should be read in conjunction with the audited
consolidated balance sheets as of December&nbsp;31, 2004 and 2005, and the related audited consolidated
statements of operations, shareholders&#146; equity and cash flows for the fiscal years ended December
31, 2003, 2004 and 2005, and the notes to the consolidated financial statements, and with &#147;Item&nbsp;5.
Operating and Financial Review and Prospects,&#148; included in this Annual Report. The selected
consolidated financial data set forth below for the fiscal years ended December&nbsp;31, 2001, 2002 and
2003 are also derived from our audited consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our consolidated financial statements are prepared in accordance with accounting principles
generally accepted in Korea, or Korean GAAP, which differ in significant respects from U.S. GAAP.
See note 28 to our consolidated financial statements.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18" style="border-bottom: 1px solid #000000"><B>Year ended December 31</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2001</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2002</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18">(millions of Won, except number of shares and per share data)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Statements of Operations Data:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Korean GAAP:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">830,721</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">&nbsp;1,417,854</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">&nbsp;1,383,486</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">&nbsp;1,449,569</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">&nbsp;1,589,345</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Voice revenue<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114,529</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">210,664</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">248,964</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">291,186</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">375,253</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Leased line revenue<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,706</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">111,813</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,992</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,717</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,255</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Broadband revenue<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">641,544</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">969,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">982,693</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">985,428</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,074,387</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,942</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">125,742</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113,837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">133,238</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95,450</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,012,924</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,396,426</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,312,792</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,335,639</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,550,823</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(182,203</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,428</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,694</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113,930</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,522</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-operating expenses, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(78,194</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(149,106</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(231,606</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(100,081</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(230,309</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Ordinary income (loss)&nbsp;before
income tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(260,397</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(127,678</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(160,912</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,849</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(210,805</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(35</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,083</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(302</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(495</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(434</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minority interest share of loss
(income)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,941</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,736</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(85</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(308</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,921</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">Won</TD>
    <TD align="right">(257,491</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">Won</TD>
    <TD align="right">(125,025</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">Won</TD>
    <TD align="right">(161,299</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">13,046</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">Won</TD>
    <TD align="right">(209,318</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Weighted average number of
shares outstanding (in
thousands) &#151; Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">285,440</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">298,251</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">321,310</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">462,135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">462,135</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Weighted average number of
shares outstanding (in
thousands) &#151; Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">285,440</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">298,251</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">321,310</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">462,135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">462,135</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic and diluted earnings
(loss)&nbsp;per share of common
share and ADS<SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">Won</TD>
    <TD align="right">(902</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">Won</TD>
    <TD align="right">(419</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">Won</TD>
    <TD align="right">(502</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">Won</TD>
    <TD align="right">(453</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends declared</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>U.S. GAAP:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">Won</TD>
    <TD align="right">(251,382</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">Won</TD>
    <TD align="right">(167,179</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">Won</TD>
    <TD align="right">(161,598</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">14,849</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">Won</TD>
    <TD align="right">(203,212</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic and diluted earnings
(loss)&nbsp;per share of common share
and ADS<SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">Won</TD>
    <TD align="right">(1,762</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">Won</TD>
    <TD align="right">(1,122</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">Won</TD>
    <TD align="right">(1,006</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">64</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">Won</TD>
    <TD align="right">(879</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">4
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18" style="border-bottom: 1px solid #000000"><B>As of December 31</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2001</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2002</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18">(millions of Won)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance Sheet Data:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Korean GAAP:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Working capital<SUP style="font-size: 85%; vertical-align: text-top">(5)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">Won</TD>
    <TD align="right">(331,119</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">Won</TD>
    <TD align="right">(882,991</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">Won</TD>
    <TD align="right">(144,797</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">Won</TD>
    <TD align="right">(117,713</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">Won</TD>
    <TD align="right">(191,802</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property and equipment, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,146,589</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,134,314</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,550,921</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,372,845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,337,884</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,104,265</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,104,785</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,386,548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,185,112</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,034,260</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,541,209</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,488,315</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,730,720</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,751,606</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,573,080</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term indebtedness<SUP style="font-size: 85%; vertical-align: text-top">(6)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,896,839</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,128,703</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,157,582</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,034,739</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">993,690</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,320,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,396,613</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,310,676</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,310,676</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,310,676</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,541,209</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,488,315</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,730,720</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,751,606</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,573,080</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends declared</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>U.S. GAAP:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property and equipment, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,727,091</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,703,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,554,089</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,377,399</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,343,979</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,672,451</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,678,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,461,727</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,232,152</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,086,105</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,450,686</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,368,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,757,035</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,775,321</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,601,800</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Voice revenue consists of revenue derived from services provided to fixed line customers.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Leased line revenue consists of revenue derived from services that give the subscriber the
right to use a private line exclusively.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Broadband revenue consists of revenue derived from high-speed data transmission services and
Internet access services.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Earnings (loss)&nbsp;per share is calculated by dividing net income (loss)&nbsp;by the weighted average
number of shares outstanding. For comparability purposes, the weighted average number of
common shares for the years ended December&nbsp;31, 2001 and 2002 was recalculated to reflect the
issuance of new shares in 2003 at a price below market. Basic and diluted earnings (loss)&nbsp;per
share under U.S. GAAP for the years ended December&nbsp;31, 2001, 2002, 2003, 2004 and 2005,
respectively, were calculated reflecting the effect from the reverse stock split that occurred
on May&nbsp;3, 2006.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>Working capital means current assets minus current liabilities.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD>Long-term indebtedness includes long-term debt in local and foreign currencies, debentures,
long-term obligations under capital leases, current portion of Asset-Backed Securities payable
and current maturities of long-term debt.</TD>
</TR>

</TABLE>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18" style="border-bottom: 1px solid #000000"><B>As of December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>As of</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>April 30,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2001</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2002</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Other Data:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Subscribers<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,747,768</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,817,378</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,727,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,162,207</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,294,276</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,157,881</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Corporate leased lines<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,709</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,480</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,057</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,958</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,080</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Employees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,519</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,489</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,532</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,461</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,467</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Network route kilometers-owned<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP>.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,804</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,425</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,317</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,826</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,258</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Network route kilometers-leased<SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,991</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,487</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,821</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,429</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,485</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,487</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Office buildings connected with fiber optic
lines</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,608</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,978</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,131</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,466</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,544</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Apartment complexes connected with fiber
optic lines</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,972</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,470</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,291</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,899</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,109</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Switches installed (voice)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Switches installed (data)<SUP style="font-size: 85%; vertical-align: text-top">(5)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">156</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">161/140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">161/149</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">161/168</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">161/161</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">161/267</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Subscribers include broadband Internet and voice subscriber numbers. As of the end of 2005,
the number of residential and corporate subscribers was 3,986,462 and 307,814, respectively.
Since 2006, we have counted subscribers without classifying
them into residential and corporate subscribers. Subscriber numbers for previous years reflect
this new counting method.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">5
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>The 7,958 leased lines in service as of December&nbsp;31, 2005 included 3,060 individual Internet
dedicated lines connected to corporate subscribers and 4,898 individual traditional leased
lines connected to corporate subscribers. The 8,080 leased lines in service as of April&nbsp;30,
2006 included 3,215 individual Internet dedicated lines connected to corporate subscribers and
4,865 individual traditional leased lines connected to corporate subscribers.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Network route kilometers&#151;owned includes owned fiber optic lines within cities we service,
including fiber optic last-mile connections.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Network route kilometers&#151;leased includes leased fiber optic lines within cities we service,
including portions of our backbone, but does not include inter-city connections.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>Information as of December&nbsp;31, 2002, 2003, 2004, 2005 and April&nbsp;30, 2006 represents the
number of ATM/routers installed. The 267 routers as of April&nbsp;30, 2006 included 110 routers
previously used by Thrunet, with which we merged on January&nbsp;1, 2006.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Exchange Rate Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth, for the periods and dates indicated, information concerning
the noon buying rate for Korean Won announced by the Federal Reserve Bank of New York, expressed in
Korean Won per U.S.$1.00. We do not intend to imply that the Won or U.S. dollar amounts could have
been or could be converted into U.S. dollars or Won, as the case may be, at any particular rate, or
at all. On June&nbsp;26, 2006, the noon buying rate was $1.00 per Won 959.20 and the inverse noon
buying rate was Won 1,000 per $1.04.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Year ended December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>At End of Period</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Average Rate</B><SUP style="font-size: 85%; vertical-align: text-top"><B>(1)</B></SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>High</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Low</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14">(Won per U.S.$1.00)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">1,313.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">&nbsp;&nbsp;1,293.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">&nbsp;&nbsp;1,369.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">&nbsp;&nbsp;1,234.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,186.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,242.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,332.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,160.60</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,192.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,193.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,262.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,146.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,035.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,139.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,195.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,035.10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,010.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,023.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,059.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">997.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2006 (through June&nbsp;26)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">959.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">958.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,002.90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">927.40</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Month ending</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>At end of period</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>High</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Low</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">(Won per U.S.$1.00)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">1,010.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">&nbsp;&nbsp;1,036.90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">&nbsp;&nbsp;1,009.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">January&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">958.90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,002.90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">958.90</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">February&nbsp;28, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">970.90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">976.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">962.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">March&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">971.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">981.95</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">966.80</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">April&nbsp;30, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">942.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">970.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">939.60</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">May&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">945.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">951.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">927.40</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>The average of the noon buying rates on the last date of each month (or a portion thereof)
during the period.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>B. Capitalization and Indebtedness</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>C. Reasons for the Offer and Use of Proceeds</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>D. Risk Factors</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Investing in our securities involves a high degree of risk. You should carefully consider the
risks described below as well as all the other information in this Annual Report, including our
consolidated</I>
</DIV>

<P align="center" style="font-size: 10pt">6
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>financial statements and related notes and &#147;Item&nbsp;11. Quantitative and Qualitative Disclosure
about Market Risk.&#148;</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Our business, operating results and financial condition could be materially adversely affected
by any of the factors discussed below. The trading price of our securities could decline due to
any of these factors. This Annual Report also contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from those anticipated in
these forward-looking statements as a result of various factors, including the risks faced by us
described below and elsewhere in this Annual Report. See &#147;Forward-Looking Statements.&#148;</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Risks Related to the Telecommunications Industry and Our Business</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>We are subject to intense competition in all of the markets in which we operate, which may
subject us to intense price competition and could affect our revenues</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The telecommunications industry is highly competitive. KT Corporation is our main competitor
in both the broadband Internet access services and local telephony services markets. As of April
30, 2006, KT had market share of approximately 49.9%, in the broadband services market in Korea and
market share of approximately 92.9% in the local telephony services market. KT has significantly
greater capital resources and owns significantly more fixed assets (including an integrated
telecommunications network throughout Korea) than we do. With respect to the broadband services
market, KT has an extensive fiber optic backbone network throughout Korea and is upgrading its
last-mile connections and related transmission facilities to provide DSL services to its
subscribers at speeds comparable to ours. We believe KT is focusing its upgrading process and
marketing efforts on targeted high density and high demand areas. With respect to the telephony
services market, KT was the sole provider of local telephony services prior to the commencement of
our operations in April&nbsp;1999 and operates an extensive fixed-line network in Korea. We remain KT&#146;s
main competitor in this market with a relatively small market share. Dacom Corporation, the only
other local telephony licensee, has also been offering commercial local telephony services since
January&nbsp;2005. In addition, certain telecommunications business operators and facilities-based
telecommunications operators were granted licenses to provide newly established Internet telephony
services and began to provide services through interconnections with existing local and mobile
telephony service providers. Continued upgrading or other competitive pressure by KT, Dacom or
Internet telephony service providers could have a negative effect on our financial condition and
results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are also facing competition from others in the broadband Internet access services market.
In particular, since the MIC granted Powercomm, a subsidiary of Dacom, a network service provider,
or NSP, license to provide retail broadband Internet access service, Powercomm has launched
aggressive marketing activities to acquire new subscribers for 100Mbps optical LAN services and
10Mbps cable modem services using its own network. As of the end of April&nbsp;2006, Powercomm had a
market share of approximately 4.4% and plans to attract approximately 1.3&nbsp;million subscribers by
the end of 2006. Since late 2004, Dacom has been strengthening its retail broadband Internet access
business by using the network facilities of Powercomm Corporation, a subsidiary of Dacom, and
launching LAN-based Internet services. Dacom&#146;s market share was 1.4% as of the end of April&nbsp;2006.
We are also facing competition from cable television network system operators and relay operators
who have a market share of 10.6% as of the end of April&nbsp;2006. Entries by competitors such as
Powercomm in the broadband Internet access market are further intensifying competition in our
market. Due to this intensifying competition, our market share fell to 28.5% at the end of April
2006, a 0.7&nbsp;percentage point decrease from the end of January&nbsp;2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result of having to compete with KT in all of our markets and new competitors such as
Powercomm in the broadband Internet access services market, we currently encounter significant
pricing pressure and other forms of competitive pressures. Increased price or other competition
could adversely affect our revenues per subscriber, the overall profitability of our business and
our financial condition and results of operations. We cannot assure you that we will have the
financial resources, technical expertise or marketing and support capabilities to compete
successfully. In addition, future acquisitions, business combinations and alliances in the
telecommunications industry may create additional competitors with resources greater than ours or
strengthen existing competitors. For example, in January&nbsp;2005, Dacom
</DIV>

<P align="center" style="font-size: 10pt">7
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">announced that it intends to merge its operations with Powercomm. The integration synergies
generated from that merger may significantly increase the competitive strength of that combined
entity. Any significant changes to the market share or resources of our competitors could have a
material adverse effect on our business, financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Targeted benefits from our merger with Korea Thrunet Co., Ltd., or Thrunet, may not be
achieved if the remaining integration work does not proceed as planned or if an unexpected change
in the regulatory environment occurs</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We completed the merger transaction with Thrunet as of January&nbsp;1, 2006. We also finished the
integration of the computer systems of both companies. We plan to finalize the integration of call
centers and the transfer of some Thrunet subscribers who had used a leased network to our own
network by the end of the second quarter of 2006. However, if the remaining integration work is
delayed or if an unexpected change in the regulatory environment occurs, the benefits targeted from
the merger with Thrunet may be smaller than previously expected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>We may not be able to maintain our current broadband subscriber base which amounts to about
3.6&nbsp;million subscribers because of severe competition in Korea&#146;s broadband market</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Korean telecommunications industry is one of the most developed in Asia, particularly in
terms of broadband penetration. According to data derived from the MIC, the broadband penetration
rate, as a percentage of Korean households with broadband Internet access, had reached 80% as of
April&nbsp;30, 2006, and broadband subscribers increased from approximately 3.9&nbsp;million as of December
31, 2000 to approximately 12.5&nbsp;million as of April&nbsp;30, 2006. With the rapid growth of broadband
penetration, broadband Internet subscriber growth has decreased significantly. As a result, it may
be difficult for us to maintain our 3.6&nbsp;million subscriber base amid competition with KT, which is
the dominant player in the market, Powercomm, which has entered the broadband Internet market using
its own network, and cable television network system operators, which are in an advantageous
position in terms of local market recognition and price. Accordingly, our ability to generate
additional revenues from our broadband operations will depend substantially on our ability to
retain our existing broadband subscribers and increase the usage of our services by providing
competitive and technologically up-to-date broadband and value-added services. The profitability
of our broadband business and our overall financial condition may be adversely affected if we fail
to retain our existing subscribers or increase the usage of our services, or develop other sources
of revenue, in a cost-effective manner.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>The telecommunications industry is capital intensive and subject to rapid changes in
technology</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The telecommunications industry is capital intensive and subject to rapid and ongoing
technological changes. In particular, Korea is experiencing the beginning of convergence between
voice, data and broadcasting, and fixed line and mobile, technologies. Government initiatives or
policies, changing market demands and consumer trends and new technological advances may require us
to adopt new technologies which could render our existing technology less competitive or obsolete.
For example, the Government is currently envisioning a Broadband Converged Network which will
combine broadband and mobile technologies and include terrestrial and satellite video broadcasting.
This rapid technological evolution has had, and will continue to have, a significant impact on the
speed and quality of our services and, in turn, the pricing of our services. In addition, we may
require substantial capital expenditure and access to related and enabling technologies in order to
develop and integrate any new technology with existing platforms and to comply with new industry
standards, including any implementation of the Broadband Converged Network. We may be unable to
integrate new technology into our network infrastructure in a timely and cost-effective manner,
which could have a material adverse effect on the value of our network, business, financial
condition and results of operations and on our ability to compete with other operators who
implement the new technology more successfully. There can also be no assurance that new technology
adopted by us will be profitable.
</DIV>

<P align="center" style="font-size: 10pt">8
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>The Government has had, and continues to have, significant control and influence over the
development of the telecommunications industry in Korea</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Government has had, and continues to have, significant control and influence over the
development of the telecommunications industry in Korea. Under Korean law, the Government,
primarily through the MIC, has authority to regulate the telecommunications industry. The MIC is
responsible for, among other things, licensing telecommunications operators, monitoring the rates
charged by some telecommunications operators, including us, and setting standards and policies
which affect pricing, competition, marketing, foreign investment, frequency allocation, technology
choices, recommended levels of research and development spending, interconnection fee and other
arrangements. Each agreement for interconnection with other service providers is subject to
approval by, or reporting requirements to, the Korea Communications Commission. In addition, if
the Communications Commission finds that we are engaged in unfair business practices, including the
implementation of a pricing structure that restricts fair competition or which is against the
interests of our service users, it may order us to take corrective measures or impose an
administrative fine of up to 3% of our average annual revenues for the three years preceding the
violation. The Government also regulates the Internet exchanges through which all broadband
networks are connected to the Internet. See &#147;Item&nbsp;4.B. Business Overview&#151;Korean
Telecommunications Laws and Regulations&#148; for a description of the regulatory environment in Korea.
No assurance can be given that the Government will not change existing regulations, or impose
additional regulations, that will have an adverse effect on our business and results of operations,
particularly in light of increasing technological convergence.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For example, the Presidential Enforcement Decree of the Telecommunications Business Law
prohibits any telecommunications service provider from offering bundled sales of telecommunications
services or products that the MIC determines to be adverse to consumer interests. In making this
determination, the MIC may weigh the advantages of cost-savings or increased convenience for the
consumer as a result of the bundling against the disadvantages of any anti-competitive effects of
the bundling. If the MIC determines our bundled sales to be adverse to consumer interests and the
MIC were to exercise its discretion to prohibit us from offering bundled services, this could have
a material adverse effect on our financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In general, the MIC has promoted, and continues to promote, fair and effective competition in
the telecommunications industry and we have benefited significantly from such policy initiatives.
The MIC&#146;s facilities provision policy, which requires dominant operators to provide their essential
facilities to competitors upon request, and local loop unbundling regulations, under which we can
use KT&#146;s local loop facilities, have allowed us and other competitors to compete more effectively
with dominant operators which may have more capital resources than we do. In particular, the MIC&#146;s
designation of KT as a dominant operator in both the local telephony services and the Internet
access services markets has been effective in preventing KT from exercising its market power. As a
dominant operator, KT is subject to more stringent regulations and restrictions on its ability to
change its local telephony rates and Internet access rates. There can be no assurance that the MIC
will continue to promote competition in the telecommunications industry and any reduction in the
MIC&#146;s support for competition could have a material adverse effect on our results of operations and
financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Our licenses from the MIC are subject to certain conditions and may be subject to future
conditions imposed by the MIC</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We operate our telecommunications businesses pursuant to various licenses granted by the MIC.
See &#147;Item&nbsp;4.B. Business Overview&#151;Licensing.&#148; The MIC may suspend or revoke our licenses or
impose fines on us under certain circumstances, including the violation of telecommunications laws
and regulations and the breach of any conditions of the relevant license. Although we believe we
are in general compliance with telecommunications laws and regulations and the conditions of our
licenses, suspension or revocation of any license required for us to operate any of our
telecommunications businesses would have a material adverse effect on our business, financial
condition and results of operations.
</DIV>


<P align="center" style="font-size: 10pt">9
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">






<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>We outsource a significant portion of our sales force needs. Our lack of direct control over
our outsourced sales force&#146;s actions may materially affect our sales and marketing efforts</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of April&nbsp;30, 2006, we had 463 employees in our marketing and sales department. However, in
order to rapidly expand the coverage of our marketing and sales efforts in a cost-efficient manner,
we outsource a significant portion of our sales force needs. In 2005, we acquired about 91% of our
new broadband services subscribers and about 68% of our new voice services subscribers through our
outside sales force. The outside sales force and its employees are not employees of hanarotelecom
and the amount of control we exercise over their activities is necessarily limited. If our
training, compensation and monitoring programs fail to ensure the quality and performance of our
outside sales force, our sales and marketing efforts will be materially affected and our
performance, including the number of new subscribers, could suffer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Certain major shareholders have a significant influence over our management and operations</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A consortium of investors comprised of companies or partnerships which are directly or
indirectly controlled and managed by the AIG Asian Infrastructure Fund II, the AIG Asian
Opportunity Fund, Newbridge Capital, Inc. and TVG Capital Partners, Ltd., owned an aggregate of
39.56% of our outstanding common shares as of December&nbsp;31, 2005. See &#147;Item&nbsp;7.A. Major
Shareholders.&#148; Pursuant to an investment agreement between us and those principal shareholders, we
have agreed not to take certain significant corporate actions without the consent of those
principal shareholders so long as they and their affiliates continue to hold an aggregate of at
least 15% or more of our outstanding common shares. In addition, pursuant to certain other
agreements, certain of the principal shareholders have the right, among other things, to nominate
directors to our board, to nominate our chief financial officer, to make proposals to our board of
directors and to discuss our business and affairs with our board of directors, officers and
independent accountants. The interests of those principal shareholders may, in certain
circumstances, differ from the interests of the other holders of our securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>The inability to lease networks from third parties could materially affect our ability to
provide services</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We lease a substantial portion of our network from third parties including telecommunications
operators. We lease from Korea Electric Power Corporation, or KEPCO, ancillary facilities such as
electric poles and conduit ducts for use in building our own local fiber optic network and our own
HFC networks. Our agreement with KEPCO to lease its ancillary facilities allows us to expand our
network coverage at a lower cost. Accordingly, the termination of the lease agreements with KEPCO
could have a material adverse effect on our operations. Furthermore, any failure by KEPCO to
properly maintain its ancillary facilities could result in service disruptions or reduced data
transmission quality.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In areas that are not covered by our network, we have entered into non-exclusive network lease
agreements with cable television network system operators, relay operators and Powercomm. Our
competitors also have, or are trying to establish, relationships with these cable television
network system operators, relay operators or Powercomm. We may not be able to maintain our
relationships with these cable television network system operators, relay operators and Powercomm.
In particular, in connection with Dacom&#146;s marketing of LAN-based Internet services, cable modem
services and VDSL services, Dacom uses Powercomm&#146;s network. In addition, in August&nbsp;2005, the MIC
granted Powercomm, a subsidiary of Dacom, an NSP license to provide retail broadband Internet
access service. Dacom&#146;s focus on the retail broadband Internet access market in conjunction with
Powercomm and Powercomm&#146;s retail broadband Internet access service may prevent us from continuing
to lease our network on similar terms from Powercomm, which may require us to make significant
capital expenditures to build our own last-mile connections in those areas.
</DIV>

<P align="center" style="font-size: 10pt">10
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Our networks may be vulnerable to security breaches, piracy and hacking</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Despite the implementation of security measures, our networks may be vulnerable to computer
viruses, piracy, hacking or similar disruptive problems. Computer viruses or problems caused by
third parties could lead to disruptions of our services to our customers. Fixing such problems
caused by computer viruses or security breaches may require the interruption, delay or temporary
suspension of our services, which could result in lost revenue and penalties payable to affected
customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Breaches of our network security, including through piracy or hacking, may have a material
adverse effect on our earnings and financial condition and may require us to incur further
expenditures to put in place more advanced security systems to prevent any unauthorized access to
our networks.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>We may not generate sufficient cash flow from operations or obtain adequate financing on
acceptable terms or at all to implement our business plan in the mid- to long-term</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result of the rapid expansion of our business and the substantial operating losses we
incurred in the past, we have principally relied on equity and debt financings to fund our
operations and have significant debt and debt service and repayment obligations. In order to
maintain our competitive position and continue to meet the increasing demands for service quality,
availability and competitive pricing, we may need to incur additional capital expenditures on
enhancing our networks and expanding our subscriber base. Our actual future financing requirements
will also depend on our future performance, market conditions and other factors, many of which are
beyond our control and cannot be predicted with certainty. In addition, we may need to raise
additional funds through long-term borrowings, the proceeds of equity and corporate bond offerings
and vendor financing to acquire complementary businesses, develop new products or otherwise respond
to changing business conditions or unanticipated competitive pressures or technological or
marketing hurdles. Our ability to obtain additional financing will be dependent on our future
performance and market conditions, among other factors. We cannot assure you that long-term
borrowings, vendor financing, or any alternative financing will be available on favorable terms, or
at all. Moreover, under current Korean law our ability to sell additional voting shares to foreign
investors is limited. As a result, our options to raise equity capital are more limited than other
companies. If we are unable to obtain sufficient new debt or equity financing, we may need to
modify, delay or abandon elements of our business plan, which could have a material adverse effect
on our business, financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>We will be exposed to increased risks as we expand the range of our services</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As we expand the range of our products and services beyond our traditional business lines and
as the complexity of our services and network systems increases, we will be exposed to new and
increasingly complex risks. We may have only limited experience with the operational risks or new
technologies related to the expanded range of our services. To the extent we expand our service
offerings through acquisitions, we face risks relating to the integration of acquired businesses
with our existing operations. Our operational systems may prove to be inadequate and may not work
in all cases or to the degree required. In addition, our efforts to offer new services may not
succeed if market opportunities develop more slowly than expected or if the profitability of
opportunities is undermined by competitive pressures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>We may be liable for information disseminated over our Internet services network</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The liability of Internet service providers, or ISPs, under Korean law for information carried
on or disseminated through their networks is not completely settled. New court decisions, laws,
regulations and other activities regarding content liability may significantly affect the
development and profitability of companies offering online and Internet access services, including
us. The imposition upon ISPs of potential liability relating to information carried on or
disseminated through the ISPs&#146; systems, such as liability for computer viruses, defamatory speech
or copyright infringement, could require us to implement measures to reduce our exposure to such
liability. Such measures may require that we spend substantial
</DIV>

<P align="center" style="font-size: 10pt">11
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">resources or discontinue some services or content offerings. Any of these actions could have
a material adverse effect on our business, financial condition or results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>We could be adversely affected if we experience a failure of our equipment</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not carry &#147;business interruption&#148; insurance. A major failure of our equipment or a
natural disaster affecting any part of our network or equipment could have a material adverse
effect on our operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>We could be subject to liability and regulatory action arising from claims or other actions
relating to our handling of subscriber information.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We maintain various information regarding our subscribers. Various laws and regulations in
Korea and other countries impose restrictions on the use and dissemination of that information by
us. We have put in place comprehensive personal information security management measures across
the company and at any third parties with which we may share subscriber information under
outsourcing arrangements, to comply with the applicable standards. If we are required to implement
further personal information security measures, we may have to incur additional costs and our
financial condition could be negatively affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the event that personal information about subscribers held by us or a third party is leaked
or improperly accessed despite these security measures, we may be subject to liability such as
damage payments or regulatory actions arising out of a failure to protect such information. In
addition, such incidents could create a negative public perception of our operations, systems or
brand, which may in turn decrease customer and market confidence and materially and adversely
affect our business, financial condition and results of operations. For example, there have been
recent press reports about subscriber information collected by certain Internet service providers,
including us, being illegally sold by current or previous employees of the Internet service
providers to third parties, who in turn used the information to distribute spam e-mail and make
unsolicited telephone calls. A Korean law firm is currently soliciting plaintiffs who were
allegedly harmed by the leakage of subscriber information to file a civil lawsuit against those
service providers, including us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Risks Related to Korea</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>There are unique economic and political risks associated with investing in Korean companies</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We generate substantially all of our revenue from operations in Korea. Our future performance
will depend in large part on Korea&#146;s future economic growth. Adverse developments in Korea&#146;s
economy or in political or social conditions in Korea may have an adverse effect on our number of
subscribers, call volumes and results of operations, which could have an adverse effect on our
business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The pace of economic recovery in Korea over the past several years has been volatile.
Economic indicators in the past few years have shown mixed signs of recovery and uncertainty, and
future recovery or growth of the economy is subject to many factors beyond our control. Events
related to terrorist attacks in the United States that took place on September&nbsp;11, 2001, recent
developments in the Middle East, including the war in Iraq, higher oil prices, the general weakness
of the global economy and the outbreak of severe acute respiratory syndrome, or SARS, in Asia and
other parts of the world have increased the uncertainty of world economic prospects in general and
continue to have an adverse effect on the Korean economy. Any future deterioration of the Korean
economy would adversely affect our financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Developments that could adversely affect Korea&#146;s economy in the future include:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>financial problems relating to chaebols, or their suppliers, and their potential
adverse impact on Korea&#146;s financial sector;</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">12
</DIV>

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<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>adverse changes or volatility in foreign currency reserve levels, commodity prices
(including oil prices), exchange rates (including depreciation of the U.S. dollar or
Japanese yen), interest rates and stock markets;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>adverse developments in the economies of countries such as the United States, China
and Japan, to which Korea exports, or in emerging market economies in Asia or
elsewhere, which developments could result in a loss of confidence in the Korean
economy;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>social and labor unrest or declining consumer confidence or spending resulting from
layoffs, increasing unemployment and lower levels of income; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a deterioration in economic or diplomatic relations between Korea and its trading
partners or allies, including such deterioration resulting from trade disputes or
disagreements in foreign policy.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Developments that adversely affect Korea&#146;s economic recovery will likely also decrease demand
for our services and adversely affect our results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Increased international tensions with North Korea could have an adverse effect on us and the
market value of our common shares</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Relations between Korea and North Korea have been tense over most of Korea&#146;s modern history.
The level of tension between Korea and North Korea has fluctuated and may increase or change
abruptly as a result of current and future events, including ongoing contacts at the highest levels
of the governments of Korea and North Korea and increasing hostility between North Korea and the
United States. In December&nbsp;2002, North Korea removed the seals and surveillance equipment from its
Yongbyon nuclear power plant and evicted inspectors from the United Nations International Atomic
Energy Agency, and has reportedly resumed activity at its Yongbyon power plant. In January&nbsp;2003,
North Korea announced its intention to withdraw from the Nuclear Non-Proliferation Treaty,
demanding that the United States sign a non-aggression pact as a condition to North Korea
dismantling its nuclear program. In August&nbsp;2003, representatives of Korea, the United States,
North Korea, China, Japan and Russia held multilateral talks in an effort to resolve issues
relating to the nuclear weapons program of North Korea. In February&nbsp;2005, North Korea announced
that it possessed nuclear weapons. In September&nbsp;2005, North Korea agreed to end its nuclear weapons
program, and the six participating nations signed a draft preliminary accord, pursuant to which
North Korea agreed to dismantle its existing nuclear weapons, abandon efforts to produce new future
weapons and readmit international inspectors to its nuclear facilities. In return, the other five
nations participating in the talks, China, Japan, Korea, Russia and the United States, expressed
willingness to provide North Korea with energy assistance and other economic support. The six
parties agreed to hold further talks in November&nbsp;2005. However, one day after the joint statement
was released, North Korea announced that it would not dismantle its nuclear weapons program unless
the United States agreed to provide civilian nuclear reactors in return, a demand that the United
States rejected. We cannot assure you that future negotiations will result in a final agreement on
North Korea&#146;s nuclear program, including critical details, such as implementation and timing, or
that the level of tensions between Korea and North Korea will not escalate. In addition, in recent
years, there have been heightened security concerns stemming from North Korea&#146;s nuclear weapon and
long-range missile programs and increased uncertainty regarding North Korea&#146;s actions and possible
responses from the international community. Any further increase in tensions resulting, for
example, from a break-down in contacts or test of long-range nuclear missiles, coupled with
continuing nuclear programs by North Korea or an outbreak in military hostilities, could adversely
affect our business, prospects, financial condition and results of operations and could lead to a
decline in the market value of our ADSs.
</DIV>

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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Korea&#146;s new legislation allowing class action suits related to securities transactions may
expose us to additional litigation risk</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective January&nbsp;1, 2005, a new law became effective that allows class action suits to be
brought by shareholders of companies listed on the KRX Stock Market or the KRX KOSDAQ Market,
including us, for losses incurred in connection with purchases and sales of securities and other
securities transactions arising from (1)&nbsp;false or inaccurate statements provided in registration
statements, prospectuses, business reports and audit reports and omission of material information
in such documents; (2)&nbsp;insider trading; or (3)&nbsp;market manipulation. This new law applies to
companies such as ourselves listed on the KRX Stock Market or the KRX KOSDAQ Market whose total
assets are equal to or greater than Won 2,000&nbsp;billion at the end of the immediately preceding
fiscal year. However, in the event that certain elements of a financial statement for the fiscal
year ended before January&nbsp;1, 2005, were not in compliance with the then-effective accounting
standards, this law does not apply, if such non-compliance is cured or addressed in the financial
statement for the fiscal year ending December&nbsp;31, 2006, and such corrected information is submitted
to the Financial Supervisory Commission, or FSC, the Korea Exchange, Inc., or KRX, or made publicly
available. This law permits, subject to court approval, 50 or more shareholders who collectively
held 0.01% or more of the shares of a company at the time when the cause of action arose to bring a
class action suit against, among others, the company and its directors, officers and auditors. It
is uncertain how the courts will apply this law. Class action suits can be time-consuming and
expensive to resolve, and can divert management time and attention from the operation of a
business. Although we are not aware of any basis for such suit being brought against us, nor of
any such suits that are pending or threatened, any such litigation brought against us could have a
material adverse effect on our business, financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Risks Related to Owning Our Shares or ADSs</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Rights of shareholders under Korean law may be different from those under the laws of
jurisdictions within the United States and other countries.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Articles of Incorporation, the regulations of our board of directors, the Korean
Commercial Code and the Korean Securities and Exchange Act govern our corporate affairs. Legal
principles relating to such matters as the validity of corporate procedures, directors&#146; and
officers&#146; fiduciary duties and shareholders&#146; rights may be different from those that would apply if
we were a non-Korean corporation. Shareholders&#146; rights under Korean law are different in some
respects from shareholders&#146; rights under the laws of jurisdictions within the United States and
other countries. You may have more difficulty in asserting your rights as a shareholder than you
would as a shareholder of a corporation organized in a jurisdiction outside of Korea. For a detail
discussion of the relevant provisions under the Korean Commercial Code and our Articles of
Incorporation, see &#147;Item&nbsp;10.B. Memorandum and Articles of Association.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Restrictions on foreign ownership of our voting shares imposed by Korean law may depress the
price of our common shares</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Telecommunications Business Law of Korea restricts foreign ownership in voting shares of a
network service provider, including us. At present, a foreign government, foreigner or any legal
entity owned by a foreigner that has 15% or more of its outstanding voting shares, including
stock-equivalents and investment equity such as depositary receipts, owned by a foreign government,
foreigner or any specially related person as the largest shareholder may not own more than 49% of
the aggregate number of the issued and outstanding voting shares of any network service provider.
In the event that such foreign ownership restrictions are violated, the holders of shares in excess
of the legal limitations cannot exercise voting rights with respect to the shares exceeding such
limit and the MIC may require that corrective measures be taken to comply with the legal
restrictions. In addition, the MIC may impose a mandatory performance fee on the non-compliant
party and the service provider may refuse to enter the violating shareholder&#146;s shares in excess of
the legal limitations in its corporate register. As of May&nbsp;30, 2006,
</DIV>

<P align="center" style="font-size: 10pt">14
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">foreign ownership in our voting shares was approximately 49%, including the 39.45% share
ownership held by a consortium of investors led by AIG Asian Infrastructure Fund II and AIG Asian
Opportunity Fund, Newbridge Capital, Inc. and TVG Capital Partners, Ltd. The market price of our
common shares may be, and may continue to be, lower because of these limitations on foreign share
ownership in our voting shares. A stricter application of the rules relating to foreign share
ownership may also negatively impact our share price in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Additional restrictions on acquiring a large stake in our common shares imposed by Korean law
may depress the market price of our common shares</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to making an investment in 10% or more of the outstanding voting shares of a Korean
company, foreign investors are generally required under the Foreign Investment Promotion Law of
Korea to submit a report to a bank located in Korea (which may include a non-Korean bank&#146;s Korean
branch office) that is licensed under the Foreign Exchange Transaction Act to engage in foreign
currency transactions or the Korea Trade Investment Promotion Agency pursuant to a delegation by
the Ministry of Commerce, Industry and Energy of Korea. Failure to comply with this reporting
requirement may result in the imposition of criminal sanctions. Subsequent sales by the investor
of its shares in the company will also require a prior report to the bank. The Telecommunications
Business Law also requires the MIC to undertake a public interest review when a shareholder of a
service provider becomes a controlling shareholder of the service provider. Depending on the
review, which assesses the impact of the transaction on the national security, public good and
order of society, the MIC may order an amendment or suspension of the relevant contract, suspension
of the voting rights, or ultimately, a sale of shares. These restrictions may discourage some
investors from acquiring large positions in our common shares and as a result, may have lowered,
and may continue to lower, the market price of our common shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Foreign exchange rate fluctuations may affect the dollar value of our ADSs and dividends
payable to holders of our ADSs</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Market prices for our ADSs may fall if the value of the Korean Won declines against the U.S.
dollar. Although we do not expect to pay dividends in the foreseeable future, any dividends that
we do declare and pay will be paid to the depositary for the ADSs in Korean Won and then converted
by the depositary into U.S. dollars. As a result, the U.S. dollar amount of cash dividends and
other cash payments made to holders of our ADSs would be reduced if the value of the Korean Won
declines against the U.S. dollar.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>As a holder of ADSs, you have fewer rights than a shareholder has, and you must act through
the depositary to exercise these rights</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The rights of our shareholders under Korean law to take actions including voting their shares,
receiving dividends and distributions, bringing derivative actions, examining our accounting books
and records and exercising appraisal rights are available only to shareholders of record. Because
the depositary, through its custodian, is the record holder of the shares underlying the ADSs, a
holder of ADSs may not be entitled to the same rights as a shareholder. In your capacity as an ADS
holder, you are not able to bring a derivative action, examine our accounting books and records or
exercise appraisal rights except through the depositary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, the Korean Commercial Code and our Articles of Incorporation require us, with
certain exceptions, to offer shareholders the right to subscribe for new shares of our common
shares in proportion to their existing ownership percentage whenever new shares of our common
shares are issued. Under the deposit agreement governing the ADSs, if we offer any rights to
subscribe for additional shares of our common shares, the depositary under the deposit agreement,
after consultation with us, may make such rights available to the holders of ADSs or dispose of
such rights on behalf of the holders and make the net proceeds available to them or, if the
depositary is unable to take such actions, it may allow the rights to lapse with no consideration
to be received by the holders of the ADSs. The depositary is required to make available any rights
to subscribe for any securities only when a registration statement under the U.S.
</DIV>

<P align="center" style="font-size: 10pt">15
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Securities Act of 1933 is in effect with respect to the securities or if the offering of the
securities is exempt from the registration requirements under the U.S. Securities Act. We are
under no obligation to file a registration statement under the U.S. Securities Act to enable
holders of the ADSs to exercise preemptive rights for our common shares underlying the ADSs, and we
cannot assure you that any registration statement would be filed or that an exemption from the
registration requirement under the U.S. Securities Act would be available. Holders of ADSs that
are not entitled to exercise preemptive rights may thereby suffer dilution of their interests.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Future sales of ADSs and common shares could lower our share price</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If existing shareholders decide to sell large amounts of our shares, the trading price for the
ADSs and our shares could fall. We believe that some of our five major shareholders are currently
contemplating selling their shares of our common shares. Any announcement of a sale by any major
shareholders of our shares or any such sale may have a material adverse effect on the price of our
common shares or the ADSs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>It may not be possible for investors to effect service of process within the United States
upon us or our directors or senior management, or to enforce against us or those persons judgments
obtained in U.S. courts predicated upon the civil liability provisions of the federal securities
laws of the United States</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a stock corporation organized under the laws of the Republic of Korea. Almost all of
our directors and senior management reside outside of the United States. Most of our assets and
those persons are located in Korea and elsewhere outside of the United States. It may not be
possible, therefore, for U.S. investors to effect service of process within the United States upon
us or those persons or to enforce against us or those persons judgments obtained in U.S. courts
predicated upon the civil liability provisions of the federal securities laws of the United States.
We believe that there is doubt as to the enforceability in Korea, in original actions or in
actions to enforce judgments of U.S. courts, of claims predicated solely upon the federal
securities laws of the United States.
</DIV>

<DIV align="left">
<A name="105"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;4. Information on the Company.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>A. History and Development of the Company.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a stock corporation organized under the laws of the Republic of Korea. We were
incorporated on September&nbsp;26, 1997. Our legal and commercial name is &#147;hanarotelecomChushikHoesa&#148;
in Korean, and &#147;hanarotelecom incorporated&#148; in English. Our registered office is located at 17-7
Yeouido-dong, Yeongdeungpo-gu, Seoul, Korea, 150-874, telephone number (82-2) 6266-5500. Our agent
for U.S. federal securities law purposes is CT Corporation System, 111 Eighth Avenue, New York, NY
10011.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We were established as Korea&#146;s second local call carrier. Since our inception, we have been
striving to become the leading provider of high-speed Internet access, data and multimedia services
in Korea. Some of the important events in the development of our business are set forth below:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In October&nbsp;1997, we received our perpetual license to provide fixed-link local
telephone service on a nationwide basis in Korea.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In June&nbsp;1998, we registered as a specific service provider to resell or provide the
same type of telecommunications services as those of domestic or foreign network
service providers.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In April&nbsp;1999, we launched our local call and high-speed Internet access services
in Seoul, Busan, Inchon and Ulsan.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In March&nbsp;2000, we successfully completed a global offering of our ADSs on the
NASDAQ National Market.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">16
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In January&nbsp;2003, we received a perpetual license to provide long distance telephony
services, including inter-city and international services.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In June&nbsp;2003, we commenced providing fixed line number portability service.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In November&nbsp;2003, we issued new shares to a consortium of investors led by AIG,
Newbridge and TVG having an aggregate value of Won 585&nbsp;billion, as a result of which
they acquired an aggregate of 39.6% equity interest in us. AIF II NT, Ltd. and its
affiliate became our largest shareholder holding a 13.67% equity interest in us.
Following such new share issuance, there was a change in certain members of our
management. See &#147;Item&nbsp;6. Directors, Senior Management and Employees.&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In July&nbsp;2004, we launched &#147;hanarotelecom&#148; as our new corporate identity.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On January&nbsp;1, 2006, we completed an acquisition of Thrunet common shares
representing 96.22% of Thrunet&#146;s outstanding common shares.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On May&nbsp;3, 2006, as a result of a reverse stock split (2:1) without payment to
shareholders, the number of our outstanding shares decreased to 231,767,506 shares.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See &#147;Item&nbsp;5.B. Liquidity and Capital Resources&#148; for a description of our principal capital
expenditures for the last three fiscal years and currently in progress.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have not received any public takeover offers by third parties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>B. Business Overview.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>General</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have been providing telecommunications services since 1999 and currently offer high-speed
broadband Internet access, voice, leased line and IDC services in Korea. We are the second largest
provider of broadband Internet access services in Korea in terms of both revenue and subscribers
and our network currently covers 80% of households in Korea. Our voice service comprises local,
domestic long distance, international long distance and VoIP services. For the year ended December
31, 2005, we had revenues of Won 1,444.4&nbsp;billion and net income of Won 208.8&nbsp;billion. As of
January&nbsp;1, 2006, we completed our merger transaction with Thrunet. The following data reflects the
operating statistics of the combined entity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of April&nbsp;30, 2006, we had 3.58&nbsp;million broadband Internet access subscribers. Our market
share of Korean broadband Internet access subscribers was 28.5%. Of our broadband Internet access
subscribers, 40.5% are using DSL technology, 59.2% are using cable modem technology and 0.3% are
using either broadband WLL, often referred to as &#147;B-WILL,&#148; or wireless LAN, often referred to as
&#147;WLAN.&#148; We are the only major provider of broadband Internet access services in Korea with a
significant presence in both DSL and cable modem technology, with our major competitors
predominantly providing one or the other. Broadband Internet access services accounted for 68.2%
of our revenues for the year ended December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of April&nbsp;30, 2006, we had 1.58&nbsp;million voice lines. Since the nationwide implementation of
fixed line number portability on August&nbsp;1, 2004, we have been expanding our coverage and subscriber
base with our integrated services of long distance and international telephony as well as voice
over Internet Protocol, or VoIP, services based on IP networks. We added 436,840 net voice lines in
the period from August&nbsp;2004 through April&nbsp;2006, which represents a 27.6% growth in our voice lines
and an increase in our market share of total voice lines in Korea from 5.0% to 6.9%. In particular,
after the acquisition of Thrunet, we are strengthening marketing activities targeting Thrunet&#146;s
broadband subscribers. Voice services
</DIV>

<P align="center" style="font-size: 10pt">17
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">accounted for 25.9% of our revenues for the year ended December&nbsp;31, 2005. As of April&nbsp;30,
2006, 29.6% of our broadband Internet access customers use our voice lines on a bundled basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also provide leased line services and operate an Internet data center for corporate
customers. These and other activities accounted for 9.07% of our revenues for the year ended
December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have a technologically advanced transmission and access network, which comprises 20,258
route kilometers of owned and 9,487 route kilometers of leased fiber optic cables as of April&nbsp;30,
2006. As of Dec 31, 2005, we had connected 9,028 apartment complexes and 3,466 office buildings
with fiber optic lines. We estimate that our network has access to approximately 12.8&nbsp;million
Korean households.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We provide our broadband Internet access and voice services under the &#147;hanafos&#148; and &#147;hanafone&#148;
brands, respectively. We have been voted the best Internet service provider for the last three
years by the Korean Standard Service Quality Index (KS-SQI), which is sponsored by the Korean
Standards Association, and the best Internet service provider for the last two years by the Global
Customer Satisfaction Competency Index (GCSI), which is sponsored by the Japan Management
Association Consulting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Recent Acquisitions and New Services</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Thrunet Acquisition</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We completed the merger transaction with Thrunet as of January&nbsp;1, 2006, in order to strengthen
our competitiveness in the broadband Internet market and maximize our corporate value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To date, we have completed the integration of computer systems of both companies. We plan to
finalize the integration of call centers and the transfer of some Thrunet subscribers who had used
a leased network to our own network by the end of the first quarter of 2006. However, if the
remaining integration work is delayed or if an unexpected change in the regulatory environment
occurs, benefits from the merger with Thrunet may be smaller than previously expected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For a discussion of the risks involved in our acquisition of Thrunet, see &#147;Item&nbsp;3.D. Risk
Factors&#151;Risks Related to the Telecommunications Industry and Our Business&#151;Targeted benefits from
our merger with Thrunet may not be achieved if the remaining integration work does not proceed as
planned or if an unexpected change in the regulatory environment occurs
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>TV-Portal Service</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to grow into a comprehensive media company, we acquired 65% of the common shares
(780,000 shares at Won 5.5&nbsp;billion) of CelrunTV, a provider of TV portal/IP TV service platform and
IP STB technology on March&nbsp;13, 2006. We plan to launch TV-Portal, a TV-based content-on-demand
service, in the second half of 2006. CelrunTV changed its corporate name to hanaromedia Inc. and
became our affiliated company on May&nbsp;2, 2006, when we invested an additional Won 6.5&nbsp;billion to
acquire new shares issued by hanaromedia. We plan to acquire additional new shares for Won 6.5
billion in the second half of 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, to strengthen our convergence services including TV-Portal, we established a
Convergence Headquarters in April&nbsp;2006. We plan to offer various value-added services based on our
own network and improve subscriber retention. For our TV-Portal business we are aiming to gain
250,000 subscribers by the end of 2006, and 1.5&nbsp;million subscribers by the end of 2008 when
government regulations on IV-TV business are expected to be eased and full-blown service will be
permitted. However, we may not be able to achieve our targeted subscriber growth for TV-Portal if
we are unsuccessful in marketing this service to our existing broadband subscribers. Actual
subscriber growth and revenue from such subscribers may differ significantly from our targets.
</DIV>


<P align="center" style="font-size: 10pt">18
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">






<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our Services</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently provide broadband Internet access services, telephony services and leased line
services in Korea pursuant to several wire-line based options and wireless technologies. The
following table shows the numbers of subscribers or lines by business segment and technology:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000"><B>As of December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>As of</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2002</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>May 31, 2006</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Broadband:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">VDSL</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">165,134</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">272,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">344,988</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">374,354</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ADSL</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,294,368</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,051,891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">823,539</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">569,604</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">508,578</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cable Modem</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,539,690</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,459,319</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,439,792</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,416,744</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,109,756</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fiber optic LAN<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">157,808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">396,088</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">589,862</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">B-WLL</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,468</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,419</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,895</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,735</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,432</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Subtotal</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,877,526</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,725,763</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,748,934</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,773,159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,591,982</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Voice lines</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">939,852</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,001,381</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,413,273</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1521,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,599,467</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Leased lines</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,709</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,480</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,057</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,958</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,200</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,824,087</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,733,624</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,168,264</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,302,234</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,199,649</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Fiber optic LAN subscribers were counted as ADSL subscribers until 2005, since which they
have been counted separately.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Since 2006, we have counted broadband subscribers without classifying them into residential
and corporate subscribers. Subscriber numbers for previous years reflect this new counting
method.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>The number of subscribers for 2005 (residential and corporate subscribers are counted
separately);</TD>
</TR>

</TABLE>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>As of December 31, 2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Broadband:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Residential:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">VDSL</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">344,871</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ADSL</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">551,128</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cable Modem</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,415,900</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fiber optic LAN</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">396,088</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Corporate:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">VDSL</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">117</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ADSL</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,476</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cable Modem</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">844</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">B-WLL</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,482</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">WLAN</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,253</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Subtotal</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,773,159</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Voice lines</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1521,117</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Leased lines</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,958</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,302,234</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the years ended December&nbsp;31, 2002, 2003, 2004 and 2005, we had the following revenues
generated by our business segments:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000"><B>Year ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2002</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14">(billions of Won)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Broadband</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">969.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">982.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">985.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">1074.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Voice</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">210.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">249.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">291.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">375.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Leased line</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">111.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">125.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">133.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">1,417.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">1,383.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">1,449.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">1589.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">19
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Broadband</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently provide high-speed broadband Internet access services through several service
offering options marketed under the brand name &#147;hanafos.&#148; Our broadband network coverage extends
to 80% of households in Korea. We offer broadband Internet services to subscribers in large
apartment complexes and commercial buildings through fiber optic networks and to subscribers in
less densely populated residential areas through HFC cable networks. We also provide wireless
broadband Internet access to medium and low density housing complexes using B-WLL technology and in
high traffic areas (such as hotels and commercial centers) using WLAN technology. Residential
subscribers in areas covered by fiber optic networks have the choice of two types of DSL services,
namely ADSL and VDSL services. With the broadband Internet market reaching saturation, 100Mbps
products such as optical LAN are driving market growth. In this environment, we provide fast and
reliable access to the Internet for subscribers in apartment complexes and residential/commercial
complexes. Corporate subscribers generally have the choice of ADSL, VDSL or our dedicated leased
line services. Subscribers in service areas covered by HFC cable networks are provided with cable
modem based services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The principal features of our main broadband Internet access service packages and tariff
structure are set out in the table below:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Monthly Service</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Service Package</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Technology</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Max Speed</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Charge</B><SUP style="font-size: 85%; vertical-align: text-top"><B>(1)</B></SUP></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">hanafos V Dream II</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">VDSL</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">50 Mbps</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Won</TD>
    <TD align="right" valign="top">43,000</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">hanafos V Dream I</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">VDSL</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">20 Mbps</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">40,000</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">hanafos V Pro xDSL</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">ADSL</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">13 Mbps</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">38,000</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">hanafos Fiber LAN</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">LAN</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">100 Mbps</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">33,000</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">hanafos V Pro CATV</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Cable Modem</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">10 Mbps</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">34,000</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">hanafos V Lite</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">ADSL, Cable Modem</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">4 Mbps</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">28,000</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>There is a one-time installation fee of Won 30,000. Cable or DSL modems are rented for a
monthly fee of Won 8,000. Discounts on the monthly service charge are given to long-term
subscribers and range from 3.0% to 11.0%. Modem rental fees have in some circumstances been
waived or discounted by up to 40.0%.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>DSL (ADSL and VDSL) Services</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DSL services are provided primarily over existing copper lines in the subscriber&#146;s premises,
which are connected to our backbone network through fiber optic last-mile connections. Our DSL
services are targeted at subscribers in large apartment complexes. ADSL services offer Internet
access transmission speeds of up to 13 Mbps and VDSL services offer data transmission speeds of up
to 50 Mbps. DSL subscribers pay a monthly flat fee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Fiber Optic LAN</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We provide fiber optic LAN service to apartments and residential complexes hooked up to our
Fiber LAN service and equipped with hanarotelecom LAN facilities. It is useful for professional
users and others desiring access to the broadband Internet at a lower flat price as well as for
customers that frequently access services requiring symmetrical throughput (equal upload and
download), such as e-Learning and e-mail Healthcare services, video chat and peer-to-peer networks.
We are able to offer Internet access transmission speeds of up to 100 Mbps.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Cable Modem Services</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our cable modem based services are currently available in 162 service areas and are delivered
via HFC cable infrastructure. HFC connections to our data network allow for maximum speeds of 10
Mbps downstream and 700&#151;800 Kbps upstream through the use of cable modems installed at our
subscribers&#146; premises. Compared to the construction of our fiber optic network, our use of
existing HFC cable lines to offer broadband Internet access allows us to expand our broadband
service coverage area with lower capital
</DIV>

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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">expenditures. We have not invested in building out our own network in areas where we have
established non-exclusive network lease agreements with cable television network system operators
and Powercomm to use their HFC cable lines. As of April&nbsp;30, 2006, approximately 31% of our cable
modem subscribers used cable lines that we lease from cable television network system operators and
Powercomm. Powercomm, a subsidiary of Dacom, began to provide retail broadband Internet access
service from September&nbsp;2005 and launched aggressive marketing campaigns to acquire subscribers. In
part to respond to such marketing, we have increased our marketing efforts and competition in the
broadband Internet market has intensified significantly. We may be prevented from continuing to
lease our network on similar terms from Powercomm in the future, which may require us to make
significant capital expenditures to build our own network in those areas. See &#147;Item&nbsp;3.D. Risk
Factors&#151;Risks Related to the Telecommunications Industry and Our Business&#151;The inability to lease
networks from third parties could materially affect our ability to provide services.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Wireless Services</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also provide wireless last-mile connections to our backbone using B-WLL and WLAN
technologies. We commenced our commercial high-speed Internet access services using B-WLL
communications technology in July&nbsp;2000. B-WLL services are marketed primarily to medium-sized
businesses and apartment complexes which are not covered by our fiber optic or HFC networks. Our
B-WLL services are currently provided in 11 cities, including Seoul and Busan. We commenced
providing &#147;hanafos wing&#148; WLAN services in April&nbsp;2002, which allow Internet access through mobile
devices such as notebook computers or personal digital assistants, or PDAs, equipped with a LAN
card for users within the coverage of our access points. As of April&nbsp;30, 2006, we provide WLAN
services in approximately 189 access point areas across Korea, including high traffic areas such as
hotels, subway stations, shopping malls, colleges and fast food stores.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Voice</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We offer corporate and residential customers in Korea, local telephony, VoIP and domestic and
international long distance telephony services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Local Telephony</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are one of two competitors to KT, the dominant operator, in the local telephony market, the
other being Dacom. Although KT has a dominant position in this market, we have increased our
market share to 6.9% as of April&nbsp;30, 2006. In addition to local dial tone service and other basic
features such as call forwarding, call waiting, dial back and voicemail services, we offer
value-added services such as wake-up call and teleconferencing services in order to distinguish our
services from those available from KT.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Most of our residential subscribers receive local telephony services bundled with our DSL
services. If customers subscribe to our bundled DSL and local telephony services, the monthly base
fee for our local telephony service is discounted from Won 4,500 to Won 2,500 per line. We believe
the ability to offer local telephony distinguishes our service offerings from that of other
communication service providers, except for KT and Dacom, because it allows our subscribers to
receive both data and local telephony services through a single provider and thus receive one bill
for both service offerings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Voice over Internet Protocol (VoIP) Services</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In April&nbsp;2002, we commenced providing VoIP services bundled with cable modem-based broadband
Internet services to residential subscribers under the name &#147;hanafos cable &#043; voice,&#148; which allow
simultaneous use of high-speed Internet and local telephony services. We also provide VoIP
services on an unbundled basis to corporate customers. We currently provide VoIP services in Seoul
and other major municipal areas. As a result of improvements in VoIP technology and our increased
marketing efforts, the number of VoIP lines increased by 34.5% to 325,523 lines as of December&nbsp;31,
2005 from 241,997 lines as
</DIV>

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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">of December&nbsp;31, 2004. As of April&nbsp;30, 2006, we provided &#147;hanafos cable &#043; voice&#148; services to
346,167 residential subscribers. In December&nbsp;2004, the MIC decided to allow us to provide local
telephony service by way of VoIP, thereby making our VoIP services eligible for fixed-line number
portability provided certain conditions are met. Pursuant to these new regulations since December
22, 2004, we have been providing VoIP services as part of our local telephony service offering. In
July&nbsp;2005, we obtained a license to provide 070 Internet telephony services. For a further
discussion of these regulations, see &#147;&#151;Competition&#151;Voice.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Long Distance Telephony</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In July&nbsp;2004, we launched our domestic long distance telephony service and international long
distance telephony services. In April&nbsp;2005, we rolled out &#147;hanafone 3050,&#148; a voice service offering
a discount of up to 50% on usage fees at the same basic monthly fees as competitors, to attract
subscribers who mainly use domestic and international long distance telephony services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Leased Line Services</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We hold a license to operate leased line services on a nationwide basis in Korea. Our leased
line fees vary depending on the distance and bandwidth requirements of our subscribers. Our leased
line services enable high volumes of data to be transmitted quickly and reliably. We also provide
back-up storage for transmitted data. We use international transmission lines with transmission
speeds of over 10 Gbps to provide leased line services to countries such as the United States,
Japan and China and have points of presence, commonly referred to as &#147;POP,&#148; facilities in the
United States. Our Internet leased line services are provided to companies with LAN facilities
through fiber optic cable lines. With the aim of expanding the scope of our Internet leased line
services, we have entered into transit or peering agreements with 89 domestic and 327 international
Internet leased line service providers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Other</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Internet Data Center</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We opened &#147;N-GENE,&#148; our IDC, in May&nbsp;2000. Through N-GENE, we provide our corporate
subscribers with server-based support in the form of co-location and dedicated server hosting.
Co-location allows our customers to connect their servers directly to our backbone network at
speeds in excess of those available through leased Internet lines. This service is targeted at
corporate customers with multiple servers and for those who need broadband circuit capacity.
Dedicated server hosting provides our customers with servers customized to their desired
specifications. These services are connected to our backbone network at Gbps rates and allow our
customers access to dedicated servers without the burden of purchasing or maintaining such servers.
As of April&nbsp;30, 2006, N-GENE hosted approximately 16,500 servers, mostly for corporate customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Internet and Related Support Services</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Through our &#147;hanafos.com&#148; portal site, which is operated by our subsidiary, Hanaro Dream
Corp., we offer to our subscribers a variety of basic on-line services, including personal
homepages, free e-mail services, chat services, bulletin board and social communities, and
multimedia contents including movies, music, comics, animation, popular on-line games, on-line
education, sports, news and television dramas. We intend to continue developing our Internet
content business and maintaining a competitive position in this business through Hanaro Dream.
</DIV>

<P align="center" style="font-size: 10pt">22
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Sales, Marketing and Customer Service</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Sales</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are focused on bringing our high-speed broadband Internet access and voice services to
residential users, and Internet dedicated lines and data, leased line services and IDC to corporate
users.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Residential</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently outsource a significant portion of our retail sales force needs. Our outside
sales force receives several weeks of training on how to sell our services. The training includes
basic instruction on selling techniques, as well as classes regarding our corporate image and our
services. Follow-up sessions are held to introduce new services to the sales force. Our outside
sales force sells our services through the following channels:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Customer Centers</I>. We have agreements with 92 customer centers and 9 service
centers, most of which are located in Seoul. Service centers serve areas with
population densities that are lower than the areas served by the customer centers.
These customer and service centers sell our services exclusively and contributed to
approximately 30% of our total sales in 2005. These centers receive a commission for
each service contract and installation contract secured. In addition, we pay these
centers for the maintenance and repair work that they perform for our subscribers.
Customer and service centers often enter into sub-contracts with smaller distribution
outlets within their area to increase their sales coverage and sell through
telemarketing.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Cable Television Network System Operators and Relay Operators</I>. As of April&nbsp;30,
2005, we have arrangements to sell our services with 50 cable television network
system operators and 30 relay operators. These arrangements form part of the
strategic alliances we have formed with these cable television network system
operators and relay operators (see &#147;&#151;Competition&#151;Broadband&#148;). The cable television
network system operators and relay operators in each of the areas covered by our cable
network leasing arrangements have the right to sell our services within their
respective areas. In the event a potential subscriber elects a non-cable service
(such as ADSL) that is available in that service area, the subscriber is referred to
one of our customer centers.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Strategic Sales Distribution Channels. </I>As of April&nbsp;30, 2006, we have agreements
with 67 strategic sales distribution channels that own nationwide sales channels.
Sales through these channels accounted for 28% of our total sales in 2005. Strategic
sales distribution channels engage in sales activities for hanarotelecom using various
channels such as telemarketers and street vendors, and receive sales commissions based
on their sales performance. Currently, we are running a task force to improve the
sales channel management and the commission system, which is aimed at enhancing the
credibility and loyalty of sales distribution channels.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Other Agents</I>. We use individual sales agents and small sales agencies to sell our
services in our coverage areas. Our agents receive a sales commission for each new
subscriber.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Corporate</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales to corporate subscribers are handled through our in-house sales group. Our sales people
focus on securing contracts with large commercial complexes, allowing us to install our remote
terminals at their premises. After installation, sales people direct their attention to individual
corporate clients within these premises. Sales people who have secured contracts with corporate
clients remain the primary contacts for all aspects of the client&#146;s needs, including further
installation and customer and follow-up service. Our sales force is compensated using an
incentive-based performance scheme.
</DIV>

<P align="center" style="font-size: 10pt">23
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Others</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also have agreements with providers of other services in order to further expand our sales
coverage. We are a party to agreements with certain construction companies pursuant to which we
install our network equipment in newly built commercial and residential buildings, which in turn
allows builders to advertise their new buildings as &#147;cyber buildings.&#148; In order to add more
Internet network game players to our subscriber base, we offer &#147;Game Plus,&#148; popular network games
bundled with our high-speed Internet access service.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Marketing</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We use a variety of marketing strategies and media to raise awareness of our services. Our
marketing strategies include the following:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Broadband</I>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Strengthening service competitiveness by offering bundled services incorporating
broadband, voice and value-added services, as well as providing media content through
the TV-Portal service</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Occupying the 100Mbps market by accelerating network upgrades</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Overhauling our distribution channels by building up distribution channel capacity,
expanding direct acquisition channels and securing new distribution channels, which
will lead to a decrease in subscriber acquisition cost</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Voice</I>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Focusing on target marketing for about 2&nbsp;million HFC subscribers of Hanaro and
Thrunet by utilizing fixed line number portability</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Planning to launch digital wired/wireless integrated voice services which support a
variety of value-added services including SMS in the third quarter of 2006</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;General</I>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Achieving customer stabilization and business performance by raising brand
awareness and credibility through an integrated brand of Hanaro and Thrunet</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Improving service quality by increasing our call center response rate, improving
the customer complaint handling process and expanding operating hours</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also organize special events, such as Internet seminars, to promote our services. We spent
a total of Won 44.8&nbsp;billion in 2004 and Won 34.9&nbsp;billion in 2005 on advertising.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Customer Service</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe our emphasis on customer care differentiates us from our competitors. We have been
voted the best Internet service provider in Korea for the last two years by the Global Customer
Satisfaction Competency Index. We provide 24-hours-a-day, 365-days-a-year customer support through
four call centers operated by our subsidiary, Hanaro Telephone &#038; Internet Information, Inc., or
Hanaro T&#038;I. We also have a customer claims center located within the call centers to handle
subscriber claims regarding our service quality and billing. All service representatives receive
two months of orientation training and on-site supervisors provide additional support. All calls
to the call centers are recorded and service
</DIV>

<P align="center" style="font-size: 10pt">24
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">representatives are graded periodically based on performance. We strive to answer all calls
within 73 seconds. The call centers currently receive approximately 72,092 calls per day. We use
automated answering services to respond to routine inquiries, such as account balances.
Subscribers can also voice their complaints through e-mail. Common questions or complaints are
posted, together with our response, on a bulletin board on our home page. As of May&nbsp;31, 2006 we
employed 1,642 workers in our call centers, each working eight hour shifts. We anticipate that we
will continue to hire additional customer support personnel as the size of our subscriber base
increases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subscribers also have face-to-face access to our representatives at our customer and service
centers and to representatives at customer centers operated by cable television network system
operators and relay operators with whom we have non-exclusive sales arrangements. Our sales staff
at our customer and service centers receive customer service training in addition to their sales
training. Our in-house sales people monitor the performance of our customer and service center
employees during their visits to these centers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Relationship with Dreamline</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2001, we acquired a 32.2% equity interest in Dreamline, a broadband and leased
line services provider. As a result of a third party&#146;s investment in Dreamline in early 2004, our
equity interest in Dreamline has been diluted and was 14.18% as of April&nbsp;30, 2005. Accordingly,
Dreamline is no longer considered our affiliate for accounting purposes. Under a stock purchase
agreement with CJ Corporation, the previous controlling shareholder of Dreamline, CJ Corporation,
has an obligation not to compete, directly or indirectly, with us in the leased line and broadband
services or other related or similar services for five years from the closing of the stock purchase
agreement. However, affiliates of CJ Corporation have been engaged in business in those service
areas, and we filed certain lawsuits against CJ Corporation to enjoin its affiliates from providing
such services and to seek monetary compensation caused by said violation and CJ Corporation&#146;s
failure to disclose certain contingent tax liabilities. See &#147;Item&nbsp;8.A. Consolidated Statements and
Other Financial Information&#151;Legal Proceedings.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Information Systems and Billing</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Information Systems</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently use an information system which consists of three separate systems: the customer
support system, the operational support system and the business support system. The customer
support system handles all information related to an individual subscriber, including customer care
and billing information, and marketing and sales data. The operational support system handles all
data related to the management of our operations and acts as the interface to the network
management system, which monitors the performance of our network and delivery of services on a
24-hour basis every day. This interface allows for quick identification of network faults and
relays the information to our customer support system. The business support system handles data
regarding internal business operations, including accounting, personnel and our assets. Our
operational information system is designed to integrate all of our internal support services. The
integration of our internal support services has been substantially completed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The integration of our operational information system allows management personnel from our
customer care, sales engineering, service management, service delivery, accounting and inventory
sales departments to access a single subscriber record. Accordingly, a subscriber is able to
request support for any of our services with one phone call. By providing comprehensive, real-time
customer information, this system is designed to enable our customer service representatives to
respond faster to inquiries and to identify more cross-selling opportunities. In addition, credit
history information regarding potential and existing subscribers obtained from credit analysis
organizations is available through our integrated information system. This allows our sales and
operational staff to suspend services to non-paying subscribers with poor credit ratings at an
early stage.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In March&nbsp;2004, we implemented our &#147;Information Strategy Planning&#148; which aims to identify new
business opportunities by analyzing the customer information contained in our operational
information
</DIV>

<P align="center" style="font-size: 10pt">25
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">system to create a transparent strategy formulation process and to promote a stable service
environment. We also intend to establish CRM and knowledge management systems, an enterprise data
warehouse, an enterprise information portal and a disaster recovery center by the end of 2007. On
October&nbsp;1, 2005, we launched the CRM system as part of our Information Strategy Planning in order
to provide customized services, enhance customer loyalty and strengthen sales and marketing
activities including retention activities. With the CRM system, we are able to support quick,
reasonable and systematic decision making based on an understanding of our customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Billing</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our billing system is designed to allow our sales and marketing staff some flexibility in
designing new pricing plans and service offerings. The subscription terms, deposit requirements
and service period for each subscriber are determined in accordance with the subscriber&#146;s credit
rating. We currently provide joint billing services for subscribers who also subscribe to the long
distance and international telephony services of Dacom and Onse Telecom.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The billing system is able to process discounted billing rates for different types of calls
and allows subscribers to pay for our services in several ways, including online payment or by
direct debit from their bank accounts. Each subscriber may also access a detailed breakdown of
services rendered on the Internet. Any bill which has not been paid for one month is actively
managed. Services are suspended if a bill remains unpaid for two months and the relevant service
agreement is terminated after four months of non-payment. After five months, the collection of any
unpaid bill is turned over to debt collection agencies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Competition</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Broadband</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the high-speed broadband Internet access market, our main competition comes from KT. As of
April&nbsp;30, 2006, KT had a 49.9% market share of total broadband subscribers in Korea. In June&nbsp;2005,
the MIC designated KT as a dominant operator for this market, taking into account KT&#146;s market share
exceeding 50%. See &#147;&#151;Korean Telecommunications Laws and Regulations&#151;Designation of a Dominant
Operator.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have also faced competition from cable television network system operators and relay
operators which have been offering broadband Internet access at steep discounts in an effort to
diversify their revenue sources. However, the recent classification of broadband as a
facilities-based service means that the cable television network system operators and the relay
operators will be required to obtain a license from the MIC to provide broadband services and will
become subject to more stringent regulations by the MIC. The MIC has granted the cable television
network system operators and relay operators a two-year period to comply with these requirements.
The two-year period ends July this year, and the cable television network system operators and
relay operators will have to finish reviews to obtain the license by July&nbsp;20, 2006. If these
operators are granted licenses, they will be required to establish an interconnection network and
backup networks. This will require additional CAPEX, which in turn will lead to an increase in
service costs. Furthermore, due to requirements to notify the MIC of the terms of service and adopt
accounting separation as well as stricter regulations imposed by the Fair Trade Commission and the
Korea Communications Commission, the cable television network system operators and relay operators
will find it difficult to continue low-price marketing. They have been engaged in aggressive
marketing to acquire as many broadband subscribers as possible before July&nbsp;2006. In addition, we
have entered into over 80 strategic alliances with cable television network system operators and
relay operators for the purposes of establishing mutually beneficial arrangements with respect to
the provision of broadband Internet access, marketing, sales and customer services. In general, we
have agreed to outsource to the cable television network system operators and relay operators our
sales, marketing and customer service functions in return for our use of their last-mile connection
networks and our acquisition of their broadband Internet subscriber base. For further detail on
our relationship with cable television network system operators, see &#147;Item&nbsp;7.B. Related Party
Transactions&#151;Relationships with Cable Television Network System Operators.&#148;
</DIV>

<P align="center" style="font-size: 10pt">26
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since late 2004, Dacom has been strengthening its retail broadband Internet access business by
using the network facilities of Powercomm, and launching LAN-based Internet services. In August
2005, the MIC granted Powercomm an NSP license to provide broadband services telecommunications.
Powercomm, which had been leasing network facilities to retail telecommunications business
operators, entered the retail broadband Internet access market in September&nbsp;2005. After Dacom, the
parent company of Powercomm, transferred its retail broadband Internet access business to
Powercomm, the two companies accounted for 5.8% of the broadband Internet market as of April&nbsp;30,
2006. In just one month after entering the retail broadband Internet access market, Powercomm was
subject to an order of suspension of business for 19&nbsp;days from October&nbsp;10, 2005 issued by the Korea
Communications Commission for violating an Internet interconnection agreement with Dacom.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>DSL (ADSL &#038; VDSL)</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;KT is our only competitor that is not limited in the coverage of its services by the coverage
of its network. KT, as the dominant telecommunications carrier, has a nationwide copper wire
last-mile network and an extensive fiber optic backbone network throughout Korea and has
significantly greater capital resources than we do. KT currently provides ADSL services and is
upgrading its last-mile connections and related transmission facilities to provide DSL services to
its subscribers at speeds comparable to ours. KT is focusing its upgrading process and marketing
efforts in our targeted high density, high demand areas and is continuing to increase the marketing
of its long-reach VDSL services to single resident houses located among apartment complexes. As of
April&nbsp;30, 2006, KT and hanarotelecom had market shares of approximately 84.4% (based on MIC data)
and 14.2% (based on MIC data), respectively, in the DSL services market in Korea. With the
broadband Internet market reaching saturation, 100Mbps services including optical LAN are driving
market growth. In these circumstances, Powercomm entered the market in September&nbsp;2005 and has been
expanding its market share by strengthening its marketing activities with its 100Mbps fiber optic
LAN service. As of April&nbsp;30, 2006, KT had 43.3% of the fiber optic LAN market while hanarotelecom
and Powercomm had 29.0% and 9.0%, respectively (based on MIC data).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Cable Modem</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Thrunet has been our main competitor in the cable modem market. We, together with Thrunet and
Onse Telecom, utilize almost all of Powercomm&#146;s cable networks for the provision of our cable modem
services. Our cable lease agreements with Powercomm are not exclusive and, accordingly, Powercomm
may lease the cable networks we are currently leasing to additional service providers. In
addition, we may be prevented from continuing our lease agreements with Powercomm on similar terms
if Dacom, together with its subsidiary Powercomm which began to provide retail broadband Internet
access service from the second half of 2005, expands its business in the retail broadband Internet
access market by using Powercomm&#146;s network. See &#147;Item&nbsp;3.D. Risk Factors&#151;Risks Related to the
Telecommunications Industry and Our Business&#151;The inability to lease networks from third parties
could materially affect our ability to provide services.&#148; Dreamline provides services through
smaller, localized cable networks owned by cable television network system operators.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Voice</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the local telephony market, we and Dacom are the only competitors to the dominant operator,
KT. As of April&nbsp;30, 2006, we and KT had a 6.9% and 92.9% market share, respectively, in the local
telephony market. Dacom was granted a local telephony license in July&nbsp;2004 and commenced its
commercial local telephony services in January&nbsp;2005. Dacom has a mere 0.2% of the local telephony
market share. Fees charged by KT for local telephony services are currently regulated by the MIC
while we are only required to report our fees charged for local telephony services to the MIC. The
MIC will not allow KT to charge fees which it deems to be unreasonable and against public interest.
See &#147;&#151;Korean Telecommunications Laws and Regulations&#151;Designation of a Dominant Operator.&#148; In
addition, as the local common carrier, KT is under a &#147;universal service&#148; obligation to provide its
local telephony services to all subscribers requesting service. We do not have a universal service
obligation and are able to focus the
</DIV>

<P align="center" style="font-size: 10pt">27
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">roll-out of our services to areas with high density populations and households with greater
than average disposable income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our main competitors in the domestic and international long distance telephony markets are KT,
Onse Telecom, Dacom and SK Telink. According to the MIC, as of April&nbsp;30, 2006, our share of the
domestic long distance telephony market was 5.1% and KT had the largest share with 85.6%, based on
the number of lines for which subscribers have designated certain operators as their preferred long
distance operators.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are currently two types of VoIP services on offer in Korea. SSPs, which are mostly
cable television network system operators and Internet portal operators, provide VoIP services
which allow calls to be made but not received. VoIP services which allow calls to be made and
received (often referred to as &#147;two-way VoIP&#148;) could only be provided, until recently, by service
operators with a local telephony license. To date, we are the only significant provider of two-way
VoIP using a standard eight-digit telephone number. While KT has not been pursuing this market
actively, Dacom has announced its intention to provide two-way VoIP by November&nbsp;2005. On October
1, 2004, the MIC announced a decree authorizing the provision of two-way VoIP service using an
eleven-digit number with a dialing prefix of &#147;070.&#148; Currently, facilities-based telecommunications
business operators and specific telecommunications business operators are offering the two-way VoIP
service. Two specific telecommunications business operators, Samsung Networks and Anyuser.Net,
launched the &#147;070&#148; service for the first time in August&nbsp;2005, followed by facilities-based
telecommunications business operators, such as KT in November&nbsp;2005 and hanarotelecom and SK Telink
in December&nbsp;2005. Furthermore, Korea Cable Telecom, a nationwide consortium of cable television
operators, plans to gain a license to provide the VoIP service and launch its service in 2006.
Separately, the MIC adopted a set of new regulations on December&nbsp;13, 2004, which allows licensed
local telephony carriers, including us, to provide local telephony service by way of VoIP provided
that certain technical and regulatory requirements are met. These requirements include improving
the voice quality to a certain level, charging VoIP subscribers different usage rates between local
telephony and domestic long distance services, and providing free emergency call services. We have
met these requirements, and have been providing VoIP-based local telephony service in our HFC areas
since December&nbsp;22, 2004. In addition, because this type of VoIP service is considered a local
telephony service under the new regulations, our VoIP-based local telephony service is currently
eligible for fixed-line number portability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Leased Line Services</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the leased line services market there are currently seven major service providers in Korea.
As of April&nbsp;30, 2006, we believe our market share in terms of revenue was 2.9% while KT, with
53.1% in terms of revenue, had the largest share of the leased line market, followed by Powercomm
with 15.7% and SK networks with 13.5%. Competition in this market is primarily based on price,
network coverage and quality. In order to provide leased line services, a service provider must
have a license to provide network services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Other</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the IDC services market, there are currently three major IDC service providers in Korea:
KT, Dacom and Hanaro (N-GENE). Competition in this market is primarily based on price and service
quality. Some of these major providers are expanding their service capacities. In addition,
approximately 10 small and medium-sized data centers provide IDC services similar to ours.
</DIV>


<P align="center" style="font-size: 10pt">28
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Licenses</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-left: 3%; margin-top: 6pt"><B><I>NSP License</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Korean Telecommunications Business Law (Law No.&nbsp;4394 of August&nbsp;10, 1991, as
amended), the telecommunications services that Network Service Providers, or NSPs, which are
facilities-based telecommunications service providers, may provide are restricted to those for
which it has received a license from the MIC. To date, we have received the following types of NSP
licenses from the MIC. In October&nbsp;1997, we received our perpetual license to provide fixed-link
local telephone service on a nationwide basis in Korea. The founding shareholders of our company
paid a one-time fee of Won 45.0&nbsp;billion for such license. In August&nbsp;1999, we obtained a perpetual
license to provide domestic leased line services, for which we paid a one-time fee of Won 1.9
billion. In February&nbsp;2000, we obtained a perpetual license to provide value-added telephone
services relating to long distance telephone services and international telephone services, for
which we paid one-time fees of Won 0.3&nbsp;billion and Won 0.1&nbsp;billion, respectively. In August&nbsp;2000,
we obtained a perpetual license to provide international leased line services for which we paid a
one-time fee of Won 0.2&nbsp;billion. In January&nbsp;2003, we obtained a perpetual license to provide long
distance telephony services, including inter-city and international services. Additionally, in
October&nbsp;2004, we obtained a perpetual license to provide broadband services as a result of recent
amendments to the enforcement regulations of the Telecommunications Business Law. In July&nbsp;2005, we
obtained a perpetual license to provide 070 Internet telephony services. Our licenses to provide
such NSP services are subject to satisfaction of certain terms and conditions, including the
following:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The licenses require us to make annual contributions to the Information Promotion
Fund for the purpose of research and development pursuant to the Telecommunications
Business Law. Only the NSPs whose total broadband, voice and leased line services
revenue amount for the preceding year was more than Won 30.0&nbsp;billion (provided that
broadband revenue will only be counted towards this threshold from 2005 onwards), and
that realized a net profit in the preceding year, are required to make annual payments
for the purpose of research and development in the amount of 0.5% of the total
broadband, voice and leased line services revenue, to the extent that the amount of
such payment does not exceed the amount of the net profit for the preceding year. In
the case of a dominant operator, the amount is 0.75% of such revenue. The &#147;net
profit&#148; which the MIC will use in its determination of the amount of our contribution
is calculated using MIC accounting standards which differ in certain respects from
Korean GAAP.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>We must comply with the business plan submitted to the MIC in all material
respects. If necessary, the business plan may be revised in accordance with the
procedures set out in the &#147;Guidelines for Handling of Change of Business Plan of
Network Service Provider.&#148; The initial service fee must be in compliance with the
business plan. We must report to the MIC the general terms (including the service fee
of each service) together with supporting documentation.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are not required to pay any fees to the Government in connection with its approval of us as
an NSP.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-left: 3%; margin-top: 6pt"><B><I>SSP License</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In June&nbsp;1998, we also registered as a Specific Service Provider, or SSP. This registration is
for an indefinite term. As an SSP, we are permitted to provide the following services:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>By utilizing our own switching facilities and other telecommunications facilities
owned by NSPs, resell or provide the same types of telecommunications services as
those of domestic NSPs.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">29
</DIV>

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<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>By leasing telecommunications facilities owned by other NSPs without its own
switching facilities, resell the same types of telecommunications services as those of
domestic NSPs.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>By utilizing our own facilities, provide telecommunications services within a
specific building.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our registration as an SSP requires that, prior to the commencement of commercial operations,
we submit to the MIC detailed information on the location of our principal facilities and the
structure of our network.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are not required to pay any fees to the Government in connection with our registration as
an SSP.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-left: 3%; margin-top: 6pt"><B><I>Cable TV Network Operator License</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the Integrated Cable Broadcasting Law (which was subsequently replaced by the
Broadcasting Law), we were designated by the MIC in June&nbsp;1999 as a network operator in the cable
television industry. As a network operator, we are permitted to install, operate and lease network
facilities to cable television network system operators and relay operators in 57 regions
throughout Korea. No fees are required to be paid to the Government in connection with such
designation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our designation as a network operator requires that we establish the transmission network in
compliance with the technical standard set forth in Article&nbsp;25 of the Telecommunications Basic Law
(Law No.&nbsp;4393 of August&nbsp;10, 1991, as amended) and obtain &#147;fitness confirmation&#148; from the MIC prior
to providing network facilities to cable television network system operators under Article&nbsp;80 of
the Broadcasting Law. We have obtained fitness confirmations from the MIC prior to each provision
of these network facilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Wireless Frequency Allocation</I>. In February&nbsp;1998, we obtained the right to the WLL frequency
of 2.3 GHz bandwidth for 20MHz down- and up-stream transmission. In August&nbsp;1999, we obtained the
B-WLL frequency of 26 GHz for 360 MHz down- and 150 MHz up-stream transmission. These rights are
for an indefinite term and no fees are required to be paid to the Government in connection with
such rights. In February&nbsp;2002, the MIC announced its plans to allocate 100 MHz of the WLL
frequency to WiBro services after June&nbsp;2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>International Common Carrier Authorization in the United States</I>. In July&nbsp;2000, hanarotelecom
America, our U.S. subsidiary, obtained a Section&nbsp;214 authorization from the U.S. Federal
Communications Commission. This authorization authorizes hanarotelecom America to operate as a
facilities-based international common carrier and to resell the international services of
authorized U.S. common carriers. On December&nbsp;15, 2004, we filed an application for the liquidation
of hanarotelecom America with the U.S. state and federal authorities. Upon liquidation, we will
cease to have this authorization and our international common carrier services will be provided
through DVS, with which we have entered into an alliance agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Interconnection</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have entered into interconnection agreements that allow for interconnection of our
telecommunications facilities and those of other telecommunications operators. These
interconnection agreements allow our customers to connect to the networks of other
telecommunications operators and receive telecommunications services, such as local, long distance
and international call, Internet telephony, cellular phone call, personal communication and
Internet access services, through our network. Pursuant to the Telecommunications Business Law, a
telecommunications service provider is required to enter into interconnection arrangements with any
other telecommunications service provider that requests interconnection. In the event a dispute
arises between interconnecting parties, the Communications Commission is to act as the arbitrator.
In addition, the MIC issues guidelines regarding interconnection. The guidelines generally require
that interconnection charges be based on the rates set by the MIC after examining the costs to
regulated operators, such as KT and mobile service operators (such as SK Telecom,
</DIV>

<P align="center" style="font-size: 10pt">30
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">KT Freetel Co., Ltd. and LG Telecom Co., Ltd.), of carrying a call. The regulated operators
are required to calculate such costs every other year. The MIC determines the interconnection rate
after the MIC reviews the cost of KT and mobile phone service providers every other year. In July
2004, the MIC determined, for the 2004 to 2005 period, that the fixed line interconnection rate be
increased from Won 11.3 to Won 16.2 per 60 seconds and no interconnection fee be charged for a
certain portion of the land-to-land telephone calls switched between the networks of hanarotelecom
and KT.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have entered into interconnection agreements with all major telecommunications service
providers in Korea. The chart below sets forth the type and name of service providers with which
we have such agreements:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="52%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Type</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Name of Providers</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Local
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">KT; Dacom</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Domestic long distance
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">KT; Dacom; Onse Telecom; SK Telink</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">International
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">KT; Dacom; Onse Telecom; SK Telink</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Internet telephony
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">KT; Dacom; SK Telink; SK Networks; Dreamline</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Cellular
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">SK Telecom</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Internet access<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">KT; Dacom; Onse Telecom; SK Networks; Dreamline; EPN</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Personal communication service providers
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">KT Freetel Co., Ltd.; LG Telecom Co., Ltd.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;We will enter into an interconnection agreement for Internet access with Powercomm in the near
future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Korean Telecommunications Laws and Regulations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-left: 3%; margin-top: 6pt"><B><I>Overview</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Korea&#146;s telecommunications industry is subject to comprehensive regulation by the MIC pursuant
to, among others, provisions of the Telecommunications Basic Law, the Telecommunications Business
Law and the Radiowave Act (Law No.&nbsp;6197 of January&nbsp;21 2000, as amended) (collectively, and
including subordinate regulations promulgated thereunder, the &#147;Telecommunications Laws&#148;). In
addition to the Telecommunications Laws, industry participants are subject to other
telecommunications regulations and regulations under various laws of general application. The
Telecommunications Laws empower the MIC to regulate and supervise, among other things, entry into
the telecommunications industry, allocation of radio spectrum, the scope of permissible business of
telecommunications service providers, technologies used by telecommunications service providers,
rate-setting, deposit requirements, the focus and budget of research and development, user
protection and interconnection and facilities sharing between telecommunications service providers.
In addition, the MIC is in charge of and responsible for informatization, information and
communications industry, telecommunications services, radio and broadcasting, postal service and
postal finance.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-left: 3%; margin-top: 6pt"><B><I>Telecommunications Laws</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Telecommunications Basic Law and the Telecommunications Business Law,
telecommunications service providers are currently classified into three categories: NSPs, SSPs
and Value-added Service Providers, or VSPs. We are classified as an NSP and also registered as an
SSP. An NSP provides specified types of telecommunications services as stipulated under the
Telecommunications Business Law (&#147;Network Services&#148;) and as licensed by the MIC, in most cases with
its own telecommunications networks and related facilities. As an NSP, we have licenses to provide
local telephony services, 070 Internet telephony services, long distance and international
telephony services, leased line services (domestic and international) and Internet access services.
These licenses are for indefinite terms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Network services to be provided by an NSP include local, long distance and international
telephone services, subscribed telegraph services, leased line services, services through allocated
radio frequencies (including cellular communications services, paging services, PCS services,
IMT-2000 services
</DIV>

<P align="center" style="font-size: 10pt">31
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">and trunked radio system services), Internet access services and such other services as
designated by the MIC (including certain VoIP services). VSPs provide telecommunications services
other than those services specified for NSPs, such as data communications using facilities leased
from an NSP following notification to the MIC. The newest category of service providers, the SSPs,
is intended to occupy a middle ground between NSPs and VSPs. The Telecommunications Business Law
provides that there are three types of SSP licenses as follows:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>type 1 reseller licenses for entities that have their own switching facilities and
resell or provide the Network Services;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>type 2 reseller licenses for entities that do not have their own switching
facilities and resell the Network Services; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>intra-building telecommunications service provider licenses for entities that
provide telecommunications services within a specific building area through their own
facilities.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-left: 3%; margin-top: 6pt"><B><I>Ownership Restrictions</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the current Telecommunications Basic Law and the Telecommunications Business Law, an
NSP, such as hanarotelecom, must be an entity incorporated in Korea (other than the Government and
any municipal government) in order to qualify for a license from the MIC. In addition, the
Telecommunications Laws restrict the ownership of NSPs by certain shareholders. Ownership
interests in NSPs are subject to the following ownership restrictions:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a foreign government or a foreigner may not own more than 49.0% of the aggregate
number of the entity&#146;s issued and outstanding voting shares, including
stock-equivalents and investment securities having voting powers such as depositary
receipts. For this purpose, an entity whose voting shares are held by a foreigner or
a foreign government that, together with specially-related parties, is the largest
shareholder and holds 15.0% or more of the total number of voting shares issued and
outstanding, is also deemed a &#147;foreigner&#148;; provided, that if such entity owned by a
foreigner or a foreign government holds less than 1.0% shares in the relevant NSP, it
is not regarded as a &#147;foreigner.&#148; In the event a foreign government or a foreigner
owns shares in excess of the shareholding restriction, the holders of shares in excess
of such limitations cannot exercise the voting rights with respect to the shares
exceeding such limitations, and the MIC may require the
&#147;foreigner&#148; who has acquired shares in violation of such restriction, the violating NSP or the shareholder of the
violating foreign entity to take corrective measures to comply with such restriction
within a grace period of six months. The MIC may also impose on a non-compliant
violator a mandatory performance fee within 3/1000th of the purchase price of the
share per day (or up to Won 0.1&nbsp;billion for cases that do not relate to shareholding);
and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>under the Telecommunications Business Law, if an NSP that is subject to mandatory
interconnection requirement (currently, KT and SK Telecom), together with specially
related person(s), acquire shares in another NSP, which is subject to a mandatory
interconnection requirement, in excess of 5%, the acquiring NSP cannot exercise the
voting rights with respect to the shares exceeding such limitation, subject to certain
exceptions.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Telecommunications Business Law, the MIC may review whether any investment in, or
change in the control or business management of, an NSP by means of any of the following
transactions impairs national security, public interest, or social order:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>owning 15% or more of total outstanding shares of the NSP in concert with
specially-related person(s);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a change in the largest shareholder of the NSP;</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">32
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the NSP or its shareholder entering into an agreement with a foreign government or
a foreigner on important business management matters, such as the appointment of
representative directors or officers of the NSP, the transfer of the NSP&#146;s business or
engaging in a new Network Service by the NSP; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an agreement by shareholders of the NSP (none of which is the largest shareholder)
to exercise their voting rights in concert so that there is a de facto change in the
management of the NSP.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If any of the above events occur with respect to the NSP, the NSP or the shareholder of the NSP is
required to report to the MIC within seven days of the occurrence of such event.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In its implementing regulations, the MIC designated KT and SK Telecom (both currently
designated as dominant operators) as the carriers subject to the foregoing rules and the MIC will
set up a Public Interest Review Committee to implement the foregoing. If the MIC finds a
violation, it may order an amendment or suspension of the relevant contract, suspension of the
voting rights or the sale of shares. The MIC may also impose on a non-compliant violator a
mandatory performance fee of up to 3/1000th of the purchase price of the share per day (or up to
Won 0.1&nbsp;billion for cases that do not relate to shareholding).
</DIV>
<DIV align="left" style="font-size: 10pt; margin-left: 3%; margin-top: 6pt"><B><I>Authority of the MIC and the Communications Commission</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The MIC has the authority to require NSPs, as a condition to granting the license, to
contribute towards the Informatization Promotion Fund, a government-managed fund for national
research and development of telecommunications technology and related projects, pursuant to the
License Application Guidelines, a notification issued by the MIC. Currently, we are required to
contribute 0.5% of the total annual service revenues derived from our voice and leased line and
broadband services which are classified as facility-based telecom services in the event that we
have net income for the preceding year. The &#147;net profit&#148; which the MIC will use in its
determination of the amount of our contribution is calculated using MIC accounting standards which
differ in certain respects from Korean GAAP.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The MIC may revoke an NSP&#146;s license. The grounds for revocation include fraud in obtaining
the license, failure to perform the conditions imposed by the MIC upon issuance of the NSP license,
failure to comply with any corrective order issued by the MIC in connection with non-compliance
with foreign shareholding restrictions, failure to commence business within the time period
designated by the MIC, failure to abide by the standard terms and conditions for the services
either reported to or approved by the MIC and failure to comply with the Telecommunications Laws,
the Act on Information Communication Network Promotion and Information Protection, the
Informatization Promotion Law or any order issued under such laws. If an NSP wants to cease its
business (or any part of it) or dissolve, such NSP must obtain MIC approval. In addition, instead
of suspending its license, the MIC may impose fines against such telecommunications service
provider, subject to certain exceptions, of up to 3.0% of the entity&#146;s average sales revenues
generated from the service in violation of such regulation during the three years preceding such
violation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Communications Commission also has the authority to monitor unfair business practices as
specified in the Telecommunications Business Law by telecommunications service providers in
accordance with the Telecommunications Business Law. If an NSP or any telecommunications service
provider engages in such activities, the Communications Commission may order such
telecommunications service provider to take certain actions, including (1)&nbsp;separating the internal
organization of telecommunications service provider, (2)&nbsp;changing its internal accounting
regulations, (3)&nbsp;disclosing certain information regarding the services, (4)&nbsp;executing, performing
or amending an agreement between telecommunications service providers, (5)&nbsp;changing its articles of
incorporation, or the standard terms and conditions of services, (6)&nbsp;discontinuing violation of the
law, (7)&nbsp;making a public announcement of the fact that a corrective order was issued, (8)&nbsp;taking
measures necessary for the rectification of any violation, such as the removal of
telecommunications facilities which gave rise to the violation, and (9)&nbsp;other actions specified in
the Presidential Enforcement Decree. In addition, if the Communications Commission finds that a
service
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">provider has conducted unfair business activities, including the implementation of a pricing
structure that restricts fair competition or that is against the interests of service users, it may
order the service provider to take corrective measures or impose an administrative fine of up to
3.0% of the service provider&#146;s average annual revenues for the three years preceding the violation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Telecommunications Business Law, telecommunications service providers may request
other service providers to interconnect to their networks for the purpose of offering other
services. Telecommunications service providers may not, without any justifiable reason, refuse to
enter into such interconnection agreements with other telecommunications service providers
requesting such interconnection. In the event an agreement between the service providers is not
reached within 90&nbsp;days, either service provider becomes entitled to file an application for
mediation before the Communications Commission. We have entered into interconnection arrangements
with most major service providers in Korea, including KT, Dacom, Onse Telecom and other NSPs, and
expect that we will enter into more interconnection agreements as additional licenses for
telecommunications services are issued.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-left: 3%; margin-top: 6pt"><B><I>Designation of a Dominant Operator</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As an NSP, we must report to the MIC our standard terms and conditions of service containing,
among others, rates and the contractual terms for each type of service we provide. In addition, an
NSP that has a dominant market share for a specified type of service must obtain prior approval
from the MIC with respect to its proposed standard terms and conditions of service, including the
rate, if its revenues from such service for the previous year exceed a specific revenue amount set
by the MIC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each year, the MIC may designate, pursuant to regulations, the NSPs that require MIC approval.
Other than the market share and the market influence of the relevant NSP, the MIC may consider
such other factors as it may deem appropriate in making these designations. On June&nbsp;8, 2004, the
MIC designated the local telephone service of KT and the mobile service of SK Telecom as requiring
prior MIC approval. The MIC requires fees and charges, in terms of the methods of their
calculation, to be adequate, fair and objective. The MIC may order changes in the standard terms
and conditions, including rates, if it deems the terms to be unreasonable and against public
interest.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In June&nbsp;2005, the MIC designated KT as a dominant market operator for the market, taking into
account KT&#146;s market share exceeding 50%.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-left: 3%; margin-top: 6pt"><B><I>Licensing</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Telecommunications Business Law, the MIC promulgated a regulation specifying a
detailed standard of review, application method and application period for each new NSP license.
Upon receipt of the application, the MIC considers various factors in its approval process,
including reasonableness of the service provision plan, size of facilities for the services,
financial and technical soundness of the applicant, results of development of technology and plans
for new technological developments.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-left: 3%; margin-top: 6pt"><B><I>Frequency Allocation</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The MIC has the discretion to allocate and adjust the frequency band for each type of service.
Upon allocation of new frequency bands or adjustment of frequency bands, the MIC is required to
give a public notice. The MIC also regulates the frequency to be used by each radio station. We
have been allocated the frequency of 2.3 GHz band for 20 MHz downstream and upstream transmission
and the frequency of 26 GHz band for 360 MHz downstream and 150 MHz upstream transmission.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-left: 3%; margin-top: 6pt"><B><I>Bundling of Services</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Presidential Enforcement Decree of the Telecommunications Business Law currently prohibits
any telecommunications service provider from offering bundled sales of telecommunications services
or products that the MIC determines to be adverse to consumer interests. In making this
</DIV>

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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">determination, the MIC may weigh the advantages of cost-savings or increased convenience for
the consumers as a result of bundling against the disadvantages of any anti-competitive effects of
bundling. According to the Decree, commencing in March&nbsp;2007, only NSPs (including us), but not
non-NSP service providers, will be subject to such review by the MIC and potential bundling
prohibitions pursuant to this Decree.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-left: 3%; margin-top: 6pt"><B><I>Other Laws</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Companies that operate network facilities for cable TV transmission are required to register
with the MIC under the Broadcasting Act (Law No.&nbsp;6139 of January&nbsp;12, 2000, as amended). We are
registered as a service provider under this statute. However, as an NSP, we are not currently
permitted to provide broadcasting services under certain other laws and regulations, including the
Broadcasting Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Foreign Exchange Transaction Law, the Foreign Investment Promotion Law and their
regulations require companies, such as hanarotelecom, to obtain approval from, or file a report
with, a foreign exchange authority in connection with any foreign direct investment. The relevant
governmental authority may be the Ministry of Finance and Economy, or MOFE, The Bank of Korea or
the designated foreign exchange bank. The type of approval or report required depends on the type
of business engaged in by the investor and/or the amount of the investment being made.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-left: 3%; margin-top: 6pt"><I>Monopoly Regulation and Fair Trade</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we are deemed a market-dominating business entity, we may be subject to certain regulations
under the Monopoly Regulation and Fair Trade Act. In determining whether an entity is a
market-dominating business, the FTC reviews the entity&#146;s market share, the existence and severity
of barriers to entry to the market concerned, the relative size of the entity&#146;s competitors and
other factors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the case of abusive business practices by a market-dominating business entity, the FTC may
order such entity to cease and desist from such business practices, publicly announce that it has
engaged in abusive business practices and/or take other corrective measures it deems fit. The FTC
may also impose fines of up to 3% of the entity&#146;s average sales revenues during the three years
preceding the violation. In addition, a violation of the Monopoly Regulation and Fair Trade Act
can bring about criminal sanctions. The violating entity may be fined up to Won 0.2&nbsp;billion or its
representative(s) may receive sentences of imprisonment of up to three years, although imprisonment
is rarely, if ever, imposed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Monopoly Regulation and Fair Trade Law, a service provider that is found guilty of
horizontal collusion with other providers may be subject to fines of up to 10% of the total
revenues derived from the collusion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Intellectual Property</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of May&nbsp;31, 2006, we held 146 registered trademarks, 89 program copyrights, 40 registered
patents and two registered industrial design rights in Korea. As of May&nbsp;31, 2006, we also had 5
trademark applications and 467 patent applications (which includes 143 international applications
under the Patent Co-operation Treaty) pending at the Korea Industrial Property Office. While we
consider all of our intellectual property to be important, we do not consider any one or group of
patents, trademarks or industrial design rights to be so important that their expiration or
termination would materially affect our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>C. Organizational Structure</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of April&nbsp;1, 2001, we and our Korean affiliates have been designated as member companies of
a &#147;business group subject to restrictions on debt guarantees&#148; as well as a &#147;business group subject
to restrictions on mutual shareholding&#148; by the FTC based on the new criteria prescribed by the
amended Monopoly Regulation and Fair Trade Act. Under the amended Monopoly Regulation and Fair
Trade Act, a member company of both the &#147;business group subject to restrictions on debt guarantees&#148;
and the
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&#147;business group subject to restrictions on mutual shareholding&#148; is subject to, among others,
the following restrictions: subject to certain exceptions, such company (1)&nbsp;shall not acquire or
own shares of an affiliate company which acquires or owns its shares; nevertheless, for newly
designated companies, the application of this restriction is waived for one year from the date of
such designation; and (2)&nbsp;shall not provide payment guarantees with respect to loans extended by
certain Korean financial institutions for its domestic affiliates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table lists information concerning the significant subsidiaries and affiliates
of hanarotelecom:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Percentage of</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Ownership and</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Voting Interest</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>held by</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Jurisdiction of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>hanarotelecom as of</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Incorporation</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>May 31, 2006</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Hanaro Realty Development &#038; Management Co., Ltd</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Korea</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">99.99</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Hanaro T&#038;I</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="center">Korea</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99.99</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Hanaro Dream<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Korea</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57.02</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Hanaromedia<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Korea</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65.00</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>In July&nbsp;2004, we purchased 57.02% of Hanaro Dream&#146;s total issued and outstanding shares from
Dreamline and other major shareholders of Hanaro Dream.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>On March&nbsp;13, 2006, we purchased shares of CelrunTV for Won 5.5&nbsp;billion , and on May&nbsp;2, 2006,
acquired additional shares of CelrunTV for Won 6.5&nbsp;billion. CelrunTV changed its name to
hanaromedia, Inc.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We sold all of our shareholdings in two of our previous affiliates, Hanaro WEB(n)TV Co.,
Ltd. and Mediaholdings Co., Ltd. to the Joong-Ang MSO in March&nbsp;2005. In addition, in December
2004, we completed the liquidation of our previous affiliate, hanarotelecom America.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Also, we completed integration of Thrunet on January&nbsp;1, 2006 and acquisition of CelrunTV on
March&nbsp;13, 2006. CelrunTV changed its name to hanaromedia, Inc. and became an affiliated company of
hanarotelecom as of May&nbsp;3, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>D. Property, Plants and Equipment</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-left: 3%; margin-top: 6pt"><B><I>Facilities</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our principal fixed assets consist of transmission facilities and telecommunications equipment
and information centers located throughout Korea. We own two central telecommunications centers in
Seoul, for the purposes of managing our nationwide network. The area of each such center is
approximately 15,000 square meters. We also own four regional telecommunications centers in Busan,
Taegu, Kwang-ju and Taejeon, to manage the networks in those regions. The area in square meters of
such centers is approximately 5,900, 6,900, 8,400 and 4,300, respectively. Those centers are
equipped with exchange and transmission equipments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also have 34 exchange offices equipped with exchange equipments in 20 cities including
Seoul, Busan, Taegu, Taejeon and Kwang-ju. We own 31 of those offices and lease the remaining
three offices. We also have 38 transmission offices equipped with transmission equipments in 23
cities including Seoul, Busan, Taegu, Taejeon and Kwang-ju. We own 33 of those offices and lease
the remaining 5 offices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We lease our head office located in the Asia One Building in Yeongdeungpo-gu, Seoul.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Of the net book value of our total plant, property and equipment as of March&nbsp;31, 2006
(excluding construction in progress), transmission facilities and telecommunications equipment
represented 87.7%, buildings and real property represented 11.3% and other assets represented 0.9%.
As of March&nbsp;31, 2006, our fiber optic network consisted of 33,412 kilometers of owned and leased
lines.
</DIV>

<P align="center" style="font-size: 10pt">36
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that our existing facilities are adequate for current requirements and that
additional space can be obtained on commercially reasonable terms to meet future requirements.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-left: 3%; margin-top: 6pt"><B><I>Network</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our subscribers are connected to our network either through fiber optic lines to the
subscribers&#146; premises or through the use of HFC lines in areas in which we have built or leased
cable networks. We began delivery of commercial services through wireless last-mile connections in
Seoul in July&nbsp;2000.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-left: 3%; margin-top: 6pt"><I>Backbone Network</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our high-speed broadband Internet access services and our telephony services are currently
provided over our fiber optic backbone network and last-mile connections consisting of 20,258
kilometers of owned and 9,487 kilometers of leased fiber optic cable. Through the merger with
Thrunet, we have been able to significantly increase our owned or leased fiber optic cables. Our
backbone network is a WDM-based ring type backbone with duplicate routers to ensure high system
reliability. We utilize advanced switches and other technologies in our backbone network to ensure
high quality and fast transmission. Our system utilizes technologies that offer the following
advantages over traditional networks:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Deployment of Gigabit IP Network over WDM Backbone Systems</I>. Our data network utilizes Gigabit
IP routers over 800 Gbps and 40 Gbps wavelength division multiplex, or WDM, systems, which offer
greater transmission speed capability than traditional backbone network. The maximum transmission
speed currently is 10 Gbps. We also deploy ATM switches which aggregate ADSL and dedicated access
lines.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>CCS7 Signaling Method</I>. Our voice network utilizes the CCS7 signaling method, which allows us
to offer advanced value-added services, such as fixed-line number portability, and to process our
calls more efficiently.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>V5.2 Protocol to Increase Voice Network Efficiency</I>. We were the first in Korea to provide
services using the V5.2 protocol. KT is using this protocol in a small number of apartment
complexes. This protocol allows us to efficiently connect multiple subscribers to our fiber optic
network through a single fiber optic connection by using remote terminals that are installed at the
subscriber&#146;s premises. Our network lines have been installed using existing infrastructure,
including subway routes and electrical poles, in order to minimize the cost of our roll-out. Our
backbone network has been built using equipment based on a number of technologies developed by
third party vendors, including Lucent Technologies, Cisco Systems, Alcatel and NEC Corporation. We
believe that telecommunications network technologies have been standardized and are generally
compatible with each other, so that equipment and hardware provided by different vendors can be
used within an integrated network and we are not dependent on any one particular vendor for the
procurement of important network equipment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have our own POP facilities in Palo Alto and Los Angeles in the United States and in
London, United Kingdom. Our backbone network has direct links of 10 Gbps to these POP facilities
in the United States and the United Kingdom via our own cable capacity and leased circuit. In
addition, we are working with all Korean Internet exchanges and major ISPs for domestic Internet
interconnection, including DACOM IX, Korea-Internet Neutral Exchange and KT-IX.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have the right to use the following international leased lines on various submarine cables
connecting the United States, Asia and certain parts of Europe until the end of the economically
useful life of such cables.
</DIV>

<P align="center" style="font-size: 10pt">37
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Bandwidth Capacity</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Connecting Points</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Providers</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Quantity</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Acquisition Cost</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">(billions of Won or</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">millions of U.S. dollars)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Korea &#151; US</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Iljin C2C Ltd.; Onse Telecom; Asia</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">30 x STM-1</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$49</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Global Crossing; Dacom Crossing;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">6 x STM-4</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Flag Telecom; Dacom</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Korea &#151; Japan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Iljin C2C; Teleglobe Dacom;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">14 x STM-1</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$19.8</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Teleglobe Onse Telecom</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1 x E-1</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Korea &#151; Hong Kong</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Onse Telecom</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">19,158km</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$1.2</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">HGC</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$2.5</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Japan &#151; US</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Teleglobe; Metromedia Fiber Network</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">3 x STM-1</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$1.3</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Japan &#151; US</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Cable Network</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2 x STM-1</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$5.8</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Korea &#151; Vietnam</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Dacom</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2 x Half E-1</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Won0.2</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Korea &#151; Belgium</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Dacom</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2 x Half E-1</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Won0.2</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Korea &#151; Singapore</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Iljin C2C</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1 x Half STM-1</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$0.4</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Korea &#151; China</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Enterprise Networks</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1 x Half STM-1</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$1.0</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">US &#151; UK</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">France Telecom; British Telecom;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4 x STM-1</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$0.9</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Onse Telecom; FLAG Telecom</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1 x DS-3</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1 x STM-4</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Each STM-1 represents a bandwidth capacity of 155 Mbps.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Each E-1 represents a bandwidth capacity of 2 Mbps.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Each STM-4 represents a bandwidth capacity of 622 Mbps.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, we have agreements with foreign ISPs, such as Level3, Verio, AboveNet
Communications, Inc., AT&#038;T and Teleglobe, for global Internet Protocol transit services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our backbone network has been deployed in 83 cities and 58 districts, including Seoul, Busan,
Inchon, Taegu and Ulsan. Each of the ten local loops is interconnected by 800 Gbps and 40 Gbps WDM
backbone networks.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have expanded our voice network to 52 cities for PSTN and VoIP services. PSTN is in
service in 32 cities and districts, and VoIP in 52 cities and 4 districts. After taking into
account the overlapping coverage areas between the two services, our voice services are available
in 52 cities and 4 districts in total.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-left: 3%; margin-top: 6pt"><I>Fiber to the Office and the Curb</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We connect subscribers in large commercial buildings and apartment complexes with over 150
units to our backbone network through fiber optic connections directly to the premises. These
subscribers have three basic options in the mode of service to be used to secure access to our data
network.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>DSL</I>. Subscribers in large apartment complexes and buildings can receive our services by
installing ADSL or VDSL modems in their offices or homes that allow our services to be provided
through existing copper lines within the building. Our subscribers&#146; premises are then connected to
our backbone network through fiber optic last-mile connections. Single residential households and
small apartment buildings located within a one kilometer radius of certain of these large buildings
can also receive DSL services through copper connections we install from the remote terminals
located in the large buildings. These additional services are provided in order to maximize the
return on expensive remote terminals and other equipment installed in connection with our fiber
optic connection services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Ethernet (LAN)</I>. In August&nbsp;2001, we introduced the &#147;e-Valley&#148; service, which connect
subscribers to a remote router in each apartment complex via a LAN cable instead of copper wire.
The remote router is, in turn, connected to our backbone network through fiber optic cable. Our
fiber optic LAN service operates at a maximum speed of 100 Mbps. As of March&nbsp;31, 2006, we were
providing e-Valley service to 2,612 apartment complexes.
</DIV>


<P align="center" style="font-size: 10pt">38
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">






<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Internet Direct service</I>. Large corporate subscribers often find dedicated line service to be
the most cost effective means of securing high-speed data transmission capability. Our dedicated
line service, which we call &#147;Internet Direct&#148; service, is provided through our ATM-based network
and Gigabit routers at maximum speeds of up to 10 Gbps.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Hybrid Fiber Coaxial</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently provide our cable modem high-speed Internet access through hybrid fiber coaxial
connections in 118 service areas. These HFC connection services are provided over our own cable
network in 50 service areas, Powercomm&#146;s cable network in 62 service areas and other cable
television network system operators&#146; cable networks in 55 areas. The approximate number of homes
within these areas is 9.6&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have agreements with 80 (including 50 Ros and 30 SOs) cable television network system
operators in 55 service areas as of March&nbsp;31, 2006. Each of these cable television network system
operators is responsible for maintaining subscriber lines and subscriber relationships within its
service area. The cable television network system operators in the service areas in which we own a
network also provide cable television services to subscribers. Most of the agreements are for
three to five year terms that are automatically renewed absent termination by either party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The head-end of each system operator is connected to our regional data center at a maximum
speed of 1 Gbps, either through self-constructed fiber optic lines or through lines leased from
other telecommunications companies. We currently provide services using HFC lines at a maximum
speed of ten Mbps downstream and 600&#151;700 Kbps upstream. As of March&nbsp;31, 2006, our HFC cable
network covered 9,566,946 households and 2,136,077 subscribers were provided with our services
through HFC connections. As of March&nbsp;31, 2006, our network was connected to 3,509 (including
Thrunet&#146;s network) cells through HFC connections.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Wireless Connections</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also provide the use of wireless last-mile connections to our fiber optic network using
BWLL and WLAN technologies. WLAN connection equipment and infrastructure are easier and quicker to
install than wire-line connections to our backbone network.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Services using B-WLL are transmitted at a maximum speed of 8 Mbps. As of December&nbsp;31,2005,
our network was connected to 630 buildings through B-WLL connections. The number of buildings
connected to our B-WLL decreased because of a subscriber decrease. Our WLAN services allow
Internet access through mobile devices equipped with a LAN card for users within the coverage of
our access points. Internet access services using WLAN are transmitted at a maximum speed of 11
Mbps. We currently provide WLAN services in approximately 189 access point areas across Korea,
including high traffic areas such as hotels, subway stations, shopping malls, colleges and fast
food stores.
</DIV>
<DIV align="left">
<A name="106"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;4A. Unresolved Staff Comments.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>
<DIV align="left">
<A name="107"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;5. Operating and Financial Review and Prospects.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>The following discussion is based on information derived from our consolidated financial
statements. Our consolidated financial statements have been prepared in accordance with Korean
GAAP, which differ in significant respects from U.S. GAAP. Our consolidated financial statements
for the years ended December&nbsp;31, 2003, 2004 and 2005 have been reconciled to U.S. GAAP (see note 28
to our</I>
</DIV>

<P align="center" style="font-size: 10pt">39
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>consolidated financial statements included in this Annual Report). The following discussion
also contains forward-looking statements that involve risks and uncertainties. Our actual results
could differ materially from those anticipated in these forward looking statements as a result of
certain factors, including those set forth under &#147;Item&nbsp;3.D. Risk Factors&#148; and elsewhere in this
document. You should read the following discussion together with our audited consolidated
financial statements and the related notes for the years ended December&nbsp;31, 2003, 2004 and 2005,
included in this Annual Report.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>A. Operating Results</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Overview</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We offer high-speed broadband Internet access, voice, leased line and IDC services in Korea.
We are the second largest provider of broadband Internet access in Korea and our network covers
approximately 80.6% of households in Korea as of April&nbsp;30, 2006. We offer broadband Internet
access service utilizing DSL technology, cable modem technology, B-WLL and WLAN. Our voice service
comprises local, domestic long distance, international long distance and VoIP services. We also
provide leased line services and operate an Internet data center for corporate customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table indicates the percentage of revenue for the several segments of our
operations:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Year Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Revenue:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Broadband</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">68.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">67.6</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Voice</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Leased Line</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our broadband Internet access business has been our largest business segment and has
contributed the vast majority of our operating income to date. Our market share of Korean
broadband Internet access subscribers was 22.7% as of December&nbsp;31, 2005, but as a result of our
merger with Thrunet on January&nbsp;1, 2006, our market share increased to 28.5% as of April&nbsp;30, 2006.
We provide broadband Internet access through DSL services utilizing our fiber optic network,
through cable modem access technology, and through wireless access via B-WLL and WLAN. As of April
30, 2006, we had a 6.9% share of the local telephony market in Korea, KT, the dominant operator in
the local telephony market, had a 92.9% market share and Dacom, which commenced its commercial
local telephony services in January&nbsp;2005, had a 0.2% market share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our broadband Internet access services are provided over our fiber optic backbone network and
last-mile connections, consisting of 20,258 kilometers of owned and 9,487 kilometers of leased
fiber optic cable as of April&nbsp;30, 2006. In order to maintain the customer base and achieve the
targeted synergies following the merger with Thrunet, we have focused on increasing the portion of
our owned access network and, as of April&nbsp;30, 2006, have shifted approximately 460,000 subscribers,
who were previously connected through leased last-mile connections, to our owned network.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2004, we commenced providing VoIP services as part of our local telephony service
offerings. We have recently focused on marketing our VoIP services to the new customer base
acquired through our merger with Thrunet. As a result of such efforts, the number of local
telephony service lines as of December&nbsp;31, 2005 increased by 107,844 compared to December&nbsp;31, 2004,
including an increase of 83,526 in VoIP lines. At the end of 2005, however, we elected to modify
the method in accounting for the number of local telephony service lines from the number of
telephone numbers to the number of billing accounts, which reduced the number of service lines by
approximately 40,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The competitive environment in the industry in which we operate has intensified as Powercomm
began to provide retail broadband Internet access service from September&nbsp;2005 and launched
aggressive marketing campaigns to acquire subscribers. We expect competition may continue to
intensify in the
</DIV>

<P align="center" style="font-size: 10pt">40
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">future, and may need to increase our marketing expenses to retain our customer base. In that
case, our operating income may be adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Significant Factors Affecting Our Results of Operations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Factors Directly Affecting Revenues</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our service revenues are driven primarily by subscriber growth and retention, usage and prices
charged for the services we offer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Subscriber Growth</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Broadband</I>. During our first several years of operation from 1999 to 2002, our results in the
broadband Internet access area were driven by rapid growth in number of subscribers for these
services. The compound average growth rate in broadband subscribers during this period was 204%.
Since that time, our rate of broadband subscriber growth has slowed. The broadband penetration
rate in Korea is among the highest in the world; according to data derived from the MIC, the
broadband penetration rate (as a percentage of Korean households with broadband Internet access)
was 77% as of December&nbsp;31, 2005. The relatively high level of penetration suggests a more moderate
growth trend going forward. Our revenue growth in this area in the future will depend on retaining
our existing customers as well as the customers acquired through our merger with Thrunet, and on
increasing the usage of our services through adding or improving value-added services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Voice</I>. Voice subscriber growth has increased significantly in 2004 due to the regulatory
change permitting fixed-line number portability and our consequent marketing efforts. Although the
growth rate has decreased, the overall increase in the number of voice subscribers continued in
2005. We believe the new customer base acquired through our merger with Thrunet will offer us
additional opportunities to market our bundled broadband Internet access and voice services and
increase our voice subscribers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Revenue per Subscriber</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our revenue per subscriber of broadband services has declined over the past several years.
The primary factors contributing to this trend are (1)&nbsp;revenue levels among long-term subscribers
declining slightly due to the impact of discounts provided in connection with such customers
shifting into longer term (one year or longer) contracts, (2)&nbsp;slower increases in numbers of
subscribers yielding fewer installation and connection charges than in years of rapidly increasing
subscriber bases and (3)&nbsp;the increasing proportion of subscribers who are exempt from modem rental
fees after using our services over three years. Our average revenue per subscriber in voice
services decreased though 2004 due to rapid growth in the total number of subscribers and the
larger proportion of lower usage subscribers. In 2005, however, average revenue per subscriber
began to recover mainly due to an increase in the number of subscribers using our voice services as
their primary phone service.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Competition and Pricing</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since our inception, we have been operating in a competitive environment featuring a dominant
operator, KT, with a majority or significantly greater market share in both the broadband Internet
access market (49.9% versus our 28.5% share as of April&nbsp;30, 2006, according to the MIC) and the
local telephony market (92.9% versus our 6.9% share as of April&nbsp;30, 2006, according to the MIC).
KT has significantly greater financial resources than we do, and has been aggressively upgrading
its broadband offerings in the past year. In the broadband Internet access market, in addition to
KT, we face competition from Powercomm, which began to provide retail broadband Internet access
service from September&nbsp;2005, Onse Telecom Co., Ltd. and a variety of cable service operators. As a
result, pricing competition in our market is likely to continue to be intense and our ability to
implement price increases or to avoid price decreases may be limited. In the local telephony
market, although KT is constrained in its pricing flexibility by its &#147;dominant operator&#148; status
(see &#147;&#151;Significant Factors Affecting Our Results of Operations&#151;Extensive
</DIV>

<P align="center" style="font-size: 10pt">41
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Governmental Regulation&#148;), we are effectively constrained in our ability to increase prices by
KT&#146;s dominant position.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Customer Churn</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Managing our customer churn is a significant business objective. Customer churn is a measure
of the number of customers who stop using our services. We continue to focus on improving our
customer services and enhancing and expanding our service offerings to existing customers in an
effort to manage our customer churn rate. We have implemented quality improvements such as
increasing broadband Internet access speed and expanding the coverage of fiber optic LAN service,
which offers Internet access transmission speeds of up to 100 Mbps, in apartment complexes. In
addition, we have promoted conversion of non-contract subscribers to contract subscribers and are
developing differential customer management programs such as customer relationship management,
commonly referred to as &#147;CRM,&#148; a data analysis program designed to capture more customer usage data
and enable us to tailor packages, features and promotions to customers&#146; preferences. Our average
monthly churn rate increased slightly to 1.8% for 2005 from 1.7% for 2004 as a result of increased
competition following our merger with Thrunet and the launch of retail broadband Internet access
service by Powercomm in September&nbsp;2005. Our average monthly churn rate for the first quarter of
2006 stabilized at around 2.55% compared to the average monthly churn rate of 2.8% on a simple
combined basis for us and Thrunet.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Extensive Governmental Regulation</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Government has played a very active role in the development of the telecommunications
industry in Korea, primarily through regulation by the MIC. The MIC is responsible for licensing
(including granting licenses to utilize new technologies), competitive practices, interconnection
rates, tariff regulation, technological choices and levels of foreign investment, among others.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Among the centerpieces of the MIC&#146;s regulatory regime is its monitoring and control of pricing
policies. KT has been designated as the &#147;dominant operator&#148; of local telephony services in Korea.
The MIC has the authority to review and reject pricing proposals by the dominant operator. Thus,
we believe the potential market power of KT, at least as it relates to pricing, is restrained. In
June&nbsp;2005, the MIC designated KT as the dominant operator in the broadband Internet access market.
Although our market share has increased to 28.5% as of April&nbsp;30, 2005 through our merger with
Thrunet, we do not believe we will be designated as the dominant operator given our small market
share compared to that of KT. The nature and content of new regulations will continue to affect
our operations. See also &#147;Item&nbsp;4.B. Business Overview&#151;Korean Telecommunications Laws and
Regulations,&#148; &#147;Item&nbsp;4.B. Business Overview&#151;Recent Acquisitions and New Services&#148; and &#147;Item&nbsp;3.D.
Risk Factors&#151;Risks Related to the Telecommunications Industry and Our Business&#151;The Government has
had, and continues to have, significant control and influence over the development of the
telecommunications industry in Korea.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Rapid Technological Change</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The telecommunications industry is subject to rapid and ongoing technological change. Due to
the rapidly changing technological capabilities necessary to remain competitive, we may be required
to incur substantial capital expenditures to meet these requirements. The convergence of various
technologies competing to provide similar or related services may also dictate technological change
and attendant expenditure (if, for example, one technology offers a combination of benefits that
prove more attractive to subscribers than our then-current technology). See &#147;Item&nbsp;3.D. Risk
Factors&#151;Risks Related to the Telecommunications Industry and Our Business&#151;The telecommunications
industry is capital intensive and subject to rapid changes in technology.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Critical Accounting Estimates and Judgments</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our financial statements are prepared in accordance with Korean GAAP. The preparation of
these financial statements requires management to make estimates and judgments that affect the
reported
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">amounts of assets, liabilities, revenue and expenses as well as the disclosure of contingent
assets and liabilities. Management bases its estimates and judgments on historical experience and
other factors that are believed to be reasonable under the circumstances. We believe the following
are among our critical accounting policies:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Allowance for doubtful accounts</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We maintain an allowance for doubtful accounts for estimated losses, which result from the
inability of our customers to make the required payments. We base our allowance on the likelihood
of recoverability of accounts receivable based on past experience and taking into account current
collection trends that are expected to continue. If economic or specific industry trends worsen
beyond our estimates, actual losses could exceed estimated losses, and we would need to increase
our allowance for doubtful accounts by recording additional expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Estimated useful lives of property and equipment</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The useful lives are estimated at the time the asset is acquired and are based on historical
experience with similar assets, as well as taking into account anticipated technological or other
changes. If technological changes were to occur more rapidly than anticipated or in a different
form than anticipated, the useful lives assigned to these assets may need to be shortened,
resulting in the recognition of increased depreciation expense in future periods. Alternatively,
these types of technological changes could result in the recognition of an impairment charge to
reflect the write-down in value of the asset. We review these types of assets for impairment
annually, or when events or circumstances indicate that the carrying amount may not be recoverable
over the remaining lives of the assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We changed the useful lives of certain types of tangible assets, effective from January&nbsp;1,
2004, to more accurately reflect our own experience as well as the rapidity of technological change
in the telecommunications industry. These changes increased our depreciation expense by Won 8.0
million for the fiscal year ended December&nbsp;31, 2004. The changes in estimated useful lives were:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Previous useful lives</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Revised useful lives</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Buildings and structures.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">50&nbsp;years
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">40&nbsp;years</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Machinery (duct lines).
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">8&nbsp;years
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">15&nbsp;years</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Machinery (terminal equipment)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">8&nbsp;years
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">6&nbsp;years</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Vehicles and other.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5-8&nbsp;years
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4&nbsp;years</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, after a review by management of equipment values in 2004, we determined that
certain equipment had become obsolete or had significantly deteriorated and wrote off Won 20.7
billion of such equipment in 2004. As a result of a further review by management, we have written
off Won 60.6&nbsp;billion of equipment in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Impairment of investments in non-listed equity securities</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have investments in non-listed equity securities that are stated at acquisition cost. If
we determine that a decline in the net asset value below the book value of an investee is temporary
and recoverable, such unrecognized valuation loss is not reflected as a reduction of shareholders&#146;
equity. If the net asset value of an investee declines compared to the acquisition cost and is not
expected to recover, the carrying value of the non-listed equity security is adjusted to the net
asset value, with the resulting valuation loss charged to current operations. As part of this
evaluation, we consider the investee&#146;s results of operations, the investee&#146;s performance forecast
and general market conditions. If economic or specific industry trends worsen beyond our
estimates, valuation losses previously determined to be recoverable may need to be charged as a
valuation loss in current operations.
</DIV>

<P align="center" style="font-size: 10pt">43
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Impairment of goodwill</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We record the excess of acquisition cost over the fair value of net identifiable assets
acquired that are related to entities being consolidated as goodwill, which is amortized on a
straight-line base over its estimated economic useful life.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We review goodwill for impairment whenever events or changes in circumstance indicate that the
carrying amount may not be recoverable. In addition, we evaluate our goodwill for impairment each
year as part of our annual forecasting process. An impairment loss will be recognized when the
carrying amount of goodwill exceeds estimated discounted future cash flows expected from the
entities that are being consolidated and its eventual disposition is less than its carrying amount.
As a result of an impairment test, we have impaired Won 79.6&nbsp;billion of intangibles (including
goodwill) in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>U.S. GAAP Reconciliation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2004, we recorded net income of Won 14.8&nbsp;billion under U.S. GAAP compared to net income
of Won 13.0&nbsp;billion under Korean GAAP, primarily because of the different accounting treatment of
development costs, interest capitalization and amortization of goodwill and other GAAP differences.
In 2005, we recorded a net loss of Won 203.2&nbsp;billion under U.S. GAAP compared to a net loss of
Won 209.3&nbsp;billion under Korean GAAP, primarily because of the different accounting treatment of
development costs, interest capitalization and amortization of goodwill.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholders&#146; equity under U.S. GAAP is higher than that under Korean GAAP by Won 23.7
billion and Won 28.7&nbsp;billion at December&nbsp;31, 2004 and 2005, respectively, primarily as a result
of:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151; the difference in the treatment of licensing costs;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151; the difference in the treatment of interest capitalization;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151; the difference in the treatment of loans to employees;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151; the difference in the treatment of development costs; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151; the difference in the treatment of goodwill.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Earnings per share under U.S. GAAP was higher than earnings per share under Korean GAAP for
2004 by Won 36 and loss per share under U.S. GAAP was higher than loss per share under Korean
GAAP for 2005 by Won 426 because the calculation of earnings per share under U.S. GAAP reflects
the effect of the reverse stock split that took place on May&nbsp;3, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Results of Operations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Year ended December&nbsp;31, 2005 compared to year ended December&nbsp;31, 2004</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Operating Revenues</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our total revenue for the year ended December&nbsp;31, 2005 was Won 1,589.3&nbsp;billion, an increase
of Won 139.7&nbsp;billion, compared to total revenue of Won 1,449.6&nbsp;billion in 2004. The increase
in total revenue in 2005 was primarily due to a Won 89.0&nbsp;billion increase in broadband revenue
attributable to Thrunet after the acquisition, and a Won 84.1&nbsp;billion increase in voice revenue
from Won 291.2&nbsp;billion in 2004 to Won 375.3&nbsp;billion in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table provides revenue data for the several segments of our operations:
</DIV>

<P align="center" style="font-size: 10pt">44
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Year Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left"><B>Revenue:</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">(billions of Won)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Broadband</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">985.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">1,074.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Voice</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">291.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">375.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Leased Line</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">133.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">1,449.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">1,589.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Broadband revenues for 2005 increased by Won 89.0&nbsp;billion compared to Won 985.4
billion in 2004. The increase is primarily attributable to additional revenues from Thrunet of
Won 145.4&nbsp;billion after the acquisition. Without the positive effect attributable to Thrunet,
our broadband revenues decreased from Won 985.4&nbsp;billion in 2004 to 937.9&nbsp;billion in 2005 as a
result of increased competition following our acquisition of Thrunet and the launch of Powercomm&#146;s
services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Voice revenues increased primarily due to (1)&nbsp;the continued growth in voice subscribers, (2)
the re-categorization of revenues relating to VoIP services into voice revenues from other revenues
in accordance with the MIC policy announced in December&nbsp;2004, and (3)&nbsp;the effect of recognizing a
full year of revenues from our domestic long distance telephony services and international long
distance telephony services, which were commercially launched in July&nbsp;2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other revenues for 2005 decreased to Won 95.5&nbsp;billion compared to Won 133.2&nbsp;billion for
2004. The decrease was primarily due to the re-categorization of revenues relating to VoIP
services into voice revenues from other revenues.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Operating Expenses</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our total operating expenses for the fiscal year ended December&nbsp;31, 2005 were Won 1,550.8
billion, an increase of Won 215.2&nbsp;billion, compared to total operating expenses of Won 1,335.6
billion in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table presents significant accounts of operating expenses:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Year Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">(billions of Won)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Salaries and wages</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">103.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">122.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for severance indemnities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Welfare</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Rent</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Taxes and dues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">442.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">498.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Advertising</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ordinary research and development cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Utilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Telecommunication equipment lease expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">140.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">164.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bad debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Maintenance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales commissions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">178.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">249.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interconnection charges</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">142.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">164.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commissions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outsourcing services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">1,335.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">1,550.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The increase in operating expenses in 2005 was primarily due to increases of Won 71.4
billion in sales commissions, Won 55.8&nbsp;billion in depreciation and Won 23.6&nbsp;billion in
telecommunications equipment lease expenses. Our acquisition of Thrunet increased operating
expenses by Won 151.2&nbsp;billion, including increases in sales commissions, depreciation and
telecommunications equipment lease expenses of Won 45.7&nbsp;billion, Won 33.5&nbsp;billion and Won
38.3&nbsp;billion, respectively. In addition, our sales
</DIV>

<P align="center" style="font-size: 10pt">45
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">commissions increased as we responded to heightened competition to retain our subscriber base.
Telecommunications equipment lease expenses also increased Won 23.6&nbsp;billion, mainly due to the
additional Won 38.3&nbsp;billion of expenses attributable to our acquisition of Thrunet partially
offset by our efforts to reduce such expenses by increasing our owned last-mile network.
Interconnection charges increased Won 22.7&nbsp;billion to Won 164.7&nbsp;billion for 2005 as a result of
increased call traffic and subscribers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These increases were partially offset by decreases in (1)&nbsp;bad debt expenses resulting from our
efforts to have subscribers consent to automatic bank withdrawals to pay monthly fees and (2)
advertising expenses as we shifted our marketing efforts from trying to obtain new customers
through general advertisements to retaining existing customers and target marketing our voice
services to our broadband subscribers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Operating Income</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our total operating income for the year ended December&nbsp;31, 2005 was Won 38.5&nbsp;billion, a
decrease of Won 75.4&nbsp;billion, compared to a total operating income of Won 113.9&nbsp;billion in
2004. The decrease in our total operating income in 2005 was primarily due to increased expenses
attributable to our acquisition of Thrunet and increased marketing expenses to retain our
subscribers. For segment information on operating income, see note 24 to our consolidated
financial statements for the years ended December&nbsp;31, 2005 and 2004 included in this Annual Report.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Non-Operating Income</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our non-operating income for the year ended December&nbsp;31, 2005 was Won 83.2&nbsp;billion, an
increase of Won 21.0&nbsp;billion, compared to non-operating income of Won 62.2&nbsp;billion in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table presents data for non-operating income:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Year Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left"><B>Non-Operating Income:</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">(billions of Won)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">18.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">16.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on disposal of short-term investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on disposal of long-term investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on disposal of investment securities using the equity method</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on disposal of property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on foreign currency transactions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on foreign currency translation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on early redemption of debentures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on valuation of forward exchange contract</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on transaction of forward exchange contract</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">62.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">83.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The increase in non-operating income in 2005 was primarily due to gain on disposal of
investment securities using the equity method of Won 25.4&nbsp;billion relating to our sale of shares
in Hanaro Web&#168;&#218;TV and Media Holdings. Our gain on foreign currency translations decreased by Won
22.1&nbsp;billion from Won 33.8&nbsp;billion in 2004 to Won 11.7&nbsp;billion in 2005 as the Korean Won
appreciated less against the U.S. dollar in 2005 than it did in 2004. With the appreciation of the
Korean Won, our gain on foreign currency transactions in 2005 increased by Won 7.5&nbsp;billion
compared to 2004, mainly due to increased debt repayment, including through the refinancing of our
senior secured credit facility. The Korean Won has continued to appreciate against the U.S.
dollar from Won 1,192.60 to U.S.$1.00 as of December&nbsp;31, 2003 to Won 1,035.00 to U.S.$1.00 as
of December&nbsp;31, 2004, and to Won 1,004.50 to U.S.$1.00 as of December&nbsp;31, 2005.
</DIV>

<P align="center" style="font-size: 10pt">46
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Non-Operating Expenses</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our non-operating expenses for the year ended December&nbsp;31, 2005 were Won 313.5&nbsp;billion, an
increase of Won 151.2&nbsp;billion, compared to non-operating expenses of Won 162.3&nbsp;billion in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table presents data for non-operating expenses:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Year Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left"><B>Non-Operating Expenses:</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">(billions of Won)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">100.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">98.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Asset Backed Securities payable expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on foreign currency transactions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on foreign currency translation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on disposal of short-term investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on disposal of long-term investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on valuation of trading securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impairment loss on short-term investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impairment loss on long-term investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Donations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on early redemption of debentures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on early redemption of long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on redemption of long-term obligation under capital leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on valuation using the equity method</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on disposal of property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on disuse of property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on valuation of forward exchange contract</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on transaction of forward exchange contract</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impairment loss on intangibles</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other bad debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-operating expense&#151;other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">162.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">313.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The increase in non-operating expenses in 2005 was primarily due to (1)&nbsp;an increased
level of loss on disuse of property and equipment, (2)&nbsp;impairment loss on intangibles when we
acquired Thrunet, and (3)&nbsp;early retirement allowance payments in connection with our restructuring
initiatives in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss on disuse of property and equipment increased to Won 60.6&nbsp;billion in 2005 mainly due to
the Won 29.0&nbsp;billion loss on disuse of Thrunet property and equipment and the increased loss on
disuse of our own property and equipment as we discontinued the use of such property and equipment
in connection with our network upgrades.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recorded Won 122.4&nbsp;billion of goodwill for the Thrunet shares that we acquired in 2005.
At the end of 2005, we recognized an impairment loss of Won 79.2&nbsp;billion with respect to such
goodwill. After the amortization of goodwill in 2005 and the impairment loss, we had Won 32.9
billion of goodwill relating to Thrunet as of December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In late 2005, we implemented an early retirement program as part of our efforts to improve our
operating efficiency. Through such measure, we reduced the combined head count of us and Thrunet
by about 260, or 16%. We paid early retirement allowance in connection with such measure of Won
21.9&nbsp;billion. We expect that reduction in head count through the early retirement program will
have a positive impact on salaries and wages.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Net Income (Loss)</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result of the various factors discussed above, we recorded a net loss of Won 209.3
billion for the year ended December&nbsp;31, 2005 compared to net income of Won 13.0&nbsp;billion for the
same period in 2004.
</DIV>

<P align="center" style="font-size: 10pt">47
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Year ended December&nbsp;31, 2004 compared to year ended December&nbsp;31, 2003</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Operating Revenues</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our total revenue for the year ended December&nbsp;31, 2004 was Won 1,449.6&nbsp;billion, an increase
of Won 66.1&nbsp;billion, compared to total revenue of Won 1,383.5&nbsp;billion in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table provides revenue data for the several segments of our operations:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Year Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left"><B>Revenue:</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">(billions of Won)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Broadband</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">982.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">985.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Voice</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">249.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">291.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Leased Line</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">133.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">1,383.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">1,449.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The increase in total revenue in 2004 was primarily due to an increase in revenue of
Won 42.2&nbsp;billion from our voice services from Won 249.0&nbsp;billion in 2003 to Won 291.2&nbsp;billion
in 2004. The primary reason for the increase in voice revenues was the net addition of 411,892
subscribers, compared to the level as of December&nbsp;31, 2003 (including additions of 149,733 during
the third quarter of 2004). This was due to an extensive marketing campaign targeted at Seoul and
Busan in the third quarter of 2004 seeking to capitalize on fixed-line number portability. VoIP
also contributed to the growth of revenues from voice services. This increase resulted from (1)
the improved quality of VoIP vis-&#224;-vis standard Public Switched Telephone Network, commonly
referred to as &#147;PSTN,&#148; telephony and (2)&nbsp;a marketing campaign aimed at promoting this new service.
The significant percentage growth, however, represents an increase over a very small base.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Broadband revenues for 2004 increased slightly by Won 2.7&nbsp;billion compared to Won 982.7
billion in 2003. The slight increase is primarily attributable to an increase in the number of
active subscribers. In effect we recorded an increase of 23,171 subscribers as of December&nbsp;31,
2004 compared to the corresponding date in 2003 as we deactivated approximately 240,000 inactive
subscribers in the fourth quarter of 2003. As noted elsewhere, we have focused on the retention of
customers (reflected in lower churn rates) and have been able to maintain a relatively stable cash
flow from our broadband Internet access operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other revenues for 2004 increased to Won 133.2&nbsp;billion compared to Won 113.8&nbsp;billion for
2003 primarily due to increased sales volume of VoIP services and PABX services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Operating Expenses</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our total operating expenses for the fiscal year ended December&nbsp;31, 2004 were Won 1,335.6
billion, an increase of Won 22.8&nbsp;billion, compared to total operating expenses of Won 1,312.8
billion in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table presents significant accounts of operating expenses:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Year Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">(billions of Won)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Salaries and wages</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">92.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">103.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for severance indemnities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Welfare</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Rent</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Taxes and dues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">428.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">442.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Advertising</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39.5</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">48
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Year Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">(billions of Won)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ordinary research and development cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">Won</TD>
    <TD align="right">4.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">Won</TD>
    <TD align="right">4.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Utilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Telecommunication equipment lease expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">165.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">140.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bad debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Maintenance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales commissions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">196.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">178.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interconnection charges</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">131.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">142.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commissions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outsourcing services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">1312.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">1335.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The increase in operating expenses in 2004 was primarily due to increases of Won 13.8
billion in depreciation and amortization, Won 12.1&nbsp;billion in advertising expenses and Won 10.9
billion in interconnection charges. The increase in depreciation and amortization was caused by
increases in depreciable plant and equipment. The increase in advertising expense in 2004 was the
result of significant advertising campaigns in the second and third quarters of 2004 to promote our
change in corporate identity and logo, our newly branded &#147;hanafone&#148; telephony services and
fixed-line number portability. Although lower interconnection fee rates set by the MIC took effect
in January&nbsp;2004, interconnection charges increased primarily due to an increase in the number of
our local telephony services subscribers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These increases were partially offset by decreases in (1)&nbsp;sales commission expenses resulting
from the slower growth in subscribers during 2004 compared to growth in 2003, (2)
telecommunications equipment lease expense due to reduced dependence on cable lines leased to us by
Powercomm and a reclassification of expenses relating to long distance calls as interconnection
fees, and (3)&nbsp;certain promotional expenses attributable to our increased focus on entering into
strategic alliances with certain system operators and relay operators and our seeking to avoid
predatory pricing practices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Operating Income</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our total operating income for the year ended December&nbsp;31, 2004 was Won 113.9&nbsp;billion, an
increase of Won 43.2&nbsp;billion, compared to a total operating income of Won 70.7&nbsp;billion in 2003.
The increase in our total operating income in 2004 was primarily due to an increase in our voice
revenues in 2004. For segment information on operating income, see note 24 to our consolidated
financial statements for the years ended December&nbsp;31, 2003 and 2004 included in this Annual Report.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Non-Operating Income</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our non-operating income for the year ended December&nbsp;31, 2004 was Won 62.2&nbsp;billion, an
increase of Won 35.2&nbsp;billion, compared to non-operating income of Won 27.0&nbsp;billion in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table presents data for non-operating income:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Year Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Non-Operating Income:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">(billions of Won)</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">18.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">18.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on disposal of short-term investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on disposal of long-term investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on disposal of investment securities using the equity method</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on disposal of property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on foreign currency transactions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on foreign currency translation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on early redemption of debentures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on valuation of forward exchange contract</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on transaction of forward exchange contract</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">27.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">62.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">49
</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The increase in non-operating income in 2004 was primarily due to increases in gain on
foreign currency translations. Our gain on foreign currency translations increased by Won 33.8
billion from Won 19&nbsp;million in 2003 to Won 33.8&nbsp;billion in 2004 primarily due to the appreciation
of the Korean Won against the U.S. dollar and an increase in our dollar-denominated liabilities in
2004. The Korean Won slightly depreciated against the U.S. dollar from Won 1,186.30 to U.S.$1.00
as of December&nbsp;31, 2002 to Won 1,192.60 to U.S.$1.00 as of December&nbsp;31, 2003, but appreciated
against the U.S. dollar to Won 1,035.00 to U.S.$1.00 as of December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Non-Operating Expenses</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our non-operating expenses for the year ended December&nbsp;31, 2004 were Won 162.3&nbsp;billion, a
decrease of Won 96.3&nbsp;billion, compared to non-operating expenses of Won 258.6&nbsp;billion in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table presents data for non-operating expenses:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Year Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Non-Operating Expenses:</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">(billions of Won)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="RIGHT">Won&nbsp;139.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="RIGHT">Won&nbsp;100.9</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Asset Backed Securities payable expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on foreign currency transactions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on foreign currency translation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on disposal of short-term investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on disposal of long-term investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on valuation of trading securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impairment loss on short-term investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impairment loss on long-term investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Donations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on early redemption of debentures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on early redemption of long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on redemption of long-term obligation under capital leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on valuation using the equity method</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on disposal of property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on disuse of property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on valuation of forward exchange contract</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on transaction of forward exchange contract</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impairment loss on intangibles</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other bad debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-operating expense-other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="RIGHT">Won&nbsp;258.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="RIGHT">Won&nbsp;162.3</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The decrease in non-operating expenses in 2004 was primarily due to lower interest
expense as we reduced our debt levels, particularly those with higher interest rates. The level of
write-off of property and equipment also decreased compared to 2003. In addition, the significant
losses attributable to Dreamline were not reflected in our income statement under the equity method
following the reclassification of our interest in Dreamline to a long-term investment. See note 8
to our consolidated financial statements for a detailed discussion relating to Dreamline. These
improvements in non-operating expenses were, however, partially offset by losses of Won 34.0
billion on valuation of forward exchange contract. See note 15 to our consolidated financial
statements for more a detailed discussion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Net Income (Loss)</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result of the various factors discussed above, we recorded net income of Won 13.0&nbsp;billion
for the year ended December&nbsp;31, 2004 compared to a net loss of Won 161.3&nbsp;billion for the same
period in 2003.
</DIV>

<P align="center" style="font-size: 10pt">50
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Impact of Inflation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In view of our operating history, we believe that inflation in Korea has not had a material
impact on our results of operations. Inflation in Korea in 2001, 2002, 2003, 2004 and 2005 was
4.1%, 2.7%, 3.6%, 3.6% and 2.7%, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Impact of Foreign Currency Fluctuations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See &#147;Item&nbsp;11. Quantitative and Qualitative Disclosures about Market Risk&#151;Foreign Currency
Risk.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>B. Liquidity and Capital Resources</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our primary uses of cash are to fund working capital, service indebtedness and fund capital
expenditures. Our primary sources of liquidity and capital requirements traditionally have been
from equity and debt financings, as cash flows from operations had not been sufficient to meet our
needs. Our cash flow from operations, however, has been increasing in recent periods, and this, in
turn, has led, among other things, to a reduced need for short term financing. In 2006, we expect
that our capital expenditures will not increase significantly from the level of 2005 and that they
will focus mostly on upgrades of our fiber LAN network. In addition, we have approximately Won
220.4&nbsp;billion of long-term debt obligations maturing within 2006, out of which we have repaid Won
190&nbsp;billion due in February&nbsp;2006 with the issuance of corporate debentures amounting to Won 100.0
billion, our cash on hand and available credit lines.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result of the issuance and sale of the $500&nbsp;million aggregate principal amount of 7%
notes due 2012 in February&nbsp;2005, our debt-to-equity ratio changed from 59.1% as of December&nbsp;31,
2004 to 63.2% as of December&nbsp;31, 2005. As of March&nbsp;31, 2006, we had Won 287.4&nbsp;billion of principal
payments and contracted commitments coming due in the remainder of 2006 through the end of 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With the combination of our cash on hand, increased cash flow from operations, and our
improved liquidity position attributable to the issuance and sale of our 7% notes in February&nbsp;2005
and the refinancing of the secured credit facility in May&nbsp;2005, we believe that we have sufficient
funding to meet our currently anticipated debt repayment, capital expenditure and debt service
requirements, as well as our working capital and other funding objectives for the next 12&nbsp;months.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to maintain our competitive position and continue to meet the increasing demands for
service quality, availability and competitive pricing and to further build our network, we may need
to incur capital expenditures in addition to those currently anticipated. Our actual future
financing requirements and our ability to obtain additional financing will depend on our future
performance, market conditions and other factors, many of which are beyond our control and cannot
be predicted with certainty. We believe that adequate financing will be available in the event we
need additional funds for such purposes. Nevertheless, we cannot assure you that such financing
will be available on favorable terms. If we are unable to obtain such financing, we may need to
modify, delay or abandon elements of our strategy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Cash Flows</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth selected information concerning our combined cash flows during
the periods indicated:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Year ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">(in billions of Won)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flows from operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="RIGHT">Won&nbsp;303.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="RIGHT">Won&nbsp;469.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="RIGHT">Won&nbsp;489.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flows from investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(250.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(209.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(574.6</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flows from financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(135.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(294.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(48.4</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">51
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash flows from operating activities have increased during the three years ended December
31, 2005, primarily due to the improvement in operating performance and the change in working
capital.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash flows used in investing activities have generally show a decreasing trend in the past
three years due to decreased acquisitions of short-term financial instruments. In 2005, however,
cash flows used in investing activities increased significantly as a result of our acquisition of
Thrunet shares and bonds. Acquisitions of property and equipment in 2005 increased to Won 311.7
billion from Won 212.5&nbsp;billion for 2004 as we made capital expenditures to reduce our dependence on
our leased last-mile network from Powercomm by further building out our own network. In addition,
we did not acquire any property and equipment through capital leases in 2005 compared to the Won
37.7&nbsp;billion of property and equipment acquired through capital leases in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash flows from financing activities have turned negative from 2003, reflecting decreased
levels of financing activity and our repayment of indebtedness. Cash flows used in financing
activities were Won 48.4&nbsp;billion in 2005, reflecting a continuation of the factors primarily
responsible for the earlier trend partially offset by the proceeds from the issuance of $500
million aggregate principal amount of bonds issues in February&nbsp;2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See &#147;&#151;Liquidity and Capital Resources&#151;Long Term Indebtedness and Capital Lease Payments&#148; for
information regarding future repayments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Equity Investment</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On November&nbsp;18, 2003, we issued 182,812,500 common shares (representing an aggregate of 39.6%
equity interest) at a purchase price of Won 3,200 per share by way of a private placement to a
consortium of investors led by AIG, Newbridge and TVG, which resulted in aggregate proceeds of Won
585.0&nbsp;billion. These proceeds were a primary source for our debt repayments in 2003 and 2004 as
well as for meeting our debt service requirements. See &#147;Item&nbsp;7.B. Related Party
Transactions&#151;Relationship with AIG-Newbridge-TVG Consortium.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Long Term Indebtedness and Capital Lease Payments</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our contractual obligations, including commitments for future payments under lease
arrangements and short-term and long-term debt arrangements, are summarized below and are fully
disclosed in notes 11 and 13 to our consolidated financial statements included elsewhere in this
Annual Report.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="29%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Balance</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18" style="border-bottom: 1px solid #000000"><B>Payments due during</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>December&nbsp;31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18" style="border-bottom: 1px solid #000000"><B>Year ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2010</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="22">(in billions of Won and millions of U.S. dollars)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Korean corporate debentures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="RIGHT">190.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="RIGHT">190.0.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="RIGHT">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="RIGHT">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="RIGHT">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="RIGHT">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Global corporate debentures<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">500.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Syndicated loan:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Won</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Dollar</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">201.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">30.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">80.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">90.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="RIGHT">39.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="RIGHT">26.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="RIGHT">12.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="RIGHT">0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="RIGHT">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="RIGHT">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total &#151; Won</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="RIGHT">309.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="RIGHT">216.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="RIGHT">31.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="RIGHT">22.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="RIGHT">25.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="RIGHT">12.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">&#151; Dollar</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">701.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">30.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">80.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">90.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>The maturity for the $500&nbsp;million aggregate principal amount of global bond is February&nbsp;2012.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2005, we had outstanding long-term debt (including current portions of
long term debt) in an aggregate amount of Won 974.8&nbsp;billion (of which the current portion was Won
220.4&nbsp;billion). Of that amount, 20.8% was denominated in U.S. dollars and 79.2% was denominated in
Korean Won. The Won-denominated long-term debt consisted of (1)&nbsp;Korean corporate debentures, (2)
amounts borrowed from the senior secured credit facility and (3)&nbsp;the capital lease agreements.
</DIV>

<P align="center" style="font-size: 10pt">52
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Korean Corporate Debentures</I>. As of December&nbsp;31, 2005, we had outstanding Korean corporate
debentures of Won 190.0&nbsp;billion (of which the current portion was Won 190.0&nbsp;billion). The
creditors include various Korean financial institutions. The scheduled maturity of these
debentures is on February&nbsp;24, 2006 and the interest rate for these debentures is 6% per annum.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Global Corporate Debentures</I>. As of December&nbsp;31, 2005, we had outstanding global corporate
debentures of U.S.$500&nbsp;million. The scheduled maturity of these debentures is February&nbsp;2012, and
the interest rate for these debentures is 7% per annum.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Senior Secured Credit Facility</I>. As of December&nbsp;31, 2005, we had outstanding Won 79.8&nbsp;billion
of Won-denominated indebtedness and U.S.$201.8&nbsp;million of dollar-denominated indebtedness under our
senior secured credit facility. The senior secured credit facility provided for a term loan
facility in the aggregate amount of Won 660.0&nbsp;billion and a revolving credit facility in the
aggregate amount of Won 60.0&nbsp;billion. The Won-denominated debt under the senior secured credit
facility bore interest rates of 6.36% per annum and the dollar-denominated debt under the senior
secured credit facility bore an interest rate of 6.18% per annum.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Capital Lease Agreements. </I>We also have capital lease agreements with Korea HP Financial
Service Co., LG Card Services Corp. and Cisco Systems Capital Korea Ltd. for certain machinery and
equipment. As of December&nbsp;31, 2005, the amount of payments attributable to the debt portion of our
lease obligations was Won 39.4&nbsp;billion (of which the portion due in 2006 was approximately Won 26.7
billion).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A portion of the proceeds from the notes offering and the borrowings under the new secured
credit facility was applied to repay some of our outstanding debt obligations. Between January&nbsp;1,
2005 and April&nbsp;30, 2005, we repaid at maturity or prepaid prior to maturity the following amounts:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Won 120&nbsp;billion aggregate principal amount of Korean corporate debentures,
including Won 100&nbsp;billion of prepayments;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all outstanding amounts under the Information Promotion Fund loan amounting to Won
66.7&nbsp;billion;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Won 39.0&nbsp;billion of the Won 40.0&nbsp;billion outstanding amount under the Citibank
Korea loan;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all outstanding amounts under the previous senior secured credit facility; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Won 25.6&nbsp;billion of lease obligations due under our capital lease agreements,
including Won 7.1&nbsp;billion of prepayments.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Other Financial Transactions</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;19, 2003, we entered into a cross-currency swap contract with Korea Development
Bank (pursuant to which we exchanged Won 75.0&nbsp;billion for U.S.$63.1&nbsp;million with a final maturity
dated as of November&nbsp;13, 2008), in connection with the Senior Secured Credit Facility agreement
dated April&nbsp;21, 2005, to hedge the exposure to changes in the foreign currency exchange rate at Won
1,190.0 per U.S.$1.00. This contract also includes an interest rate swap under which we agreed to
pay a fixed rate of 7.72% per annum on the notional principal amount and are to receive payments
based on LIBOR plus a 3.25% spread.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2005, we provided a blank promissory note as collateral to LG Card Services
Corp. in connection with the lease agreements. It is common practice for Korean companies to issue
blank promissory notes with a maximum note amount to financial institutions as collateral in credit
transactions. In the event a holder of a blank promissory note attempts to claim an amount in
excess of the maximum note amount, the issuer of such promissory note will be required to pay the
entire note amount. However, in such event, the issuer has a right of indemnification from such
holder with respect to the excess amount.
</DIV>

<P align="center" style="font-size: 10pt">53
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February&nbsp;10, 2004, we entered into cross-currency swap contracts under which we exchanged
an aggregate of Won 161.8&nbsp;billion (Won 116.6&nbsp;billion with Korea Development Bank, Won 21.9&nbsp;billion
with Korea Exchange Bank and Won 23.3&nbsp;billion with Calyon Bank &#091;formerly &#147;Credit Lyonnais Bank&#148;)
for U.S.$138.7&nbsp;million with a maturity date of November&nbsp;13, 2008 to hedge exposure to changes in
the foreign currency exchange rate at Won 1,166.2 per U.S.$1.00. These contracts also include
interest rate swaps under which we agreed to pay a fixed rate of 7.60% per annum on the notional
principal and are to receive three month LIBOR plus a spread of 3.25%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;26, 2005, we entered into cross-currency swap contracts under which we exchanged an
aggregate of Won 258.8&nbsp;billion (Won 103.5&nbsp;billion with Korea Development Bank, Won 103.5&nbsp;billion
with DBS Bank and Won 51.8&nbsp;billion with Shinhan Bank) for U.S.$250.0&nbsp;million with a final maturity
date of February&nbsp;1, 2012 to hedge the exposure to changes in the foreign currency exchange rate at
Won 1,035.0 per U.S.$1.00. These contracts also include interest rate swap arrangements under
which we agreed to pay a fixed rate of 7.13% per annum on the notional principal pursuant to the
contracts with Korea Development Bank and DBS Bank and a fixed rate of 7.15% per annum on the
notional principal pursuant to the contract with Shinhan Bank, and are to receive a 7.00% fixed
coupon.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;28, 2005, we entered into cross-currency swap contracts under which we exchanged an
aggregate of Won 154.0&nbsp;billion (Won 102.7&nbsp;billion with ABN AMRO Bank and Won 51.3&nbsp;billion with
JPMorgan Chase Bank N.A.) for U.S.$150.0&nbsp;million with a final maturity date of February&nbsp;1, 2012 to
hedge the exposure to changes in the foreign currency exchange rate at Won 1,026.5 per U.S.$1.00.
These contracts also include interest rate swap arrangements under which we agreed to pay a fixed
rate of 6.89% per annum on the notional principal pursuant to the contract with ABN AMRO Bank and a
fixed rate of 6.98% per annum on the notional principal pursuant to the contract with JPMorgan
Chase Bank N.A., and are to receive a 7.00% fixed coupon.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February&nbsp;1, 2005, we entered into cross-currency swap contracts under which we exchanged an
aggregate of Won 102.9&nbsp;billion (Won 82.3&nbsp;billion with Shinhan Bank &#091;formerly &#147;Chohung Bank"&#093; and
Won 20.6&nbsp;billion with Societe Generale) for U.S.$100.0&nbsp;million with a final maturity date of
February&nbsp;1, 2012 to hedge the exposure to changes in the foreign currency exchange rate at Won
1,028.6 per U.S.$1.00. These contracts also include interest rate swap arrangements under which we
agreed to pay a fixed rate of 7.23% per annum on the notional principal and are to receive a 7.00%
fixed coupon.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Capital Expenditures</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the amount of our capital expenditures incurred from 2002 to
2005:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000"><B>Year ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2002</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14">(in billions of Won)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">hanarotelecom:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Backbone network</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">Won&nbsp;128.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">Won&nbsp;111.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">Won&nbsp;99.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">Won&nbsp;73.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Last mile connection</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">205.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">191.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">183.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Subtotal</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">362.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">337.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">281.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">311.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Consolidated subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">Won&nbsp;420.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">Won&nbsp;337.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">Won&nbsp;282.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">Won&nbsp;326.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our capital expenditures differ from investments in property and equipment in our cash
flow statements, as capital expenditures also include capital lease payments and transfer of
inventories to property and equipment. Our capital expenditures over the last three years
consisted primarily of purchasing and deploying switchboards, fiber optic cable lines and other
telecommunications equipment. In 2005, we recorded Won 311.3&nbsp;billion in capital expenditures, out
of which a substantial amount of our capital expenditures was incurred in the fourth quarter due to
the timing of expenditures on several planned projects and because certain investments related to
the integration of our network with Thrunet&#146;s network. At this time, we expect that our capital
expenditures in 2006 will not increase significantly from the level of 2005 and that they will
focus mostly on upgrades of our fiber LAN network.
</DIV>

<P align="center" style="font-size: 10pt">54
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Other Contractual Obligations</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We, as well as other license holders, are required to make annual contributions to public
research and development funds under the terms of the licenses granted to us by the Government to
operate our business. On May&nbsp;9, 2002, the MIC announced that, effective from 2002, only the NSPs
whose total broadband (from 2005 onwards), voice and leased line services revenue amount for the
preceding year was more than Won 30&nbsp;billion and that realized a net profit in the preceding year
are required to make annual payments for the purpose of research and development in the amount of
0.5% of the total broadband (from 2005 onwards), voice and leased line services revenue, to the
extent that the amount of such payment does not exceed the amount of the net profit for the
preceding year. The &#147;net profit&#148; which the MIC will use in its determination of the amount of
these contributions is calculated using accounting standards and policies specified by the MIC
which differ in certain respects from Korean GAAP. Based on the MIC accounting standards, we did
not realize a net profit in 2004 and are not required to make a contribution in 2005. We do not
anticipate that we will realize a net profit based on the MIC accounting standards in 2005 and
therefore do not anticipate that we will be required to make a contribution in 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Korean law, an employee with more than one year of service is entitled to receive from
the company a lump-sum payment upon termination of his or her employment, based on the length of
service and the rate of pay at the time of termination. In 2004, we made severance payments of Won
5.1&nbsp;billion and Won 19.7&nbsp;billion in 2005, respectively. Our accrued severance indemnities as of
December&nbsp;31, 2005 was Won 36.0&nbsp;billion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2004 and as of December&nbsp;31, 2005, we had provided loans to our employees in
the amount of Won 13.1&nbsp;billion and Won 9.8&nbsp;billion, respectively, for the purchase of our common
shares through our employee stock ownership association. The loans are secured by the shares
purchased. As of December&nbsp;31, 2005, we had also provided housing loans and other loans for medical
expenses and dependent educational expenses to our employees in the amount of Won 8.6&nbsp;billion and
Won 0.2&nbsp;billion, respectively. These loans are secured by accrued severance benefits of the
borrowing employees. As of December&nbsp;31, 2005, we had not experienced any defaults under these
loans. The loans are provided as a perk to our employees and are not required by Korean law. Our
officers and directors are not eligible for these loans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For time to time, we have provided secured or guaranteed interest-free loans to cable network
operators. The terms of each of those loans require repayment after a specified period (ranging
from one year to three years) from the date of the loan by equal installments on a quarterly basis
for two years. As of December&nbsp;31, 2005, we provided a guarantee of one loan with an outstanding
balance of Won 70&nbsp;million. The loan agreements require the cable network operators to use the loan
proceeds to upgrade their systems so that our services can be provided over their networks. The
loan agreements also require the borrower to lease to us its cable network for our HFC-based
Internet access services upon completion of the system upgrade.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>C. Research and Development, Patents and Licenses, etc.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We engage in ordinary research and development to improve our technologies. We have not spent
a significant amount on such research and development activities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>D. Trend Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See &#147;Item&nbsp;5.A. Operating Results&#148; above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>E. Off-balance Sheet Arrangements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There were no off-balance sheet arrangements that have or are reasonably likely to have a
current or future effect on our financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or capital resources that is
material to investors.
</DIV>


<P align="center" style="font-size: 10pt">55
</DIV>


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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>F. Tabular Disclosure of Contractual Obligations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth information with respect to our known contractual obligations
as of December&nbsp;31, 2005:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18" style="border-bottom: 1px solid #000000"><B>Payments due by period</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Total</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Less than 1 year</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>1-3 years</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>3-5 years</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>More than 5 years</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="18">(in billions of Won)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term debt obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">974.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">220.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">213.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">38.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">502.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital lease obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating lease obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">1,045.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">278.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">226.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">38.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">502.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>G. Safe Harbor</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See discussion under &#147;Forward-Looking Statements.&#148;
</DIV>
<DIV align="left">
<A name="108"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;6. Directors, Senior Management and Employees.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>A. Directors and Senior Management</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets out our directors, their age, their position on the board and audit
committee and the shareholder, if any, who nominated them.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="25%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Age</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Position</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Nominated by</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Byung-Moo Park
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">44</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Representative
Director and Chief
Executive Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Wilfried Kaffenberger
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">61</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Non-standing Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">AIG Asian Infrastructure Fund II</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">David Yeung
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">56</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Non-standing Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">AIG Asian Opportunity Fund</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Paul Chen
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">41</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Outside Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Outside Director Candidate Nominating Committee</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Varun Bery
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">48</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Outside Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Outside Director Candidate Nominating Committee</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Sung Kyou Park
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">67</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Outside Director &#038;
Chairman of Audit
Committee
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Outside Director Candidate Nominating Committee</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Sun Woo Kim
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">65</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Outside Director &#038;
Member of Audit
Committee
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Outside Director Candidate Nominating Committee</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Steven J. Schneider
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">47</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Outside Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Outside Director Candidate Nominating Committee</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Afshin Mohebbi
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">43</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Outside Director
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Outside Director Candidate Nominating Committee</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Peter Whang
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">39</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Non-standing
Director &#038; Member of
Audit Committee
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">AIG Asian Infrastructure Fund II</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Byung-Moo Park </B>was appointed as Representative Director on March&nbsp;24, 2006 and prior to
that served as our outside Director since November&nbsp;2003. Since 2003, he has served as a managing
director of Newbridge Capital Korea Ltd. Prior to joining Newbridge, he served as Chief Executive
Officer of PLENUS Entertainment Inc. Prior to that, he was a partner in the law firm of Kim &#038;
Chang in Korea. Mr.&nbsp;Park is a graduate of the College and the Graduate School of Law at Seoul
National University and received his masters in business administration from Yonsei University and
an LL.M. from Harvard Law School. Mr.&nbsp;Park is a member of the Korean and New York Bar
Associations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Wilfried Kaffenberger </B>has served as our non-standing Director since November&nbsp;2003. He is
currently serving as Managing Director of Emerging Markets Partnership and as Chief Executive
Officer of AIG Asian Infrastructure Fund II. Prior to joining Emerging Markets Partnership, he was
with International Finance Corporation for over 25&nbsp;years in various capacities, including as a Vice
President Investment Operations. Mr.&nbsp;Kaffenberger received a bachelor of science in chemical
engineering from Princeton University in 1966 and masters in business administration from Harvard
Graduate School of Business in 1968.
</DIV>

<P align="center" style="font-size: 10pt">56
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>David Yeung </B>has served as our non-standing Director since November&nbsp;2003. He is currently
serving as Head of AIG&#146;s infrastructure investments in developing markets and as Managing Director
of AIG Global Investment Corp in Hong Kong. Prior to joining AIG in Hong Kong in 1995, Mr.&nbsp;Yeung
was with Bell Canada Enterprise and Northern Telecom managing telecom and technology investments in
North America. Mr.&nbsp;Yeung received a bachelor of science from Indiana University in 1972 and
masters in business administration from The Graduate School of Business, University of Chicago in
1974. He is a U.S. certified public accountant as well as a Canadian chartered accountant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Paul Chen </B>has served as our outside Director since November&nbsp;2003. He is currently a Managing
Director of Newbridge Capital based in Hong Kong. Mr.&nbsp;Chen played a key role in Newbridge&#146;s
investments in hanarotelecom and Korea First Bank and currently serves as a member of our Director
and Compensation Committee and as a Director and Audit Committee member of Korea First Bank. Prior
to joining Newbridge in 1996, Mr.&nbsp;Chen worked in the investment banking division at Morgan Stanley
&#038; Co. in New York and Hong Kong as well as Bankers Trust Company in New York. Mr.&nbsp;Chen has a
bachelor of science in applied economics and business management from Cornell University and
masters in business administration from Harvard Business School.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Varun Bery </B>has served as our outside Director since March&nbsp;2004. In April&nbsp;1998, he co-founded,
and has since served as a managing director of TVG. From May&nbsp;1995 until March&nbsp;1998, he served as a
Director of the Telecom Group at the Asian Infrastructure Fund. From September&nbsp;1992 until May
1995, he served as a Director of the Telecom Investment Banking Division at Credit Suisse First
Boston. From September&nbsp;1985 until August&nbsp;1992, he was a management consultant with McKinsey &#038; Co.
in New York and Tokyo. Mr.&nbsp;Bery received a bachelor of arts from Yale University in 1981 and a
masters in business administration from Harvard University.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Sung Kyou Park </B>has served as our outside Director and chairman of our audit committee since
March&nbsp;2000. From 1987 until 1995, he served as President of Daewoo Telecom. From 1995 until 1997,
he served as Chairman and Chief Executive Officer of Daewoo Telecom. From 1998 until 1999, he
served as Chairman and Chief Executive Officer of Daewoo Maghreb S.A. From 1996 until 1998, Dr.
Park served as Chairman of the Telecommunications Industry Association of Korea. He has a bachelor
of electronics engineering from MIT. He also received masters in electronics engineering from
Northeastern University in 1966 and a Ph.D. in electronics engineering from the University of Texas
at Austin in 1971.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Sun Woo Kim </B>has served as our outside Director and member of our audit committee since March
2003. Since May&nbsp;2004, he has served as a chairman of the board of directors of Korea Digital
Satellite Broadcasting. From 2000 until 2003, he served as a director of Korea Broadcasting
System. He has been a member of the Advisory Council on Democratic and Peaceful Unification since
1997. From 1992 until 1999, he served as an Executive Director of Busan Daily. Mr.&nbsp;Kim received a
bachelor of arts in political science from the Seoul National University in 1965 and masters in
business administration from Dankook University in 1983.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Steven J. Schneider </B>has served as our outside Director since March&nbsp;2006. He earned a bachelor
of arts in business administration from Grove City College. From 2001 until 2005, he served as
Chairman and CEO of GE China, and from 2005, also served as CEO of GE Asia-Pacific. Since November
2005, he has been a Managing Director of Newbridge Capital.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Afshin Mohebbi </B>has served as our outside Director since March&nbsp;2006. He received his masters in
business administration from University of California Irvine and has been serving as President and
Chief Operating Officer of Qwest Communications International Inc. since 1999. He is currently a
member of the board of directors of BearingPoint, Inc.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Peter Whang </B>has served as our Director and a member of our audit committee since March&nbsp;2006.
He received a masters in business administration from the University of Chicago. He worked at the
Chairman&#146;s Office of LG Group before serving as Representative Director of AIGGIC Korea. Although
Mr.&nbsp;Whang does not meet the Nasdaq requirements for outside (independent)&nbsp;directors, he satisfies
the requirements for audit committee members under the Korean Securities and Exchange Act.
Accordingly, as
</DIV>

<P align="center" style="font-size: 10pt">57
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">a person specially related to the largest shareholder (AIF II NT), he was appointed as a
non-standing Director who serves as a member of our audit committee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets out information on our principal senior executive officers who are
not members of the board of directors.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="25%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="63%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Age</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Position</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Jin Ha Kim
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">50</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Executive Vice President and Chief Technology Officer</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Dominic A. Gomez
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">51</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Executive Vice President and Chief Operating Officer</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Soon Man Hong
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">47</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Executive Vice President and Head of the Convergence Headquarters</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Eric Choi
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">49</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Executive Vice President and Head of the Sales Channel
Management Headquarters</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Mark D. Pitchford
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">42</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Vice President and Chief Marketing Officer</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Janice Lee
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">44</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Executive Vice President and Chief Financial Officer</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Matt Lee
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">48</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Vice President and Chief Business Officer</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Kyu Shik Shin
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">49</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Vice President and Head of the Corporate Business Headquarters</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Chong Hoon Park
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">41</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Vice President and Head of the External
Collaboration/Strategy Headquarters</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Young Bo Chang
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">47</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Geon Jun Park
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">48</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Sang Hwan Oh
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">48</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Seok Ho Lee
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">52</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Myong Heon Choi
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">48</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Sang Jin Jeun
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">41</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Marshall J. Cochrane
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">63</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President and Chief Procurement Officer</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Kyoung Yu Min
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">46</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Yeon Ho Kim
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">42</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Myung Joo Ko
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">42</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Baeky Rhee
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">45</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Jin Ha Kim </B>has served as our Senior Executive Vice President and Chief Technology Officer
since January&nbsp;2006. Mr.&nbsp;Kim joined us in December&nbsp;1997 as Executive Vice President, Head of
Network Facility Unit and served in such role until November&nbsp;2003. Before joining us, he served as
Director at Dacom from July&nbsp;1997 and various other roles at Dacom before then.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Dominic A. Gomez </B>has served as our Senior Executive Vice President and Chief Operating Officer
since May&nbsp;2005. Mr.&nbsp;Gomez previously served as an Executive Vice President at Lantern
Communications from 2002 to 2004 and Chief Operating Officer at EdgeNet Communications from 2000 to
2002. He received a bachelor of public administration in 1977 from University of Southern
California and completed PMD Business Administration at Harvard University.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Soon Man Hong </B>has served as our Senior Executive Vice President and Head of the Convergence
Headquarters since April&nbsp;2006. He was appointed as an Executive Vice President on February&nbsp;1, 2006,
promoted from the Head of the Marketing Headquarters to a Senior Executive Vice President on April
17, 2006 and appointed as Head of the Convergence Headquarters on April&nbsp;30, 2006. He received a
bachelor of science in aerospace engineering from Seoul National University and a masters of
business administration from the Helsinki School of Economics and Business Administration. Mr.&nbsp;Hong
served as Deputy Senior Manager of the PC Business Department of IBM Korea, Senior Vice President
of the Enterprise Computing Group of Compaq Korea between 1998 and 2002, Senior Vice President of
the Enterprise Solution Group of HP Korea between June&nbsp;2002 and December&nbsp;2002 and Representative
Director of Cybase Korea from February&nbsp;2003 until he joined us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Eric Choi </B>has served as our Senior Executive Vice President and Head of the Sales Channel
Management Headquarters since January&nbsp;2006. He was appointed on January&nbsp;1, 2006. He served as
President &#038; CEO of SAP Korea from 2000 until 2002, President &#038; CEO of webMethods Korea from 2003
until 2005 and President of Siebel Systems Korea in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Mark D. Pitchford </B>has served as our Executive Vice President and Chief Marketing Officer since
May&nbsp;2006. He received a masters in business administration from Santa Clara University. He served
as Vice President of Consumer Marketing at Pacific Bell from 1984 to 1997, Vice President of
Consumer
</DIV>

<P align="center" style="font-size: 10pt">58
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Marketing at SBC Communications, Inc. from 1997 to 1999 and Senior Vice President of Marketing
at Qwest from 1999 to 2005. He served as our International Sales &#038; Marketing Consultant from 2005
to April&nbsp;2006, when he was promoted to Head of the Marketing Headquarters of hanarotelecom.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Janice Lee </B>has served as our Senior Executive Vice President since January&nbsp;2006 and Chief
Financial Officer since May&nbsp;2004. From December&nbsp;1998 until May&nbsp;2004, she served as Chief Financial
Officer and Financial Projects Manager of Volvo Construction Machinery Korea. From 1993 until
November&nbsp;1998, she served as Financial Controller at Daewoo Heavy Industries America. Ms.&nbsp;Lee
received a bachelor of arts in English from Ewha Womans University in 1983, masters in finance from
Ohio State University in 1986, masters in accounting from Cleveland State University in 1990 and
executive masters in business administration from the University of Chicago in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Matt Lee </B>has served as our Executive Vice President since January&nbsp;2006 and Chief Business
Officer since January&nbsp;2005. He previously served as Vice President of Nokia Networks, Managing
Director of Excel Tech, General Manager of Hyundai Electronics, and Member of Technical Staff in
AT&#038;T Bell Laboratories. Mr.&nbsp;Lee received a bachelor of arts in mathematics in 1984, masters in
mathematics in 1985 and masters in statistics in 1986 from the University of Illinois,
Urbana-Champaign.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Kyu Shik Shin </B>has served as a Executive Vice President and the Head of Corporate Business
Headquarters of hanarotelecom since January&nbsp;2006. From 1985 to 2003, he served 10&nbsp;years in IBM, 9
years in COMPAQ and HP as an Enterprise sales director. Mr.&nbsp;Shin received a bachelor of food
technology from Seoul National University in 1981.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Chong Hoon Park </B>has served as an Executive Vice President and the Head of External
Collaboration/Strategy Headquarters at hanarotelecom since January&nbsp;2006. From June&nbsp;1999 to
December&nbsp;2004, Mr.&nbsp;Park served as a Research Fellow of Telecom Policy Division at KISDI. He
received a bachelor of economics and mathematics from University of Wisconsin at Madison, an MBA
from George Washington University and a Ph.D. in economics from Northwestern University.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Young Bo Chang </B>has served as a Senior Vice President and the Head of the Financial Management
Unit of hanarotelecom since January&nbsp;2005. From February&nbsp;2004 to December&nbsp;2004, he served as the
Vice President and Head of the Investor Relations team. Mr.&nbsp;Chang previously served as a Senior
Director at Jardine Fleming Securities from 1995 to 2000 and as a Vice President at JPMorgan from
2000. He received a bachelor of political and diplomatic science at Yonsei University in Korea and
MBA from the Kellogg School of Management of Northwestern University in 1986.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Geon Jun Park </B>has served as our Senior Vice President and the Head of Network Operation Unit
since March&nbsp;2004. From December&nbsp;1992 to October&nbsp;1997, he served as Director of Network Cable
Planning of Dacom. Mr.&nbsp;Park received a bachelor of electronic engineering from Ah-ju University in
1983.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Sang Hwan Oh </B>has served as a Senior Vice President and the Head of the Business Alliance Unit
(Vice President) since January&nbsp;2005. He served as a Senior Manager of the Mass Marketing Division
of Dacom before joining hanarotelecom as the Head of the Honam Branch Office in 2005. He was
promoted to Senior Vice President on January&nbsp;1, 2006. He became the Head of the Business Alliance
Unit in March&nbsp;2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Seok Ho Lee </B>has served as a Senior Vice President and the Head of the Busan Branch Office
since January&nbsp;2006. He was promoted from Vice President to Senior Vice President on January&nbsp;1,
2006. He worked at the Corporate Business Headquarters of Dacom before becoming the Head of the
Busan Branch Office of hanarotelecom in December&nbsp;2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Myung Heon Choi </B>has served as a Senior Vice President and the Head of the Choongchung Branch
Office since January&nbsp;2006. He was promoted from Vice President to Senior Vice President on January
1, 2006. He worked at the Local Network Facility Headquarters of Dacom before joining hanarotelecom
as the Head of the Choongchung Branch Office in December&nbsp;2003.
</DIV>

<P align="center" style="font-size: 10pt">59
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Sang Jin Jeun </B>has served as a Senior Vice President and the Head of the Communications Unit
since January&nbsp;2006. He was appointed on January&nbsp;1, 2006. He received a bachelor of arts in
government and international affairs from Augustana College in 1989 and a master of arts in east
Asian studies from University of Illinois at Urbana-Champaign in 1991. From October&nbsp;2005 and January
2006, he served as head of the Internal Communications of SC First Bank.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Marshall J. Cochrane </B>has served as a Senior Vice President and Chief Procurement Officer since
February&nbsp;2006. He was appointed on February&nbsp;27, 2006. He received a bachelor of arts in sociology
from United States International University and a masters in industrial administration from
Carnegie Mellon University. He has served as Vice President of Pac TelSBC Corp and Chief
Procurement Officer of Cochrane Consulting Services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Kyung Yu Min </B>has served as a Senior Vice President and the Head of the Kyungbuk Branch Office
of hanarotelecom since April&nbsp;2006. He served as the Head of the Leased Line Team Facilities Part at
Dacom prior to joining hanarotelecom as the Head of the Product Planning Unit (Vice President) in
2005. He was promoted to the Head of the Kyungbuk Branch Office (Senior Vice President) on April
17, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Yeon Ho Kim </B>has served as a Senior Vice President and the Head of the Kangnam Branch Office
since April&nbsp;2006. He worked at the SI Headquarters of Samsung SDS before joining hanarotelecom as
the Head of the Business Development 1 Team (Vice President) under the Business Development Unit on
February&nbsp;14, 2005. After working as the Head of the Information and Technology Unit (Senior Vice
President), he became the Head of the Kangnam Branch Office (Senior Vice President) on April&nbsp;17,
2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Myung Ju Ko </B>has served as a Senior Vice President and the Head of the Human Resources
Headquarters Unit since April&nbsp;2006. He received a bachelor of arts in archaeology and art history
from Seoul National University. He worked at Daewoo Motor, Hungkuk Life Insurance, Daehan Synthetic
Fiber and Sehwa Girls&#146; High School. On April&nbsp;1, 2006, he joined hanarotelecom as the Head of the
Human Resources Headquarters Unit (Senior Vice President).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Baeky Rhee </B>has served as a Senior Vice President and an Executive Vice President of Hanaro
T&#038;I, Inc. since April&nbsp;2006. He received a bachelor of engineering from Inha University and a master
of arts from the Graduate School of Business Administration of Ajou University. He served as a
partner of PWC Consulting, general manager of Customer Relationship Management at Locus
Technologies and general manager of telemarketing at AIG Life Insurance. On April&nbsp;24, 2006, he
became a Senior Vice President of hanarotelecom and an Executive Vice President of Hanaro T &#038; I, an
affiliate of hanarotelecom.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are no family relationships between our directors and officers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The board of directors and executive officers may be contacted through our headquarters at
hanarotelecom incorporated., 17-7 Yeouido-dong, Yeongdeungpo-gu, Seoul 150-874, Korea.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>B. Compensation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We paid an aggregate of Won 2.0&nbsp;billion as compensation during 2005 to our directors and
executive officers as a group. In addition, we set aside or accrued during 2005 an aggregate
amount of Won 1.88&nbsp;billion to provide retirement and severance benefits for our directors and
executive officers (including our statutory auditor). Of this amount, Won 1.79&nbsp;billion was paid to
directors and outside directors and Won 0.08&nbsp;billion was paid to our audit committee members in
2005. In particular, the paid amount includes retirement and severance benefits paid to our former
Representative Director Chang Bun Yoon, who resigned on August&nbsp;12, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also granted to our directors and executive officers 2,922,250 stock options during 2005
and 2006 under our stock option plan. For a detailed description of the stock options, as well as
the stock option plan, see &#147;Item&nbsp;6.E. Share Ownership&#151;Stock Option Plan.&#148;
</DIV>

<P align="center" style="font-size: 10pt">60
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From January&nbsp;1, 2005 to March&nbsp;31, 2006, a total of 5,260,000 stock options were granted and
2,337,750 stock options were cancelled. As of the end of April&nbsp;2006, we have outstanding employee
stock options to purchase a total of 17,936,481 common shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>C. Board Practices</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Board of Directors</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>General</I>. The board of directors has the ultimate responsibility for the administration of the
affairs of hanarotelecom. Our Articles of Incorporation, as currently in effect, provide for a
board of directors comprised of standing directors and non-standing directors, including outside
directors. Non-standing directors have the same rights and duties as those of standing directors,
but are not officers, or otherwise employees, of hanarotelecom. Under the Korean Commercial Code
and our Articles of Incorporation, directors serve a three-year term but if the term ends prior to
the date of the ordinary general meeting of shareholders in the last fiscal year of their term, the
term will be extended until the close of the ordinary general meeting of shareholders. Our
Articles of Incorporation provide for a board of directors consisting of up to ten directors in
total. Our Articles of Incorporation further provide that any person who is employed by a company
that conducts business in Korea that is in competition with our business objectives or a company
belonging to the same group of companies as such competitor company pursuant to the Monopoly
Regulation and Fair Trade Act, cannot be a director of hanarotelecom and any existing director
(including those who were appointed prior to the amendments to the Articles of Incorporation) shall
immediately lose his or her directorship if the foregoing restriction becomes applicable. The
directors are elected at a general meeting of shareholders by a majority of the vote of the
shareholders present or represented, subject to such majority equaling at least one-quarter of all
issued and outstanding shares with voting rights. None of our directors is party to a service
contract with us that provides for benefits upon termination of employment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Shareholders&#146; Agreement</I>. Our major shareholders that form the investment consortium led by
AIG, Newbridge and TVG are parties to a shareholders&#146; agreement governing the terms of their
investments in us. See &#147;Item&nbsp;7.A. Major Shareholders&#148; for more information with respect to the
beneficial ownership of our common shares by the major shareholders. Wilfried Kaffenberger, David
Yeung, Paul Chen, Varun Bery, Steven J. Schneider, Afshin Mohebbi, Peter Whang and Byung Moo Park
were appointed to the board of directors of hanarotelecom pursuant to the terms of the agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Korean Commercial Code and our board regulations, any director that has a special
interest with respect to the agenda of a board meeting may not exercise his voting rights in such
board meeting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Audit Committee</I>. Under the Korean Securities and Exchange Act, we must establish an audit
committee instead of appointing a statutory internal auditor. Our Articles of Incorporation and
Audit Committee Regulations provide that the Audit Committee, which must consist of three or more
directors, and of which at least two-thirds should be outside directors, is responsible for
examining internal transactions and potential conflicts of interest and reviewing accounting and
other relevant matters. The Audit Committee has the right to request the board of directors to
convene a shareholders&#146; meeting by providing a document that sets forth the agenda and reasons.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors established the Audit Committee on March&nbsp;17, 2000 in accordance with
our Articles of Incorporation. Our Audit Committee consists of three outside directors: Sung Kyu
Park, Sun Woo Kim and Peter Whang. Mr.&nbsp;Sung Kyou Park serves as the chairman of the Audit
Committee. Byung Moo Park was appointed as Representative Director and Peter Whang was appointed as
an audit committee member who is specially related to the largest shareholder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Remuneration Committee</I>. We have a President Compensation Committee and an Officers
Compensation Committee. The President Compensation Committee is composed of our outside directors,
Varun Bery and Paul Chen, and our non-standing directors, David Yeung and Wilfried Kaffenberger.
David Yeung serves as chairman of the four-member committee. The Officers Compensation Committee is
</DIV>

<P align="center" style="font-size: 10pt">61
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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">composed of our Representative Director Byung-Moo Park, outside directors, Varun Bery and Paul
Chen, and non-standing directors, David Yeung and Wilfried Kaffenberger. David Yeung serves as
chairman of the five-member committee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Outside Directors. </I>Our outside directors are appointed from among those persons who do not
have a special relationship with us that would interfere with the exercise of their independent
judgment. Our Articles of Incorporation prohibit a person who does not have the qualifications
under the Korean Securities and Exchange Act or any other statutes from being appointed as an
outside director, and in the event that an outside director falls under one of these categories,
then he or she will be disqualified from office.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Paul Chen, Varun Bery, Steven J. Schneider, Afshin Mohebbi, Sung Kyou Park and Sun Woo Kim
currently serve on the board of directors as outside directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For additional information on board practices, see &#147;Item&nbsp;6.A. Directors and Senior
Management.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>D. Employees</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2005, we had a total of 1,461 employees and an additional 128 full-time
employees employed on a contractual basis. The following chart shows the number of permanent
employees by functional areas.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>As of December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Planning and management.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">169</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">258</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">171</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Information technology</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Marketing and sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">565</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">480</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">479</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Network and engineering.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">647</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">684</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">711</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research and development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,489</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,532</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,461</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have a trade union, called &#147;hanarotelecom Trade Union,&#148; which is a member organization
of the Federation of Korean Trade Union. Of the 1,199 employees who could apply for the union
membership, 92.9% or 1,114 are members, of which seven members are serving as full-time union
members. We have not experienced any work stoppages. We consider our relations with employees to
be good.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As with most other Korean companies, our employees are granted wage increases annually. In
addition, we provide other benefits to our employees, including subsidized housing, medical care
and financial assistance with the education of their children.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In accordance with Korean labor laws, employees who terminate their employment with more than
one year of service are entitled to receive a lump sum payment based on the length of their service
and their rate of pay at the time of leaving our employment. They do not receive a pension annuity
from us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2005, we have provided loans and guarantees to our employees in the amount
of Won 15.1&nbsp;billion for the purchase of our common shares through our employee stock ownership
association. The loans are secured by the shares purchased. As of May&nbsp;31, 2006, we have also
provided housing loans to our employees in the amount of Won 8.6&nbsp;billion, of which 1.45&nbsp;billion was
newly provided during 2005. These loans are secured by accrued severance benefits of the borrowing
employees. As of May31, 2006, we have not experienced any defaults under these loans. The loans
are provided as a benefit to our employees and are not required under Korean law. Our officers and
directors are not eligible for these loans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2005, we averaged 13 part-time employees at the end of each month.
</DIV>

<P align="center" style="font-size: 10pt">62
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>E. Share Ownership</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No director or member of senior management beneficially owns 1.0% or more of our shares on an
individual basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Stock Option Plan</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may, by special resolution of the shareholders, grant stock options to our officers and
employees who have contributed or are qualified to contribute to our establishment, management and
technical innovation pursuant to our Articles of Incorporation and the Korean Securities and
Exchange Act, exercisable for up to an aggregate of 15% of our total number of issued and
outstanding shares, provided that up to an aggregate of 1% of our total number of issued and
outstanding shares may be granted by resolution of the board of directors. However, stock options
may not be granted to (1)&nbsp;our largest shareholder or its related parties, (2)&nbsp;any shareholder or
its related parties who owns, directly or indirectly, 10% or more of our outstanding shares having
voting rights or certificates of capital contribution of paid-in capital, or (3)&nbsp;an officer or
employee who becomes a major shareholder as described in paragraph (2)&nbsp;above upon exercise of the
stock option.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;According to our Articles of Incorporation, the stock options are exercisable for our common
shares at an exercise price per share determined according to relevant laws and regulations. The
stock option must be exercised within five years from the date on which the stock option may first
be exercised.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The stock option may be cancelled by a resolution of our board of directors (1)&nbsp;if the officer
or employee holding the option resigns voluntarily or is discharged from office; (2)&nbsp;if the officer
or employee holding the option by willful misconduct or by negligence inflicts substantial or
material damage to us, or (3)&nbsp;in the event of the occurrence of any cause for cancellation of stock
options specified in the stock option agreement between us and the officer or employee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;1, 1999, we granted stock options to our then Director, President and Chief Executive
Officer, Mr.&nbsp;Yun-Sik Shin. Mr.&nbsp;Shin resigned from his offices on March&nbsp;28, 2003. Until his
options are cancelled by a resolution of our board of directors, Mr.&nbsp;Shin may exercise his options
to purchase 50,000 shares of common shares at the price of Won 5,630 per share during the period
beginning on March&nbsp;1, 2002 and ending February&nbsp;27, 2007. On October&nbsp;1, 1999, we granted stock
options to some of our directors, officers and statutory internal auditor to purchase 120,000
shares of common shares at the price of Won 19,910 during the period beginning on October&nbsp;1, 2002
and ending on September&nbsp;30, 2007. The exercise price per share was set at the minimum price
permitted under the working rules of the Korean Securities and Exchange Act applicable at the time
the options were granted. Pursuant to the working rules of the Korean Securities and Exchange Act,
the formula for determining permissible price for the stock options granted on March&nbsp;1, 1999 and
October&nbsp;1, 1999 was the higher of (1)&nbsp;the average of the closing prices of the common shares during
a three month period prior to the date of the special resolution of the shareholders granting the
stock option and (2)&nbsp;the par value of the common shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;17, 2000, we granted 882 of our employees (including certain directors and officers),
employed by us as of December&nbsp;31, 1999, stock options to purchase a total of 1,771,566 common
shares at a price of Won 17,750 per share during the period beginning March&nbsp;18, 2003 and ending
March&nbsp;17, 2008. We allocated the stock options based on employee seniority and position. The
employees&#146; exercise price per share was set at the minimum price permitted under the amendment of
the working rules of the Korean Securities and Exchange Act, effective from March&nbsp;15, 2000. Under
the price formula currently in effect, the option price per share shall be the higher of (1)&nbsp;the
average of (x)&nbsp;the weighted average of the closing prices of the common shares during a two-month
period immediately preceding the option granting date, (y)&nbsp;the weighted average of the closing
prices of the common shares during the one-month period immediately preceding the option granting
date, and (z)&nbsp;the weighted average of closing prices of the common shares during the one week
period immediately preceding the option granting date, and (2)&nbsp;the par value of the common shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No stock options were granted at the shareholders&#146; meetings held in 2001, 2002 and 2003.
</DIV>

<P align="center" style="font-size: 10pt">63
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;16, 2004, we granted 1,451 of our employees (including certain directors and
officers), employed by us as of October&nbsp;25, 2004, stock options to purchase a total of 19,772,890
common shares at a strike price currently of Won 5,000 per share during the period beginning
December&nbsp;17, 2006 and ending December&nbsp;16, 2011.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;25, 2005, we granted seven of our officers stock options to purchase a total of
610,000 common shares at a price of Won 5,000 per share during the period beginning March&nbsp;26, 2007
and ending March&nbsp;25, 2012.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February&nbsp;27, 2006, we cancelled stock options granted to 13 former and current officers
(including Senior Executive Vice President Janice Lee) to purchase a total of 1.9&nbsp;million common
shares (following a voluntary surrender of such options by the holders), and on March&nbsp;8, 2006 we
cancelled stock options granted to seven officers (including then Chairman and CEO Soon Yub Kwon)
to purchase a total of 2.13&nbsp;million common shares (following a voluntary surrender of such
options by the holders). On March&nbsp;24, 2006, we granted seven of our officers (including Senior
Executive Vice President Janice Lee) stock options to purchase a total of 4.65&nbsp;million common
shares. The exercise price is Won 5,000, and the exercise period is from March&nbsp;25, 2008 to March
24, 2013.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have outstanding employee stock options to purchase a total of 17,936,481 common shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Stock Ownership Association</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An employee stock ownership association under the Employee Welfare Basic Law is an association
formed by the employees of a corporation for the purpose of acquiring and managing stocks issued by
such corporation. Only full-time workers of a corporation may join the employee stock ownership
association and officers elected by a shareholders&#146; meeting, shareholders of such corporation
(excluding certain minority shareholders), and part-time workers are not qualified to become a
member of the association. The right to become a member of the employee stock ownership
association must be available to all full-time employees and the regulations governing the
association must contain certain matters relating to the operation and management of the
association.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We established our employee stock ownership association in November&nbsp;1997. As of December&nbsp;31,
2004, 500 employees of hanarotelecom were depositing members of the employee stock ownership
association and the association held 2,667,982 shares of our common shares. As of March&nbsp;31, 2006,
370 employees of hanarotelecom were members of the employee stock ownership association and the
association held 1,088,823 common shares.
</DIV>
<DIV align="left">
<A name="109"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;7. Major Shareholders and Related Party Transactions.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>A. Major Shareholders</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth information with respect to the beneficial ownership of our
common shares, on a fully diluted basis, as of December&nbsp;31, 2005, by each person known to us to own
beneficially more than 1% of our common shares.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Shares Beneficially Owned as of</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>December 31, 2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Percent</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">AIG-Newbridge-TVG Consortium</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">182,812,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">39.56</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SK Telecom</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,090,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.78</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dacom and its affiliated companies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,727,291</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.05</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Korea Investment and Trust Management Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,993,227</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.46</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Daewoo Securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.60</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Credit Suisse Financial</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,054,513</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.31</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">64
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Shares Beneficially Owned as of</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>December 31, 2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Percent</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">NTC-SAUDI ARAB MASTER FU</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,999,155</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.08</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The number of shares held by the AIG-Newbridge-TVG Consortium includes shares directly
held by Newbridge Asia HT, L.P., AIF II NT Ltd., AOF NT, Ltd., United Classic Investment Limited
and five other HT Holdings L.P. companies. As of December&nbsp;31, 2005, Newbridge directly owned
49,535,799 common shares, AIF II NT Ltd. directly owned 38,456,250 common shares, AOF NT, Ltd.
directly owned 24,721,875 common shares, United Classic Investment Limited directly owned
20,392,746 common shares and the HT Holdings L.P. companies directly owned 49,705,830.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The number of shares held by Dacom includes shares directly held by LGEI Inc. and LG Telecom
Co., Ltd. Dacom and the other two companies are members of the LG Group. As of December&nbsp;31, 2005,
Dacom directly owned 8,964,561 common shares and LG Telecom directly owned 5,397,574 common
shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None of hanarotelecom&#146;s common shares entitles the holder to any preferential voting rights.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of April&nbsp;1, 2001, we and our Korean affiliates have been designated as member companies of
a &#147;business group subject to restrictions on debt guarantees&#148; as well as a &#147;business group subject
to restrictions on mutual shareholding&#148; by the FTC based on the new criteria prescribed by the
amended Monopoly Regulation and Fair Trade Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of the end of 2005, the number of US residents holding ADRs or our original shares
(including Deutsche Bank which was counted as one shareholder) on our shareholder registry was 72
and they owned a total of 7,139,747 common shares, or 1.55% of our outstanding common shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We know of no arrangements the operation of which may at a later time result in a change of
control.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>B. Related Party Transactions</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Relationship with AIG-Newbridge-TVG Consortium</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On November&nbsp;18, 2003, we issued common shares pursuant to an Investment Agreement dated
September&nbsp;9, 2003. The Investment Agreement provides that we will not take certain significant
corporate actions without the consent of the investors so long as the investors, together with
their affiliates, continue to hold an aggregate of 15.0% or more of our outstanding common shares.
We also entered into an Investors&#146; Rights Agreement with the investors and a Management Rights
Agreement with certain of the investors, each dated as of November&nbsp;18, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2005, the AIG-Newbridge-TVG Consortium beneficially owned an aggregate of
39.56% of our outstanding common shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Investors&#146; Rights Agreement</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the Investors&#146; Rights Agreement, we have provided certain registration rights to
the investors with respect to the shares in which they originally invested. We have agreed to file
with the U.S. Securities and Exchange Commission, or SEC, a shelf registration statement on Form
F-3 covering resales of the investors&#146; shares by the holders thereof within 90&nbsp;days after the
written request of the investors&#146; representative (made not less than 360&nbsp;days after November&nbsp;18,
2003). We are not required to effect and complete more than three such shelf registration
statements. In addition, such holders have certain rights to &#147;piggyback&#148; on other registration
statements relating to our common shares and the right to cause us to effect up to six demand
registrations pursuant to the terms of the Investors&#146; Rights Agreement. The term of this agreement
terminates upon the earlier of (1)&nbsp;the sixth anniversary of November&nbsp;18, 2003 or (2)&nbsp;the
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">date as of which all of the registrable securities have been sold pursuant to a registration
statement or the holders are permitted to sell their registrable securities under Rule 144(k) under
the Securities Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Management Rights Agreement</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the Management Rights Agreement, we have granted to certain of the investors or
their affiliates, certain management rights in hanarotelecom so long as such investor owns any the
shares in which they originally invested, including, but not limited to, the right to make
proposals, recommendations and suggestions to our board of directors, the right to discuss our and
our subsidiaries&#146; business and affairs with our board of directors, officers and independent
accountants, the right to examine our books, records and documents as may be reasonably requested
and the right to be informed in advance with respect to any significant corporate actions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Relationship with Dacom</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2005, Dacom and its affiliated companies beneficially owned 4.05% of our
common shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have entered into several interconnection agreements with Dacom with respect to Dacom&#146;s
domestic and international long distance networks and data communications network, several of our
local telephony service areas and certain telecommunications facilities. We have also acquired
from Dacom a right to use two Korea&nbsp;&#151;&nbsp;Japan international leased lines each supporting a bandwidth
capacity of 155 Mbps, three Korea&nbsp;&#151;&nbsp;Asia international leased lines (half circuits), two
Korea&nbsp;&#151;&nbsp;Vietnam international leased lines (half circuits) and two Korea&nbsp;&#151;&nbsp;Belgium leased lines (half
circuits). In addition, we have an agreement with Dacom which allows our subscribers who use Dacom
for domestic and international long-distance services to receive only one monthly statement for
local, long-distance and international call charges.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Relationship with SK chaebol</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2005, SK Telecom beneficially owned 4.78% of our outstanding shares. In
December&nbsp;1998 and in February&nbsp;2001, we entered into an interconnection agreement with SK Telecom,
under which we interconnect to SK Telecom&#146;s mobile telecommunications network and wireless paging
service network. The interconnection charges are based on the standard rates established by the
Korean government. Pursuant to the February&nbsp;2001 agreement, we entered into a further agreement
with SK Telecom in July&nbsp;2001, under which SK Telecom&#146;s mobile telecommunications network is
connected to our local telephone network in the following cities: Jeon-ju, Chang-won/Masan,
Chung-ju, Chun-ahn and Su-chun.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also leased our office space of a building in Bundang-Ku, Sungnam from SK Telecom for which
we paid a rental deposit of Won 2.1&nbsp;billion for five years from May&nbsp;3, 1999 until May&nbsp;2, 2004. We
have continued to lease the space under the same terms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Relationship with Cable Television Network System Operators</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;15, 2004, we entered into four agreements with the Joong-Ang MSO, a consortium of
12 cable television network system operators pursuant to which we agreed to sell all of our shares
in Hanaro WEB(n)TV to the Joong-Ang MSO for a purchase price of Won 32.0&nbsp;billion and to outsource
our sales, customer service and HFC cable related services to the Joong-Ang MSO. In addition, the
Joong-Ang MSO has agreed not to engage in the broadband Internet access business or to cooperate
with or enter into similar agreements or arrangements with another ISP for a period of five years
from December&nbsp;15, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have agreements with GS Digital Broadcasting, Korea Cable TV Taegu Broadcasting, Korea
Cable TV Kwangju Broadcasting, Chung-buk Broadcasting and Hanbat Cable Network pursuant to which we
agreed to provide our HFC network to these cable television network system operators. These cable
television network system operators are responsible for maintaining subscriber lines and subscriber
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">relationships (including customer service, troubleshooting and related services) within those
areas where they are licensed to provide cable broadcasting services. Through our relationships
with cable television network system operators, we seek to establish mutually beneficial
arrangements with respect to the provision of broadband Internet access, marketing, sales and
customer services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For time to time, we have provided secured or guaranteed interest-free loans to cable network
operators. These loans were provided pursuant to a loan program we commenced in 2000 as a means of
ensuring that cable television network system operators, with which we had or intended to have
network leasing arrangements, had the funds to upgrade their networks. The terms of each of those
loans require repayment after a specified period (ranging from one year to three years) from the
date of the loan by equal installments on a quarterly basis for two years. As of December&nbsp;31,
2005, we had outstanding interest-free loans to a cable network operator in the amount of Won 70
million. The loan agreements require the cable network operators to use the loan proceeds to
upgrade their systems so that our services can be provided over their networks. The loan
agreements also require the borrower to lease to us its cable network for our HFC-based Internet
access services upon completion of the system upgrade.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Relationship with Dreamline</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2001, we acquired a 32.2% equity interest in Dreamline and in January&nbsp;2002, we
entered into an agreement with Dreamline to outsource to it our subscriber sales business. Our
equity interest in Dreamline was reduced to 14.18% in January&nbsp;2004. The scope of the outsourced
business includes management of our subscribers, attracting new subscribers, receipt of
subscriptions and handling other subscription related operations. In April&nbsp;2002, we also entered
into an agreement with Dreamline to outsource to it the business of managing our marketing channels
and regional sales offices and to provide installation and customer services to our subscribers in
our HFC service areas. The term of each of these agreements is one year (renewable for one year
periods), and has been renewed on the same terms and is currently in effect. Under a stock purchase
agreement with CJ Corporation, the previous controlling shareholder of Dreamline, CJ Corporation,
has an obligation not to compete, directly or indirectly, with us in the leased line and broadband
services or other related or similar services for five years from the closing of the stock purchase
agreement. However, affiliates of CJ Corporation have been engaged in business in those service
areas, and we filed certain lawsuits against CJ Corporation to enjoin its affiliates from providing
such services and to seek monetary compensation caused by said violation and CJ Corporation&#146;s
failure to disclose certain contingent tax liabilities. See &#147;Item&nbsp;8.A. Consolidated Statements
and Other Financial Information&nbsp;&#151;&nbsp;Legal Proceedings.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>C. Interests of Experts and Counsel</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>
<DIV align="left">
<A name="110"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;8. Financial Information.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>A. Consolidated Statements and Other Financial Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The information required by this item is set forth in our consolidated financial statements
starting on page F-1 of this Annual Report.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Legal Proceedings</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Legal Proceeding related to Horizontal Collusion with other Telecommunications Companies</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2005, the Korean Fair Trade Commission, or the FTC, announced that, together with KT, we
formed a price cartel with other telecommunications companies with respect to local telephony
service, leased line service, domestic long distance telephony service and broadband service, and
imposed an
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">aggregate fine of Won 2,498&nbsp;million and certain administrative orders, including publication
of our violation in a daily newspaper. We have objected to the monetary fine and certain
administrative orders, and have subsequently filed a series of lawsuits against the FTC in the
Seoul High Court, seeking cancellation of the fines and certain administrative orders imposed by
the FTC against us. Currently, three lawsuits are pending, and the outcomes of these lawsuits are
uncertain.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following the announcement of the FTC decision, a citizen activist group announced its
intention to solicit subscribers harmed by the horizontal collusion to file a civil lawsuit against
us and KT. After such solicitation, in October&nbsp;2005, a total of 484 of our subscribers for local
telephony service have filed lawsuits seeking monetary damages from us and KT, based on the FTC
conclusion of horizontal collusion with respect to local telephony service. The lawsuits are
pending in the Seoul Central District Court and we are uncertain as to the outcome of the lawsuits.
If damages are awarded to the plaintiffs in these lawsuits, we may face additional actions from
the same subscribers based on findings of horizontal collusion with respect to other services
and/or by other subscribers based on similar grounds. The outcome of current or any possible
related lawsuits may adversely affect our competitive environment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Legal Proceedings related to Internet Outage</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;25, 2003, the Slammer Worm originating from countries such as the United States and
Australia infected the MS SQL Server 2000 of Microsoft Corporation and disrupted the Internet
service between Microsoft and a number of other Internet service providers, including us. As a
result, numerous Internet users experienced outages for five hours and five minutes on their email
servers and websites. We are a party to some legal proceedings in relation to such outages,
including one proceeding we assumed from Thrunet as a result of our merger with Thrunet.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February&nbsp;25, 2003, with the help of the Green Consumer Network, a citizen activist group,
seven customers filed a petition with the Communications Commission. On October&nbsp;13, 2003, the
Communications Commission awarded damages to the petitioners according to the terms of our standard
hanafos service agreement. However, the Communications Commission awarded only actual damages for
the disruption of service for five hours, without imposing a penalty on us, which resulted in an
award of Won 1,974 for the seven petitioners. To challenge this award, we filed a countersuit with
the Seoul Central District Court on December&nbsp;12, 2003, seeking declaratory judgment that we have no
liability against the petitioners.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;30, 2003, 1,516 Internet users (out of whom 421 were our customers), 71 Internet cafe
owners and OhmyNews, Co., Ltd., an Internet news media business, also sued a number of Internet
service providers, including us, Microsoft, and the Government for failure to provide stable
Internet service without major disruptions, negligence in maintaining a stable network system and
failure in taking necessary measures to prevent further damage. The total sum claimed by these
plaintiffs is Won 0.1&nbsp;billion. Among these lawsuits, the court rejected a lawsuit filed by OhmyNews
alleging that the defendant has no obligation to procure a stable network system against OhmyNews.
Co., Ltd., which was not a direct customer under any agreement with the defendant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The legal proceedings immediately described above (other than the lawsuit raised by OhmyNews
Co., Ltd.) are currently pending in the Seoul Central District Court. We are not certain whether
the outcome of the above legal proceedings will be decided in our favor. If we lose, we may face
additional legal actions based on similar grounds by other customers or Internet users, which could
adversely affect our business, financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Legal Proceedings against CJ corporation</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2001, we acquired 32.2% equity interest in Dreamline, which was reduced to 14.18%
in January&nbsp;2004. Under a stock purchase agreement with CJ Corporation, the previous controlling
shareholder of Dreamline, CJ Corporation, has an obligation not to compete, directly or indirectly,
with us in the leased line and broadband services or other related or similar services for five
years from the closing of the stock purchase agreement. However, CJ Corporation has continuously
been engaged in competition with us in those service areas through its affiliates, and on August
23, 2005, we commenced a
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">lawsuit in the Seoul Central District Court against CJ Corporation seeking to enjoin CJ
Corporation from engaging in such business through its affiliates. Our claim also included
compensation for damages caused by said violation and failure of CJ Corporation to disclose certain
contingent tax liabilities in connection with our acquisition of the equity interest in Dreamline
in the amount of about Won 16.8&nbsp;billion. We also filed a preliminary injunction in the competent
court seeking immediate suspension of CJ Corporation engaging in prohibited business through its
affiliates. We won the preliminary injunction in the Seoul Highest Court, and the court decided in
our favor to impose on CJ Corporation a monetary penalty equivalent to Won 20&nbsp;million per day, if
CJ Corporation continuously engages in such prohibited business during the period prohibited under
the stock purchase agreement. CJ Corporation appealed the injunction awarded by the court. The
court has not yet issued a final decision on the preliminary injunction, and the main lawsuit has
not been finally determined. We are also discussing with CJ Corporation the possible settlement of
all relevant lawsuits subject to the satisfaction of certain conditions, but a conclusive
settlement has not yet been reached.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Other Legal Proceedings</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are several other legal proceedings to which we are a party. However, such pending
legal proceedings involve minor claims, none of which is likely to have a material adverse effect
on our business or financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Dividend Policy</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under our Articles of Incorporation, we are permitted to pay dividends to our shareholders
beginning in the first fiscal year in which our aggregate carried-over loss incurred since the date
of commencement of our local telephony services has been made up in full. In addition, the
declaration and payment of dividends are subject to our earnings, our financial condition and other
factors. We may decide that it is not in our best interest to pay dividends in any particular
period. We currently expect to pay no dividends for 2006. If we declare cash dividends, the
dividends will be paid to the depositary for the ADSs in Won and then converted by the depositary
into U.S. dollars.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>B. Significant Changes</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
</DIV>
<DIV align="left">
<A name="111"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;9. The Offer and Listing</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>A. Offer and Listing Details</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Market Price Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With the enactment of the Korea Securities and Futures Exchange Act, which came into effect on
January&nbsp;27, 2005, the three existing spot and futures exchanges (which were the Korea Stock
Exchange, Korean Futures Exchange, and KOSDAQ) and KOSDAQ Committee, a sub-organization of Korea
Stock Dealers Association, were merged and integrated into a newly established joint-stock company
called the Korea Exchange Inc. or the KRX. There are three different markets run by the KRX: the
KRX Stock Market, the KRX KOSDAQ Market and the KRX Futures Market. The KRX, headquartered in
Busan, has one branch located in Seoul. Our common shares are traded on the KRX KOSDAQ Market,
under the symbol &#147;033630.&#148; Our shares were listed on Korea Securities Dealers Association
Automated Quotation Market (KOSDAQ)&nbsp;in November&nbsp;1998.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The KOSDAQ market index is computed by taking the aggregate market capitalization of all
companies included in the index as a percentage of the market capitalization of the base date (July
1, 1996), multiplied by 100. From January&nbsp;26, 2004, the base figure has changed to 1,000.
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The most widely followed price index of stocks quoted on stock exchanges in Korea is the
Korea Composite Stock Price Index, or KOSPI, an index of all equities listed on the KRX Stock
Market. The KOSPI is computed by aggregating the market capitalization of all listed companies and
(subject to certain adjustments) by expressing this aggregate as a percentage of the aggregate
market capitalization of all listed companies as of the base date (January&nbsp;4, 1980).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth, for the periods indicated, (1)&nbsp;the high and low sales price
for our common shares as reported on the KRX, (2)&nbsp;the average daily trading volume of our shares,
(3)&nbsp;the highs and lows of the KOSDAQ Index and (4)&nbsp;the highs and lows of the KOSPI:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Price per share of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Average daily</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>our common shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>trading volume of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>KOSDAQ</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>KOSPI</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>High</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Low</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>our shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>High</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Low</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>High</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Low</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Year ended December&nbsp;31</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">5,580</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">Won</TD>
    <TD align="right">1,930</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,508,725</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">876.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">460.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">704.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">468.76</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,082,647</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">943.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">436.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">937.61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">584.04</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,339,993</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">535.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">346.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">822.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">515.24</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,073,122</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">491.53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">324.71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">936.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">719.59</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,585</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,380</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,471,167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">747.96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">390.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1379.37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">870.84</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Quarter Ended</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">March&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,205</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,956,487</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">458.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">420.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">907.43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">821.26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">June&nbsp;30, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,623,955</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">491.53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">361.17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">936.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">728.98</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">September&nbsp;30, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,325</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,370</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,798,398</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">383.84</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">324.71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">857.15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">719.59</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">December&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,640</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,165</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,930,121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">382.71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">350.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">895.92</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">808.14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">March&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,585</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,865</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,192,942</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">515.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">390.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,022.79</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">870.84</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">June&nbsp;30, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,880</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,380</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,049,783</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">503.21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">423.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,010.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">911.30</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">September&nbsp;30, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,920</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,136,015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">571.95</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">492.66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,231.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,018.02</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,515</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,443,690</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">747.96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">573.19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,379.37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,140.72</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">March&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,240,090</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">754.97</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">601.33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,421.79</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,297.43</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">June&nbsp;30, 2006 (through May&nbsp;31)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,617,081</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">704.57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">620.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,464.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,295.76</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Month Ended</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,665</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,515</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,666,427</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">747.96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">688.23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,379.37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,305.98</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">January&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,510</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,593,154</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">754.97</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">601.33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,421.79</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,297.43</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">February&nbsp;28, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,720</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,395</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,895,930</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">682.36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">639.92</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,375.97</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,303.84</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">March&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,690</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,397,764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">679.19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">637.41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,367.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,309.83</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">April&nbsp;30, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,090</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,218,837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">704.57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">677.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,452.53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,379.75</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">May&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,187,909</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">691.89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">620.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,464.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,295.76</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A reverse stock split (2:1) without payment to shareholders was approved at our annual
shareholders&#146; meeting held on March&nbsp;24, 2006. As a result, the number of total outstanding shares
decreased from 463,353,012 to 231,676,506 and paid-in capital decreased from Won 2,316,765,060,000
to 1,158,382,530,000 as of May&nbsp;3, 2006, the effective date of capital reduction. Due to the
closing of the shareholder register, trading was suspended from April&nbsp;27, 2006 through May&nbsp;18,
2006. The data set forth above does not include any retroactive adjustments to the price and
trading volume of our shares for the reverse stock split. In addition, the above data were
tabulated excluding the price and trading volume of our shares during the trading suspension
period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of May&nbsp;2, 2006, the number of our shareholders was 105,502. On May&nbsp;19, 2006, the first day
of trading after capital reduction, the closing price of our common shares was Won 6,270 per share.
As of May&nbsp;30, 2006, the closing price was Won 5,880 per share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our ADSs have been quoted on the NASDAQ National Market under the symbol &#147;HANA&#148;(&#147;HANAD&#148; for 20
trading days from May&nbsp;19, 2006, which was the first day of trading after capital reduction ) since
March&nbsp;29, 2000. The price of our ADSs on NASDAQ as of its close of trading on May&nbsp;31, 2006 was
$5.59 per ADS. The table below shows the high and low closing prices of the ADSs on NASDAQ since
our listing. The following figures regarding the price and trading volume of the ADSs include the
retroactive adjustments to reflect the reverse stock split to all periods prior to such
transaction.
</DIV>

<P align="center" style="font-size: 10pt">70
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Average daily</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Price per share of our ADS</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>trading volume of</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>High</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Low</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>our shares</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Year ended December&nbsp;31</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">8.40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.84</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,970</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,449</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,981</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.76</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,860</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,420</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Quarter Ended</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">March&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.76</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,812</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">June&nbsp;30, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,710</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">September&nbsp;30, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,844</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">December&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.72</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,598</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">March&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.46</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,016</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">June&nbsp;30, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,495</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">September&nbsp;30, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,842</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,384</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">March&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,903</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">June&nbsp;30, 2006 (through May&nbsp;31)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,963</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Month Ended:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,939</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">January&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,526</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">February&nbsp;28, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,352</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">March&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,775</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">April&nbsp;30, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,085</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">May&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,437</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>B. Plan of Distribution</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>C. Markets</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our ADSs have been quoted on the NASDAQ National Market under the symbol &#147;HANA&#148; since March
29, 2000. We have decided to pursue deregistration from the SEC and delisting of our ADSs from
NASDAQ and the decision was filed with the SEC on February&nbsp;22, 2006. We will pursue the delisting
and deregistration process after the relevant law of the United States is enacted and we meet the
basic requirements for such process.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common shares have been traded on the KRX KOSDAQ Market under the symbol &#147;033630&#148; since
November&nbsp;1998.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Description of KOSDAQ</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The KOSDAQ was launched on July&nbsp;1, 1996 as an alternative investment market to the Korea Stock
Exchange, the principal stock exchange in Korea. With the enactment of the Korea Stock and Futures
Exchange Act, which came into effect on January&nbsp;27, 2005, the three existing spot and futures
exchanges (which were the Korea Stock Exchange, Korean Futures Exchange, and KOSDAQ) and KOSDAQ
Committee, a sub-organization of Korea Stock Dealers Association, were merged and integrated into a
newly established joint-stock company called the Korea Exchange Inc. The KOSDAQ, which became KRX
KOSDAQ Market, a division of newly established KRX, is originally modeled after the NASDAQ National
Market. However, unlike NASDAQ, shares listed on the KRX KOSDAQ Market are traded by the KRX
KOSDAQ Market participants and their brokers through market-makers at a physical exchange located
in Seoul, Korea. The participants also use a central electronic trading system designed to
increase the speed at which orders are matched. The trading hours for the KRX KOSDAQ Market are
9:00 a.m. to 3:00 p.m. Margin trading is not permitted on the KRX KOSDAQ Market and daily price
changes are limited to a range of 15%% of the closing price for the previous trading day.
</DIV>

<P align="center" style="font-size: 10pt">71
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The KRX KOSDAQ Market has grown significantly since its inception. As of May&nbsp;31, 2006, 925
companies were listed on the KRX KOSDAQ Market with an aggregate market capitalization of Won 66.3
trillion. The average daily turnover for 2005 was Won 1,793&nbsp;billion. Market capitalization on the
KRX KOSDAQ Market is heavily concentrated in the larger companies, with the top 10 companies
comprising approximately 22.70% of total market capitalization and the companies that rank in the
top 5% accounting for 38.41% of total market capitalization as of May&nbsp;31, 2006. Companies listing
on the KRX KOSDAQ Market must meet its listing requirements and register with the Financial
Supervisory Commission of Korea.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>D. Selling Shareholders</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>E. Dilution</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>F. Expenses of the Issue</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>

<DIV align="left">
<A name="112"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;10. Additional Information.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>A. Share Capital</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;24, 2006, our shareholders approved a capital reduction to improve our financial
structure. The capital reduction was completed on May&nbsp;3, 2006, and as a result, our issued and
outstanding shares changed to 231,676,506 common shares from 463,353,012 common shares and our
paid-in capital changed to Won 1,158,382,530,000 from Won 2,316,756,060,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>B. Memorandum and Articles of Incorporation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The section below provides summary information relating to the material terms of our capital
stock and our Articles of Incorporation. It also includes a brief summary of certain provisions of
the Securities and Exchange Act, the Commercial Code and related laws of Korea, all as currently in
effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Objectives</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Article&nbsp;2 of our Articles of Incorporation states our objectives as follows:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to play a leading role in the nation&#146;s efforts to accomplish a society of
multimedia super-highway telecommunications industry by efficient performance of
telecommunications business;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to establish and operate the nation&#146;s second basic communication service network,
as a preparation against any national disaster or calamity, by establishing
diversified communication channels and an automatic recovery system; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to enhance the improvement of end users&#146; convenience and public welfare.</TD>
</TR>

</TABLE>
</DIV>
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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>General</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Currently, we are authorized to issue 700,000,000 shares of stock. Under our Articles of
Incorporation, we are authorized to issue four classes of stock, which are registered common stock,
registered preferred stock, registered convertible stock and registered redeemable stock. Our
issued and outstanding shares are all registered common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of June&nbsp;13, 2006, and as a result of a recent capital reduction, we had a total of
231,676,506 shares issued and outstanding. All of the issued and outstanding shares are fully paid
and non-assessable and are in registered form. We may issue additional shares without further
shareholders&#146; approval as provided in our Articles of Incorporation. The unissued shares remain
authorized until an amendment to our Articles of Incorporation changes the status of the authorized
shares to unauthorized shares. We can issue share certificates in denominations of up to 10,000
shares. Our common shares have a par value of Won 5,000 per share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Directors</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No director who has a special interest in a matter for resolution can exercise his vote upon
such matter. Under the recent amendment of the Korean Securities and Exchange Act, we are
prohibited from lending money (or other equivalent assets) to, or providing security or
guaranteeing in favor of each of our board of directors or any of our major shareholders (including
any specially related person), except in certain circumstances.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Dividends</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under our Articles of Incorporation, we may pay dividends to our shareholders beginning in the
first fiscal year in which our aggregate carried-over losses incurred since the date of
commencement of our local telephony services have been made up in full. From such fiscal year, we
may distribute dividends to our shareholders in proportion to the number of shares owned by each
shareholder following the approval by the shareholders at an annual general meeting of
shareholders. The shares represented by the ADSs have the same dividend rights as common shares.
We will pay full annual dividends on shares issued during such fiscal year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may declare dividends at the annual general meeting of shareholders, which is held within
three months after the end of a fiscal year. Dividends will be paid shortly after the annual
general meeting declaring such dividends. We may distribute dividends in cash or in shares.
However, a dividend in shares must be distributed at par value. If the market price of the shares
is less than par value, dividends in shares may not exceed one-half of the annual dividends. We
have no obligation to pay any dividend unclaimed for five years from the payment date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Korean Commercial Code, we may pay an annual dividend only out of the excess of our
net assets, on a non-consolidated basis, over the sum of (1)&nbsp;our stated capital, (2)&nbsp;the total
amount of our capital surplus reserve and legal reserve accumulated up to the end of the relevant
dividend period and (3)&nbsp;the legal reserve to be set aside for the annual dividend. In addition, we
may not pay an annual dividend unless we have set aside as legal reserve an amount equal to at
least 10% of the cash portion of the annual dividend or unless we have accumulated a legal reserve
of not less than one-half of our stated capital. We may not use legal reserves to pay cash
dividends but may transfer amounts from legal reserves to reduce an accumulated deficit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Distribution of Free Shares</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to paying dividends in shares out of our retained or current earnings, we may also
distribute to our shareholders an amount transferred from our capital surplus or legal reserve to
our stated capital in the form of free shares. We must distribute such free shares to all our
shareholders in proportion to their existing shareholdings.
</DIV>

<P align="center" style="font-size: 10pt">73
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Preemptive Rights and Issuance of Additional Shares</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may issue authorized but unissued shares at the times and, unless otherwise provided in the
Korean Commercial Code, on such terms as our board of directors may determine. We must offer new
shares on uniform terms to all shareholders who have preemptive rights and are listed on our
shareholders&#146; register as of the relevant record date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our shareholders are entitled to subscribe for any newly issued shares in proportion to the
number of shares they own, except that under our Articles of Incorporation, if the new shares will
be (1)&nbsp;issued to the public in accordance with the Korean Securities and Exchange Act, (2)&nbsp;issued
by public offering in accordance with the Korean Securities and Exchange Act, (3)&nbsp;issued to our
employee stock ownership association as provided in the Korean Securities and Exchange Act, (4)
issued in the form of depositary receipts in accordance with the Korean Securities and Exchange
Act, (5)&nbsp;issued upon the exercise of stock options which are provided in accordance with the
relevant provision of the Korean Securities and Exchange Act, (6)&nbsp;issued to a foreign
telecommunications company or a foreign financial or investment company that has completed the
foreign investment procedures for the purpose of a strategic alliance relating to our business or
(7)&nbsp;issued to domestic and foreign investors or our officers or employees up to an amount not
exceeding 50% of the then current total issued and outstanding shares for the purpose of realizing
our business objectives, including, but not limited to, improving our financial structure and
entering into new business areas, our board of directors may pass a resolution to issue the new
shares to persons other than existing shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We must give public notice of preemptive rights regarding new shares and their transferability
at least two weeks before the relevant record date. We will notify shareholders who are entitled
to subscribe for newly issued shares of the deadline for subscription at least two weeks prior to
such deadline. If a shareholder fails to subscribe by the deadline, the shareholder&#146;s preemptive
rights will lapse. Our board of directors may determine how to distribute shares for which
preemptive rights have not been exercised and fractional shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Korean Securities and Exchange Act, employee stock ownership associations of the
companies that are listed or will be listed on the KRX Stock Market generally have a preemptive
right to subscribe for up to 20% of the shares publicly offered. Although we are not a company
whose shares are listed on the KRX Stock Market, we have by our Articles of Incorporation opted to
grant a right of preemption to our employee stock ownership association on the same terms as are
applicable to companies listed on the KRX Stock Market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>General Meeting of Shareholders</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We hold the annual general meeting of shareholders within three months after the end of each
fiscal year. Subject to a board resolution or court approval, we may hold an extraordinary general
meeting of shareholders:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>as necessary;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>at the request of holders of an aggregate of 3% or more of our outstanding shares;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>at the request of shareholders holding an aggregate of 1.5% or more of our
outstanding shares for at least six months; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>at the request of our audit committee.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We must give shareholders written notice setting out the date, place and agenda of the meeting
at least two weeks prior to the general meeting of shareholders. However, for holders of less than
1% of the total number of issued and outstanding voting shares, we may give notice by placing not
less than two notices in each of the two daily newspapers published in Seoul, Korea such as &#147;The
Seoul Shinmun&#148; and &#147;Maeil Economic Daily Newspaper,&#148; at least two weeks in advance of the meeting.
Shareholders not on
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">the shareholders&#146; register as of the record date are not entitled to receive notice of the
general meeting of shareholders or attend or vote at the meeting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our shareholders&#146; meetings are held in Seoul, Korea.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Voting Rights</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders of our shares are entitled to one vote for each share. However, shares held by us
(i.e., treasury shares) or by any corporate entity in which we have, directly or indirectly,
greater than a 10% interest, do not exercise voting rights. The Korean Commercial Code permits
cumulative voting pursuant to which each share entitles the holder thereof to multiple voting
rights equal to the number of directors to be elected at such time. A holder of shares may
exercise all voting rights with respect to his or her shares cumulatively to elect one director,
unless the Articles of Incorporation provide otherwise. However, our Articles of Incorporation do
not provide for cumulative voting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our shareholders may adopt resolutions by an affirmative vote of the voting shares present or
represented at the meeting, where the affirmative votes also represent at least one-fourth of our
total voting shares then issued and outstanding. However, under the Korean Commercial Code and our
Articles of Incorporation, the following matters require approval by the holders of at least
two-thirds of the voting shares present or represented at a meeting, where the affirmative votes
also represent at least one-third of our total voting shares then issued and outstanding:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>amending our Articles of Incorporation;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>removing a director;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>effecting a capital reduction;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>effecting any dissolution, merger or consolidation with respect to us;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>transferring all or any significant part of our business;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the acquisition of all of the business of any other company;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the acquisition of a part of the business of any other company, which significantly
affects our business;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>lease of entire business, delegation of business operations, or the execution,
modification or cancellation of agreements from which profit/losses shall affect both
parties;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>issuing new shares at a price below par value; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any other matters for which a resolution is required under relevant laws and regulations.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholders may exercise their voting rights by proxy. Under our Articles of Incorporation,
the person exercising the proxy does not have to be a shareholder. A person with a proxy must
present a document evidencing its power of attorney in order to exercise such voting rights.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders of ADRs exercise their voting rights through the ADR depositary. Subject to the
provisions of the deposit agreement, ADR holders are entitled to instruct the depositary as to how
to vote the shares underlying their ADSs.
</DIV>


<P align="center" style="font-size: 10pt">75
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Rights of Dissenting Shareholders</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In some limited circumstances, including the transfer of all or any significant part of our
business and our merger or consolidation with another company, dissenting shareholders have the
right to require us to purchase their shares. To exercise this right, shareholders must submit to
us a written notice of their intention to dissent before the applicable general meeting of
shareholders. Within 20&nbsp;days after the relevant resolution is passed, the dissenting shareholders
must request us in writing to purchase their shares. We are obligated to purchase the shares of
dissenting shareholders within two months after the expiration of the 20-day period. The purchase
price for the shares is required to be determined through negotiations between the dissenting
shareholders and us. If an agreement on the purchase price for the shares is not made within 30
days from the date of our receipt of the dissenting shareholders&#146; request, we or such dissenting
shareholder may request a court in Korea to determine the purchase price. Holders of ADSs will not
be able to exercise dissenter&#146;s rights unless they withdraw the underlying common shares and become
our direct shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Register of Shareholders and Record Dates</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our transfer agent maintains the register of our shareholders at its office in Seoul, Korea.
It registers transfers of shares on the register of shareholders on presentation of the share
certificates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The record date for annual dividends is December&nbsp;31 of each year. For the purpose of
determining shareholders entitled to annual dividends, the register of shareholders may be closed
for the period from the day after the record date to the next annual general meeting of
shareholders. Further, for the purpose of determining the shareholders entitled to some other
rights pertaining to the shares, we may, on at least two weeks&#146; public notice, set a record date
and/or close the register of shareholders for not more than three months. The trading of shares
and the delivery of share certificates may continue while the register of shareholders is closed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Annual Report</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At least one week before the annual general meeting of shareholders, we must make our annual
report and audited non-consolidated financial statements available for inspection at our principal
office and at all of our branch offices. In addition, copies of annual reports, the audited
consolidated financial statements and any resolutions adopted at the general meeting of
shareholders will be available to our shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Korean Securities and Exchange Act, we must file with the Financial Supervisory
Commission and the KRX (1)&nbsp;an annual report within 90&nbsp;days after the end of our fiscal year, (2)&nbsp;a
half year report within 45&nbsp;days after the end of the first six months of our fiscal year and (3)
quarterly reports within 45&nbsp;days after the end of the third month and the ninth month of our fiscal
year. Copies of these reports are or will be available for public inspection at the FSC and the
KRX.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Transfer of Shares</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Korean Commercial Code, the transfer of shares is effected by delivery of share
certificates. However, to assert shareholders&#146; rights against us, the transferee must have his
name and address registered on our register of shareholders. For this purpose, a shareholder is
required to file his name, address and seal or specimen signature with our transfer agent. A
non-Korean shareholder may file a specimen signature in place of a seal, unless he is a citizen of
a country with a sealing system similar to that of Korea. In addition, a non-resident shareholder
must appoint an agent authorized to receive notices on his behalf in Korea and file a mailing
address in Korea. The above requirement does not apply to the holders of ADSs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under current regulations, Korean securities companies and banks, including licensed branches
of non-Korean securities companies and banks, investment management companies, an entity licensed
to be engaged in futures transaction business under the Korean Futures Transaction Law,
internationally
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">recognized foreign custodians and the Korea Securities Depository may act as agents and
provide related services for foreign shareholders. Certain foreign exchange controls and
securities regulations apply to the transfer of shares by non-residents or non-Koreans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our transfer agent is Korea Securities Depository, located at 34-6, Yoido-dong,
Youngdeungpo-ku, Seoul, Korea.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Acquisition of Shares by hanarotelecom</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may not acquire our own shares except in limited circumstances, such as reduction in
capital and acquisition of our own shares for the purpose of granting stock options to our officers
and employees. Under the Korean Commercial Code and the Korean Securities and Exchange Act, except
in the case of a reduction of capital (in which case we must retire the shares immediately), we
must resell any shares acquired by us to a third party within a reasonable time. Notwithstanding
the foregoing restrictions, under the Korean Securities and Exchange Act, we may acquire our own
shares through purchases on the KRX KOSDAQ Market or through a tender offer. The aggregate
purchase price for the shares may not exceed the total amount available for distribution of
dividends at the end of the preceding fiscal year less the amounts of dividends and legal reserves
required to be set aside for that fiscal year, subject to certain procedural requirements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Corporate entities in which we own a 50% or greater equity interest may not acquire our
shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Liquidation Rights</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the event of our liquidation, after payment of all debts, liquidation expenses and taxes,
our remaining assets will be distributed among shareholders in proportion to their shareholdings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Inspection of Books and Records</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Korean Commercial Code, any individual shareholder or shareholders having at least
3% of all outstanding shares (irrespective of voting or non-voting shares) of a Korean corporation
may inspect the books and records of the corporation. Under the Korean Securities and Exchange
Act, any individual shareholder or shareholders holding an aggregate of 0.1% or more of all
outstanding shares (irrespective of voting or non-voting shares) of a Korean corporation for at
least six months may inspect the books and records of the corporation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Effect of Korean Law</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For a description of the effect of relevant Korean laws applicable to us, see &#147;Item&nbsp;4.B.
Business Overview&#151;Korean Telecommunications Laws and Regulations,&#148; &#147;Item&nbsp;10.D. Exchange Controls&#148;
and &#147;Item&nbsp;10.E. Taxation&#151;Korean Tax Considerations.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>B. Material Contracts</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Thrunet Acquisition Agreement</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February&nbsp;4, 2005, we entered into an agreement with the court receiver for Thrunet relating
to the acquisition of Thrunet by us. Under the agreement, we agreed to acquire 99,240,000 Thrunet
common shares and an aggregate of Won 223.3&nbsp;billion of newly issued debt securities of Thrunet for
a combined purchase price of approximately Won 471.4&nbsp;billion. On the day of the agreement, we paid
a deposit in the amount of Won 47.1&nbsp;billion in total, equivalent to 10% of the acquisition price.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the amended reorganization plan which was approved by Thrunet&#146;s creditors committee,
interested parties&#146; meeting and the bankruptcy court, Thrunet reduced its capital and as a result,
we acquired 96.22% of Thrunet&#146;s outstanding common shares. The Thrunet acquisition agreement
requires
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">50% of the shares to be acquired by us to be locked up for a one-year period in an account
with the Korea Securities Depository.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The agreement provided for limited indemnification. We are not able to claim any damages from
Thrunet, the reorganization court or the lead manager for the Thrunet acquisition transaction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Investment Agreement between hanarotelecom and an Investment Consortium led by AIG, Newbridge
and TVG</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;9, 2003, we entered into an Investment Agreement with AIF II NT, Ltd., AIG Asian
Opportunity Fund L.P. (which later assigned its rights and obligations under the Investment
Agreement to AOF NT, Ltd.) and Newbridge Asia HT, L.P., referred to as the sponsors below,
providing for, among other things, the issuance by us and purchase by the sponsors, together with
co-investors designated by the sponsors (together, referred to as the &#147;investors&#148;), of an aggregate
of 182,812,500 common shares of hanarotelecom at a purchase price of Won 3,200 per share having an
aggregate value of Won 585&nbsp;billion. The Investment Agreement provides that we will not take
certain significant corporate actions without the consent of the investors so long as the
investors, together with their affiliates, continue to hold an aggregate of 15% or more of our
outstanding common shares. In connection with the Investment Agreement, we entered into an
Investors&#146; Rights Agreement with the investors and a Management Rights Agreement with certain of
the investors, each dated as of November&nbsp;18, 2003. A summary of each such agreement is set forth
below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Investors&#146; Rights Agreement</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the Investors&#146; Rights Agreement, we have provided certain registration rights to
the investors with respect to the shares, in which they invested. We have agreed to file with the
SEC a shelf registration statement on Form F-3 covering resales of those shares by the holders
thereof within 90&nbsp;days after the written request of the investors&#146; representative (made not less
than 360&nbsp;days after November&nbsp;18, 2003). We are not required to effect and complete more than three
such shelf registration statements. In addition, the holders have certain rights to &#147;piggyback&#148; on
other registration statements relating to our common shares and the right to cause us to effect up
to six demand registrations pursuant to the terms of the Investors&#146; Rights Agreement. The term of
this agreement terminates upon the earlier of (1)&nbsp;the sixth anniversary of November&nbsp;18, 2003 or (2)
the date as of which all of the registrable securities have been sold pursuant to a registration
statement or the holders are permitted to sell their registrable securities under Rule 144(k) under
the Securities Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Management Rights Agreement</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the Management Rights Agreement, we have granted to certain of the investors or
their affiliates, certain management rights in hanarotelecom so long as such investor owns any
shares, in which they invested, including the right to make proposals, recommendations and
suggestions to our board of directors, the right to discuss our and our subsidiaries&#146; business and
affairs with our board of directors, officers and independent accountants, the right to examine our
books, records and documents as may be reasonably requested and the right to be informed in advance
with respect to any significant corporate actions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Indenture relating to 7% Notes due 2012</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February&nbsp;1, 2005, we issued an aggregate principal amount of $500&nbsp;million of 7% notes due
2012 pursuant to an indenture between us and Deutsche Bank Trust Company Americas, as trustee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Principal, Maturity and Interest</I>. The notes are limited in initial aggregate principal amount
to $500&nbsp;million and will mature on February&nbsp;1, 2012. Interest on the notes accrues at the rate of
7% per annum and is payable semiannually on February 1 and August 1 of each year, commencing August
1, 2005.
</DIV>

<P align="center" style="font-size: 10pt">78
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We will pay Korean taxes imposed upon the payment of the principal, interest and premium,
unless deduction or withholding is required by law, or otherwise required under the indenture.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may enter into supplemental indentures for various purposes, with or without consent of
existing security holders. If the holders of at least a majority in principal amount of the
outstanding securities consent, we and the trustee may enter into a supplemental indenture for the
purpose of changing the provisions of the indenture. However, no such supplemental indenture will:
(1)&nbsp;change the stated maturity of the securities; (2)&nbsp;reduce the principal amount of, or any
interest on, or additional amounts payable on, the securities; (3)&nbsp;change the place or currency in
which the securities are payable; (4)&nbsp;impair the right to institute suit for the enforcement of any
payment on any security; or (5)&nbsp;reduce the quorum requirements to modify the indenture.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Ranking</I>. The notes will rank equally in right of payment to all existing and future unsecured
debt of hanarotelecom which is not subordinated to the notes by its express terms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Covenants</I>. The indenture constrains our ability to assume additional external indebtedness
secured by a lien on particular properties. In addition, we are prohibited from entering into any
sale/leaseback transaction unless otherwise provided in the indenture. Moreover, under certain
conditions of the indenture, we are restricted in our ability to consolidate or merge into, or
sell, transfer, lease or convey our assets to any corporation organized under Korean law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Redemption</I>. We will make an offer to redeem all outstanding securities at a redemption price
equal to 101% of the principal amount thereof, plus accrued and unpaid interest and applicable
Korean taxes, in the event that a change of control of hanarotelecom and subsequent reduction in
rating with respect to the securities occurs after November&nbsp;13, 2008, or after the cancellation of
hanarotelecom&#146;s senior secured credit facility agreement with various financial institutions.
hanarotelecom is not required to redeem outstanding securities under the above conditions if a
third party offers to redeem all outstanding securities at the same or a higher redemption price.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The outstanding securities may also be redeemed at our option in whole at a redemption price
equal to 100% of the aggregate outstanding principal amount of the securities, plus accrued
interest, if a change in Korean law would oblige hanarotelecom to pay additional taxes with respect
to the securities and such obligation cannot be avoided by the use of reasonable measures available
to us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Events of Default</I>. Events of default under the indenture include, among other things: (1)
defaults in the payment of principal or any installment of interest; (2)&nbsp;default in the compliance
with covenants contained in the indenture; (3)&nbsp;default on an aggregate outstanding principal amount
of $10&nbsp;million or more of other indebtedness; (4)&nbsp;reduction in rating in connection with a merger
transaction that occurs after November&nbsp;13, 2008, or after the cancellation of hanarotelecom&#146;s
senior secured credit facility agreement with various financial institutions; (5)&nbsp;a governmental
finding of hanarotelecom&#146;s bankruptcy or insolvency; and (6)&nbsp;hanarotelecom&#146;s voluntary commencement
of a case of bankruptcy or insolvency.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon the occurrence of an event of default, the trustees or the holders of at least 25% of the
aggregate principal amount of the outstanding securities may declare the principal amount of the
securities immediately due and payable. The holders of a majority in aggregate principal amount of
the outstanding securities may annul the acceleration of payment if: the annulment does not
conflict with any judgment or decree; all existing events of default have been cured or waived
except nonpayment of the principal amount plus premium and default interest; and compensation to
the trustee has been paid.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Secured Credit Facility Agreement</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;21, 2005, we entered into a secured credit facility agreement with a number of
financial institutions, with The Korea Development Bank acting as paying agent and security agent.
Under this agreement, the lenders provided to us four credit facilities that consist of the
following:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a U.S. dollar denominated term loan facility in an aggregate amount equal to
U.S.$201,809,520, referred to as the &#147;Facility A Loan&#148; below,</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">79
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a Korean Won denominated term loan facility in the aggregate amount equal to Won
250,047,620,000, referred to as the &#147;Facility B1 Loan&#148; below,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a U.S. dollar denominated term loan facility in the aggregate amount equal to
U.S.$208,142,860, referred to as the &#147;Facility B2 Loan&#148; below, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a revolving credit facility in the aggregate amount equal to Won 60,000,000,000,
referred to as the &#147;Facility C Loan&#148; below.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Repayment of Term Loans</I>. We will repay the loan facilities in installments by repaying a
certain percentage of the principal amount on dates specified in the agreement. For the Facility A
Loan, the first installment was made on February&nbsp;13, 2006, and the last installment will be made on
November&nbsp;13, 2008. The percentage of principal to be repaid in any single installment ranges from
3.75% to 11.25%. For the Facility B1 Loan and Facility B2 Loan, the initial installments will be
made on February&nbsp;13, 2007, and the last installments will be made on May&nbsp;13, 2010. The percentage
of principal to be repaid in any single installment ranges from 6.0% to 8.0%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Change of Control</I>. The agreement provides that upon the occurrence of a &#147;change of control
triggering event,&#148; we will be required to repay the full amount of the outstanding loan and cancel
the lender&#146;s obligations under the facilities. For the purposes of the agreement, a &#147;change of
control triggering event&#148; means the occurrence of both a change of control and a reduction in the
rating with respect to our debt securities or, in the event that our debt securities cease to be
outstanding or rated, our company rating. A change of control means the consummation of any
transaction in which any person or group other than AIG Investors, the Newbridge Investor, TVD Ltd.
or any other company or partnership that is directly or indirectly controlled by American
International Group, Inc., Newbridge Capital, Inc. or TVG Ltd. is or becomes the beneficial owner
of more than 45% of our voting stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Voluntary Cancellation</I>. Subject to certain conditions, we may cancel a lender&#146;s available
commitments with respect to a facility, in whole or in part. The minimum amount we may cancel is
Won 25&nbsp;billion or the equivalent amount.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Voluntary Prepayments</I>. Subject to some conditions, we are permitted to prepay all or a part
of the loans and the amount prepaid is applied pro rata towards prepayment of the loans in the
following order:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>First, towards prepayment of outstanding amounts under the Facility B1 Loan and
Facility B2 Loan on a pro rata basis according to their respective outstanding
amounts,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Second, towards prepayment of outstanding amounts under the Facility A Loan, and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Finally, towards prepayment of outstanding amounts under the Facility C Loan.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The minimum amount we may prepay is Won 25&nbsp;billion or the equivalent amount.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Interest and Expenses</I>. Borrowings under each loan will bear interest at the rate which is the
aggregate of the applicable base rate and the applicable margin. The interest period starts on the
date on which the loan is made or on the last day of its precedent interest period, and ends on the
next following quarterly date in the case of the Facility A loan or Facility B2 Loan or annual date
in the case of the Facility B1 Loan. The interest period for a loan under Facility C Loan starts
on the date on which the loan is made and ends on the next following quarterly date. The agreement
also provides for certain conditions, including a market disruption event, under which the
calculation of interest may change. The following table summarizes the applicable interest rates
for each loan:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="35%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="39%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Base Rate</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Margin</B><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Facility A Loan
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">3-month LIBOR
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.850</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Facility B1 Loan
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">3-year A&#043;-rated corporate bond base rate
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2.050</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">80
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="35%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="39%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Base Rate</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Margin</B><SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Facility B2 Loan
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">3-month LIBOR
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2.050</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Facility C Loan
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">91-day CD base rate
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2.075</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>The margins may be adjusted by up to 0.75&nbsp;percentage points if our credit rating is upgraded.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Ranking</I>. Our payment obligations under the secured credit facility agreement rank
equally with the claims of all of our other unsecured and unsubordinated creditors, except for
obligations mandatorily preferred by law. We have granted a security interest with respect to a
significant portion of our property to the lenders under the secured credit facility agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Events of Default</I>. Events of default under the agreement include, among other things: (1)
default in payment; (2)&nbsp;breach of certain covenants and other obligations under the agreement; (3)
misrepresentation; and (4)&nbsp;insolvency. In the event of default, all commitments are immediately
cancelled and all loans, together with accrued interest and other outstanding amounts, are
immediately due and payable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Covenants</I>. The agreement contains various affirmative, negative and financial covenants.
Limitations upon us under the agreement relate to, among other things: (1)&nbsp;aggregate capital
expenditure; (2)&nbsp;corporate status; (3)&nbsp;hedging arrangements; (4)&nbsp;subsidiary guarantees; (5)
disposal of assets; (6)&nbsp;liens and lease transactions; (7)&nbsp;corporate restructuring; (8)
acquisitions; (9)&nbsp;loans and guarantees; and (10)&nbsp;dividends and distributions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>TV-Portal and IP-TV Business Cooperation Agreement among hanarotelecom, Celrun Co., Ltd. and
CelrunTV</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February&nbsp;6, 2006, we signed a Memorandum of Understanding with Celrun Co., Ltd., CelrunTV
(whose corporate name was changed to hanaromedia Inc. and became our affiliated company on May&nbsp;2,
2006) and Young-Min Kim, who is Representative Director and shareholder of CelrunTV, regarding the
transfer of a portion of the common shares of CelrunTV and the future issuance of new shares of
CelrunTV. We also signed a business cooperation agreement. Pursuant to the agreements, we
initially acquired 780,000 registered common shares of CelrunTV, representing 65% of its total
outstanding shares (par value of Won 5,000 per share), for Won 5.5&nbsp;billion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following our initial acquisition, CelrunTV carried out a capital increase amounting to Won 20
billion through a new share issue at the end of March&nbsp;2006. The Memorandum of Understanding
provides that we will acquire 65% of such newly issued shares at Won 13&nbsp;billion, Won 6.5&nbsp;billion of
which was acquired at the end of March&nbsp;2006, and the other Won 6.5&nbsp;billion of which will be
acquired by the end of June&nbsp;2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Provision of services. </I>We will provide our broadband Internet subscribers with TV-Portal
service, Internet-based TV video-on-demand, or VOD, service and Internet-based IP-TV service.
Revenues accrued from the provision of these services will be recognized as our revenues. For
broadband subscribers of other Internet service providers and B2B subscribers, CelrunTV will
provide the services, and the relevant revenues will be recognized as revenues of CelrunTV.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Exclusive use and provision of services. </I>We have agreed to obtain the services only through
CelrunTV for five years from the date of the agreement unless Celrun Co., Ltd.&#146;s stake in CelrunTV
becomes less than 10%. Celrun Co., Ltd. will be the exclusive supplier of set-top boxes for two
years if it can supply them at the lowest unit price compared to other suppliers and will not
discontinue supplying set-top boxes or after-sale services as long as we or CelrunTV provide the
services.
</DIV>

<P align="center" style="font-size: 10pt">81
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>D. Exchange Controls</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>General</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Korean Foreign Exchange Transaction Law and the Presidential Decree and regulations under
such Act and Decree (collectively, the &#147;Foreign Exchange Transaction Laws&#148;) regulate investment in
Korean securities by non-residents and issuance of securities outside Korea by Korean companies.
Under the Foreign Exchange Transaction Laws, non-residents may invest in Korean securities only to
the extent specifically allowed by such laws or otherwise permitted by the MOFE. The FSC has also
adopted, pursuant to its authority under the Korean Securities and Exchange Act, regulations that
restrict investment by foreigners in Korean securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Foreign Exchange Transaction Laws, if the government deems that certain emergency
circumstances, including, but not limited to, extreme difficulty in stabilizing the balance of
payments or substantial disturbance in the Korean financial and capital markets, are likely to
occur, it may impose any necessary restrictions, such as requiring foreign investors to obtain
prior approval from the MOFE for the acquisition of Korean securities or for the repatriation of
dividends or sales proceeds arising from Korean securities or from disposition of such securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Reporting Requirements for Holders of Substantial Interests</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any person whose direct or beneficial ownership of shares (whether in the form of shares or
ADSs), certificates representing the right to subscribe for shares and certain equity-related debt
securities, such as convertible bonds and bonds with warrants (collectively, the &#147;Equity
Securities&#148;), together with the Equity Securities beneficially owned by certain related persons or
by any person acting in concert with such person that account for 5% or more of the total
outstanding Equity Securities, is required to report the status and purpose (in terms of whether
the purpose of shareholding is to affect control over management of the issuer) of such holding to
the FSC and the KRX within five business days after reaching the 5% ownership interest threshold.
In addition, any change (1)&nbsp;in the ownership interest subsequent to such report which equals or
exceeds 1% of the total outstanding Equity Securities, or (2)&nbsp;in the shareholding purpose, is
required to be reported to the FSC and the KRX within five business days from the date of such
change. However, the reporting deadline of such reporting requirement is extended for
institutional investors who hold shares for purposes other than management control to the tenth day
of the month immediately following the month in which the shares were acquired or the shareholdings
were otherwise changed. Those who report that the purpose of their shareholding is to affect
control over management of the issuer are prohibited from exercising their voting rights and
acquiring additional shares for five days subsequent to the report under the recently amended
Korean Securities and Exchange Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Violation of these reporting requirements may subject a person to criminal sanctions, such as
fines or imprisonment, and may result in a loss of voting rights with respect to the ownership of
Equity Securities exceeding 5%. Furthermore, the FSC may issue an order to dispose of such
non-reported Equity Securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Restrictions Applicable to ADSs</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No Korean governmental approval is necessary for the sale and purchase of ADSs in the
secondary market outside Korea or for the withdrawal of shares underlying ADSs and the delivery
inside Korea of shares in connection with such withdrawal, provided that a foreigner who intends to
acquire such shares must obtain an Investment Registration Card from the Financial Supervisory
Service as described below. The acquisition of such shares by a foreigner must be reported
immediately by the foreigner or his standing proxy in Korea to the Governor of the Financial
Supervisory Service (the &#147;Governor&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Persons who have acquired shares as a result of the withdrawal of shares underlying the ADSs
may exercise their preemptive rights for new shares, participate in free distributions and receive
dividends on shares without any further governmental approval.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Restrictions Applicable to Shares</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result of amendments to the Foreign Exchange Transaction Laws and FSC regulations
(together, the &#147;Investment Rules&#148;) adopted in connection with the stock market opening from January
1992 and after that date, foreigners may invest, with certain exceptions and subject to certain
procedural requirements, in all shares of Korean companies, whether listed on the KRX Stock Market
or the KRX KOSDAQ Market, unless prohibited by specific laws. Foreign investors may trade shares
listed on the KRX Stock Market or the KRX KOSDAQ Market only through the KRX Stock Market or the
KRX KOSDAQ Market, except in limited circumstances, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>odd-lot trading of shares;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>acquisition of shares by exercise of warrant, conversion right under equity-linked
securities or withdrawal right under depositary receipts issued outside of Korea by a
Korean company (&#147;Converted Shares&#148;);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>acquisition of shares by foreign companies as a result of merger;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>acquisition of shares as a result of inheritance, donation, bequest or exercise of
shareholders&#146; rights, including preemptive rights or rights to participate in free
distributions and receive dividends;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>acquisition of shares offered and subscribed overseas for listing on foreign
securities exchanges;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>over-the-counter transactions between foreigners of a class of shares for which the
ceiling on aggregate acquisition by foreigners, as explained below, has been reached
or exceeded;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>acquisition of underlying shares by an overseas depositary in relation to the
issuance of depositary receipts;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>disposition of shares through the exercise of dissenting shareholder&#146;s appraisal
right;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>acquisition of shares by direct investment pursuant to the Foreign Investment
Promotion Act and disposition of shares so acquired;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>acquisition or disposition of shares through a tender offer; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>acquisition or disposition of shares through the electronic over-the-counter market
brokerage companies.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For over-the-counter transactions of shares between foreigners outside the KRX Stock Market or
the KRX KOSDAQ Market for shares with respect to which the limit on aggregate foreign ownership has
been reached or exceeded, a securities company licensed in Korea must act as an intermediary.
Odd-lot trading of shares outside the KRX Stock Market or the KRX KOSDAQ Market must involve a
licensed securities company in Korea as the other party. Foreign investors are prohibited from
engaging in margin transactions by using securities borrowed from securities companies in Korea
with respect to shares that are subject to a foreign ownership limit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Investment Rules require a foreign investor who wishes to invest in shares on the KRX
Stock Market or the KRX KOSDAQ Market (including Converted Shares) to register its identity with
the FSS prior to making any such investment; however, such registration requirement does not apply
to foreign investors who acquire Converted Shares with the intention of selling such Converted
Shares within three months from the date of acquisition thereof. Upon registration, the FSS will
issue to the foreign investor an Investment Registration Card which must be presented each time the
foreign investor opens a brokerage
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">account with a securities company. Foreigners eligible to obtain an Investment Registration
Card include foreign nationals who are individuals residing abroad for more than six months,
foreign governments, foreign municipal authorities, foreign public institutions, international
financial institutions or similar international organizations, corporations incorporated under
foreign laws and any person in any additional category designated by decree of the MOFE. All
Korean offices of a foreign corporation as a group are treated as a separate foreigner from the
offices of the corporation outside Korea. However, a foreign corporation or depositary issuing
depositary receipts may obtain one or more Investment Registration Cards in its name in certain
circumstances as described in the relevant regulations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon a foreign investor&#146;s purchase of shares through the KRX Stock Market or the KRX KOSDAQ
Market, no separate report by the investor is required because the Investment Registration Card
system is designed to control and oversee foreign investment through a computer system. However, a
foreign investor&#146;s acquisition or sale of shares outside the KRX Stock Market (as discussed above)
must be reported by the foreign investor or his standing proxy to the Governor at the time of each
such acquisition or sale; provided, however, that a foreign investor must ensure that any
acquisition or sale by it of shares outside the KRX Stock Market or the KRX KOSDAQ Market, in the
case of trades in connection with a tender offer, odd-lot trading of shares or trades of a class of
shares for which the aggregate foreign ownership limit has been reached or exceeded, is reported to
the Governor by the securities company engaged to facilitate such transaction. A foreign investor
must appoint one or more standing proxies from among the Korea Securities Depository, foreign
exchange banks (including domestic branches of foreign banks), asset management companies,
internationally recognized foreign custodians, the entity licensed to be engaged in futures
transaction business under Korean Futures Transaction Law, and securities companies (including
domestic branches of foreign securities companies) which have obtained a license to act as a
standing proxy to exercise shareholders&#146; right, place an order to sell or purchase shares or
perform any matter related to the foregoing activities if the foreign investor does not perform
these activities himself. However, a foreign investor may be exempted from complying with these
standing proxy rules with the approval of the Governor in cases deemed inevitable by reason of
conflict between laws of Korea and the home country of such foreign investor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certificates evidencing shares of Korean companies must be kept in custody with an eligible
custodian in Korea. Only foreign exchange banks (including domestic branches of foreign banks),
securities companies (including domestic branches of foreign securities companies), asset
management companies, entities licensed to be engaged in futures transaction business under Korean
Futures Transaction Law, internationally recognized foreign custodians and the Korea Securities
Depository are eligible to act as a custodian of shares for a nonresident or foreign investor. A
foreign investor must ensure that his custodian deposits such shares with the Korea Securities
Depository. However, a foreign investor may be exempted from complying with this deposit
requirement with the approval of the Governor in circumstances where such compliance is made
impracticable, including cases where such compliance would contravene the laws of the home country
of such foreign investor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Investment Rules, with certain exceptions, foreign investors may acquire shares of a
Korean company without being subject to any foreign investment ceiling. As one such exception,
designated public corporations are subject to a 40% ceiling on the acquisition of shares by
foreigners in the aggregate. Furthermore, an investment by a foreign investor of not less than 10%
of the outstanding shares of a Korean company is defined as a direct foreign investment under the
Foreign Investment Promotion Law, which is, in general, subject to the report to, and acceptance
by, the Ministry of Commerce, Industry and Energy which delegates its authority to Korea
Trade-Investment Promotion Agency, or foreign exchange banks (including domestic branches of
foreign banks) under the relevant regulations. The acquisition of shares of a Korean company by a
foreign investor may also be subject to certain foreign shareholding restrictions in the event that
such restrictions are prescribed in each specific law which regulates the business of such Korean
company. For example, we are currently subject to a foreign shareholding ceiling of 49% pursuant
to the Telecommunications Business Law. A foreigner who has acquired shares in excess of such
ceiling may not exercise his voting rights with respect to the shares exceeding such limit, and the
MIC may take corrective action pursuant to the Telecommunications Business Law.
</DIV>

<P align="center" style="font-size: 10pt">84
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Foreign Exchange Transaction Laws, a foreign investor who intends to acquire shares
must designate a foreign exchange bank at which he must open a foreign currency account and a Won
account exclusively for stock investments. No approval is required for remittance into Korea and
deposit of foreign currency funds in the foreign currency account. Foreign currency funds may be
transferred from the foreign currency account at the time required to place a deposit for, or
settle the purchase price of, a stock purchase transaction to a Won account opened at a securities
company. Funds in the foreign currency account may be remitted abroad without any governmental
approval.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividends on shares are paid in Won. No governmental approval is required for foreign
investors to receive dividends on, or the Won proceeds of the sale of, any such shares to be paid,
received and retained in Korea. Dividends paid on, and the Won proceeds of the sale of, any such
shares held by a nonresident of Korea must be deposited either in a Won account with the investor&#146;s
securities company or his Won account. Funds in the investor&#146;s Won account may be transferred to
his foreign currency account or withdrawn for local living expenses up to certain limitations.
Funds in the Won account may also be used for future investment in shares or for payment of the
subscription price of new shares obtained through the exercise of preemptive right.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Securities companies (including domestic branches of foreign securities companies) in Korea
are allowed to open foreign currency accounts and Won accounts with foreign exchange banks
exclusively for accommodating foreign investors&#146; stock investments in Korea. Through such
accounts, these securities companies may enter into foreign exchange transactions on a limited
basis, such as conversion of foreign currency funds and Won funds, either as a counterparty to or
on behalf of foreign investors, without such investors having to open their own accounts with
foreign exchange banks.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>E. Taxation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Korean Tax Considerations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a summary of the principal Korean tax consequences to owners of our shares
that are non-resident individuals or non-Korean corporations without a permanent establishment in
Korea to which the relevant income is attributable (&#147;non-resident holders&#148;). The statements
regarding Korean tax laws set forth below are based on the laws in force and as interpreted by the
Korean taxation authorities as of the date hereof. This summary is not exhaustive of all possible
tax considerations which may apply to a particular investor, and prospective investors are advised
to satisfy themselves as to the overall tax consequences of the acquisition, ownership and
disposition of our shares, including specifically the tax consequences under Korean law, the laws
of the jurisdiction of which they are resident, and any tax treaty between Korea and their country
of residence, by consulting their own tax advisors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Dividends on the Shares or ADSs</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will deduct Korean withholding tax from dividends paid to you at a rate of 27.5%. If you
are a resident in a country that has entered into a tax treaty with Korea, you may qualify for a
reduced rate of Korean withholding tax. For example, if you are a qualified resident of the United
States for purposes of the tax treaty between the United States and Korea and you are the
&#147;beneficial owner&#148; of a dividend, a reduced withholding tax rate of 11% or 16.5%, including local
surtax, generally will apply. If you are a beneficial owner of ADSs, you will generally be
entitled to benefits under the tax treaty between the United States and Korea if you:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>are an individual U.S. resident, a U.S. corporation or a partnership or trust to
the extent your income is subject to taxation in the United States as the income of a
U.S. resident;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>are not also a resident of Korea for purposes of the tax treaty between the United
States and Korea;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>are not subject to any anti-treaty shopping article that applies in limited
circumstances; and</TD>
</TR>

</TABLE>
</DIV>
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</DIV>

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<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>do not hold ADSs in connection with the conduct of business in Korea through a
permanent establishment or the performance of independent personal services in Korea
through a fixed base.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to obtain the benefits of a reduced withholding tax rate under a tax treaty, you must
submit to us, prior to the dividend payment date, such evidence of tax residence as may be required
by the Korean tax authorities. Evidence of tax residence may be submitted to us through the Korea
Securities Depository. Excess taxes withheld generally are not recoverable even if you
subsequently produce evidence that you were entitled to have tax withheld at a lower rate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we distribute to you free shares representing transfer of certain capital reserves or asset
revaluation reserves into paid-in capital, that distribution may be regarded as dividend and, as
such, subject to Korean withholding tax.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Taxation of Capital Gains</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You are exempt from Korean taxation if you sell through the KRX Stock Market or the KRX KOSDAQ
Market less than 25% of our total issued and outstanding shares that you have owned, together with
certain related parties at any time during the year of sale and the five calendar years before the
year of sale, provided that you are either an individual or you are a corporate entity with no
permanent establishment in Korea (if you are an individual it is irrelevant whether or not such
capital gains are attributable to the permanent establishment). If you are a resident of the
United States for purposes of the tax treaty between the United States and Korea, you will be
exempt from Korean taxation on the capital gains realized by the disposition of ADSs. Further, the
Korean taxation authorities have issued a tax ruling confirming that capital gains earned by a
non-Korean holder (whether or not it has a permanent establishment in Korea) from the transfer of
ADSs outside of Korea are exempt from Korean taxation by virtue of the Tax Exemption Limitation
Law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you are subject to tax on capital gains with respect to the sale of ADSs, or of shares
which you acquired as a result of a withdrawal, your gain will be calculated based on your cost of
acquiring the ADSs representing such shares, although there are no specific Korean tax provisions
or rulings on this issue. In the absence of the application of a tax treaty which exempts or
reduces the rate of tax on capital gains, the amount of Korean tax imposed on your capital gains
will be the lesser of 11% of the gross realization proceeds and, subject to the production of
satisfactory evidence of the acquisition and transfer costs of the ADSs, 27.5% of the net capital
gains. The gain is calculated as the gross realization proceeds less the acquisition cost and
transfer expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you sell your shares or ADSs, the purchaser or, in the case of the sale of shares on the
KRX Stock Market or through a licensed securities company in Korea, the licensed securities company
is required to withhold Korean tax from the sales price in an amount equal to 11% of the gross
realization proceeds and to make payment thereof to the Korean tax authority, unless you establish
your entitlement to an exemption or lower rate of taxation under an applicable tax treaty or
produce satisfactory evidence of its acquisition and transfer costs for the ADSs. In order to
obtain the benefit of an exemption or reduced rate of tax pursuant to a tax treaty, you must submit
to the purchaser or the securities company (or through the Korea Securities Depository), as the
case may be, prior to or at the time of payment, such evidence of your tax residence as the Korean
tax authorities may require in support of its claim for treaty protection. Furthermore, in order
for you to obtain the benefit of a tax exemption on certain Korean source income (e.g., capital
gains) under an applicable tax treaty, Korean tax law requires you (or your agent) to submit the
application for tax exemption along with a certificate of your tax residency issued by a competent
authority of your country of tax residence, subject to certain exceptions. Such application should
be submitted to the relevant district tax office by the ninth day of the month following the date
of the first payment of such income. However, excess taxes withheld are generally not recoverable
even if you subsequently produce evidence that you were entitled to have taxes withheld at a lower
rate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because the Korean taxation authorities have issued a tax ruling that the trading of the ADSs
on the NASDAQ National Market will be regarded as the transfer of the ADSs outside Korea under the
Tax
</DIV>

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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Exemption Limitation Law, it is likely that a non-Korean seller of the ADSs on the NASDAQ
National Market will not be required to make any withholdings as described.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Inheritance Tax and Gift Tax</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you die while holding an ADS or transfer an ADS as a gift, it is unclear whether you will
be treated as the owner of the shares underlying the ADSs for Korean inheritance and gift tax
purposes. If you are treated as the owner of the shares, the heir or the donee (or you, if the
donee fails to pay) will be subject to Korean inheritance or gift tax presently at the rate of 10%
to 50%, provided that the value of such ADSs or shares is greater than a specified amount.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Securities Transaction Tax</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You will not pay a securities transaction tax on your transfer of ADSs. If you transfer
shares, you will be subject to a securities transaction tax at the rate of 0.15% and an agriculture
and fishery special tax at the rate of 0.15% of the sale price of the share when traded on the KRX
Stock Market. If you transfer shares through the KRX KOSDAQ Market, you will be subject to a
securities transaction tax at the rate of 0.3% of the sales price of the shares. If your transfer
of shares is not made on the KRX Stock Market or the KRX KOSDAQ Market, subject to certain
exceptions, you will be subject to a securities transaction tax at the rate of 0.5% and will not be
subject to an agriculture and fishery special tax.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;According to a tax ruling issued by the Korean tax authorities, foreign shareholders will not
be subject to a securities transaction tax upon the deposit of underlying shares and receipt of
depositary shares or upon the surrender of depositary shares and withdrawal of originally deposited
underlying shares. Moreover, to date, the imposition of securities transaction tax has not been
enforced on the transfers of ADSs. However, the MOFE recently issued a ruling on February&nbsp;25, 2004
to the Korean National Tax Service, holding that depositary shares fall under the meaning of share
certificates that are subject to the securities transaction tax. In the ruling, the Ministry of
Finance and Economy treats the transfers of depositary shares the same as the transfer of the
underlying Korean shares. Under Korean tax laws, transfers of depositary shares listed or
registered on the New York Stock Exchange, NASDAQ National Market, or other foreign exchanges
designated by the Ministry of Finance and Economy (which are the Tokyo Stock Exchange, London Stock
Exchange, German Stock Exchange, and a stock exchange with functions similar to the other three
exchanges, on which trading is done by standardized procedure as set forth in the Enforcement
Regulation of the Korean Securities and Exchange Act) will be exempted from the securities
transaction tax.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Securities transaction tax, if applicable, must be paid in principle by the transferor of the
shares or the rights to subscribe to such shares. When the transfer is effected through a
securities settlement company, the settlement company is generally required to withhold and pay the
tax to the tax authority. When the transfer is made through a securities company, the securities
company is required to withhold and pay the tax. Where the transfer is effected by a non-resident
without a permanent establishment in Korea, other than through a securities settlement company or a
securities company, the transferee is required to withhold the securities transaction tax.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The failure to pay the securities transaction tax will result in a penalty of 10% of the tax
amount due, plus interest at 10.95% per annum on the unpaid tax amount for the period from the day
immediately following the last day of tax payment period to the day of issuance of tax notice. The
penalty is imposed on the party responsible for paying the securities transaction tax or, if the
securities transaction tax is to be withheld, the penalty is imposed on the party that has the
withholding obligation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>U.S. Federal Income Tax Considerations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following discussion describes the material U.S. federal income tax considerations that
may be relevant to a holder of our common shares or ADSs that is a U.S. Holder (as defined below)
with respect to the receipt of distributions on, and the disposition of, common shares or ADSs.
This discussion is based on the Internal Revenue Code of 1986, as amended (the &#147;Code&#148;), existing
and proposed Treasury
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">regulations, revenue rulings, administrative interpretations and judicial decisions (all as of
the date hereof and all of which are subject to change, possibly with retroactive effect, and
different interpretations). Except as specifically set forth herein, this discussion deals only
with common shares and ADSs held by a U.S. Holder as capital assets within the meaning of Section
1221 of the Code. This discussion does not address all of the tax consequences that may be
relevant to prospective purchasers of common shares or ADSs in light of their particular
circumstances or to persons subject to special tax rules, such as insurance companies, banks,
financial institutions, regulated investment companies, real estate investment trusts, dealers in securities or foreign currencies, traders that elect to use a mark-to-market method of accounting for their securities holdings,
tax-exempt investors, persons
holding common shares or ADSs as a position in a &#147;straddle,&#148; as a part of a short-sale, or as part
of a hedging, conversion or other integrated transaction, persons owning, directly, indirectly or
constructively, 10% or more of the voting stock of hanarotelecom or persons whose functional
currency (as defined in Section&nbsp;985 of the Code) is not the U.S. dollar. U.S. Holders should
consult with their own tax advisors regarding the application of the U.S. federal income tax laws
to their particular situations as well as to any additional tax consequences of purchasing, holding
or disposing of common shares or ADSs, including the applicability and effect of the tax laws of
any state, local or foreign jurisdiction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As used in this section, the term &#147;U.S. Holder&#148; means a beneficial owner of a common share or
ADS who or that is for U.S. federal income tax purposes (1)&nbsp;a citizen or individual resident of the
United States, (2)&nbsp;a corporation or other entity treated as a corporation for U.S. federal income
tax purposes created or organized in or under the laws of the United States or of any state or
political subdivision thereof, (3)&nbsp;an estate the income of which is subject to U.S. federal income
taxation regardless of its source, or (4)&nbsp;a trust if (A)&nbsp;a U.S. court is able to exercise primary
supervision over the administration of the trust and one or more U.S. persons have the authority to
control all substantial decisions of the trust or (B)&nbsp;the trust has a valid election in effect
under applicable U.S. Treasury regulations to be treated as a U.S. person.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If a partnership or other pass-through entity holds common shares or ADSs, the tax treatment
of a partner in or owner of the partnership or pass-through entity will generally depend upon the
status of the partner or owner and the activities of the entity. We urge partners and owners of
partnerships or other pass-through entities holding common shares or ADSs to consult their own tax
advisors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Special adverse U.S. federal income tax rules apply if a U.S. Holder holds common shares or
ADSs of a company that is treated as a &#147;passive foreign investment company,&#148; a &#147;foreign personal
holding company&#148; (for 2004 and earlier years) or a &#147;controlled foreign corporation&#148; for any taxable
year during which the U.S. Holder held common shares or ADSs. We believe that we are not and will
not become a &#147;passive foreign investment company,&#148; a &#147;foreign personal holding company&#148; (for 2004
and earlier years) or a &#147;controlled foreign corporation&#148; for U.S. federal income tax purposes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In general, for U.S. federal income tax purposes, U.S. Holders of ADRs evidencing ADSs will be
treated as the owners of the common shares represented by the ADSs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Cash Distributions</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To the extent that a distribution on common shares or ADSs is paid to a U.S. Holder out of
our current or accumulated earnings and profits (as determined for U.S. federal income tax
purposes), such distribution will be includible in the U.S. Holder&#146;s gross income as foreign source
dividend income in an amount equal to the U.S. dollar value of such distribution (without reduction
for any applicable foreign withholding tax). A corporate U.S. Holder will not be entitled to a
dividends received deduction with respect to distributions on common shares or ADSs by
hanarotelecom.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Therefore, in the event that any Korean tax is withheld from a distribution on common shares
or ADSs, a U.S. Holder generally will be required to report gross income in an amount greater than
the cash received. However, subject to certain conditions and limitations (including certain
minimum holding period requirements), the U.S. dollar value of the Korean income taxes, if any,
withheld from a distribution to a U.S. Holder on the common shares or ADSs may be claimed as a
credit against the U.S. Holder&#146;s U.S. federal income tax liability. Alternatively, a U.S. Holder
may claim a deduction for such amount of </DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Korean income taxes withheld in a taxable year, but only
if such U.S. Holder does not elect to claim a foreign tax credit in respect of any foreign taxes paid by it in the taxable year. Dividends
on common shares or ADSs generally will constitute &#147;passive income&#148; or, in the case of certain U.S.
Holders, &#147;financial services income&#148; for U.S. foreign tax credit purposes for taxable years
beginning before January&nbsp;1, 2007. For taxable years beginning after December&nbsp;31, 2006, dividends
generally will be &#147;passive category income&#148; or &#147;general category income&#148; for purposes of computing
the foreign tax credit allowable to a U.S. Holder. Special rules apply to certain individuals
whose foreign source income during the taxable year consists entirely of &#147;qualified passive income&#148;
and whose creditable foreign taxes paid or accrued during the taxable year do not exceed $300 ($600
in the case of a joint return).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To the extent that the amount of any distribution on the common shares or ADSs exceeds the
current and accumulated earnings and profits of hanarotelecom (as determined for U.S. federal
income tax purposes), a U.S. Holder&#146;s pro rata share of such excess amount would be treated first
as a nontaxable return of capital that would be applied against and would reduce the U.S. Holder&#146;s
tax basis in its common shares or ADSs (but not below zero), and then as capital gain.
Distributions in excess of our current and accumulated earnings and profits (as determined for U.S.
federal income tax purposes) generally will not give rise to foreign source income and a U.S.
Holder may be unable to claim a foreign tax credit in respect of any foreign withholding tax
imposed on such distributions unless (subject to applicable limitations) the U.S. Holder has other
foreign source income in the appropriate category for foreign tax credit purposes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The rules relating to foreign tax credits are extremely complex and the availability of a
foreign tax credit depends on numerous factors. Prospective purchasers of common shares or ADSs
should consult their own tax advisors concerning the application of the U.S. foreign tax credit
rules to their particular situations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For taxable years that begin before 2011, dividends paid by hanarotelecom should be taxable
to a non-corporate U.S. Holder at the special reduced rate normally applicable to capital gains, provided hanarotelecom qualifies as a Qualified Foreign Corporation, or QFC. A company
may qualify as a QFC if it is eligible for benefits of a comprehensive income tax treaty with the United States which the Secretary of the Treasury has determined is satisfactory
for QFC treatment and which includes a provision for the exchange of information. Korea has a comprehensive income tax treaty with the United States which satisfies the two
requirements above. The reduced rate should apply if the distribution is made with respect to equity rather than indebtedness and is made out of earnings and profits. Dividends
paid by a foreign corporation will not qualify for the reduced rates, however, if that corporation is treated, for the tax year in which the dividend is paid or the preceding tax
year, as a passive foreign investment company for U.S. federal income tax purposes. A U.S. Holder will be eligible for the reduced rate only if it has held the common shares or ADSs
for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date and satisfies certain other requirements. All U.S. Holders are urged to consult their own
tax advisers regarding the special reduced rates for dividends paid by QFCs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The U.S. dollar value of any distribution to a U.S. Holder on common shares or ADSs that is
paid in a foreign currency will be calculated by reference to the exchange rate in effect at the
time the distribution is received by the U.S. Holder (or a depositary nominee, custodian or other
agent of the U.S. Holder). A U.S. Holder generally should not recognize any foreign currency gain
or loss if such foreign currency is converted into U.S. dollars on the day received. If a U.S.
Holder does not convert such foreign currency into U.S. dollars on the date of receipt, however,
such Holder will have a basis in such foreign currency equal to the U.S. dollar value on the date
of receipt, and such Holder may recognize United States source foreign currency gain or loss (which
generally will be taxable as United States source ordinary income or loss) upon a subsequent sale
or other disposition of the foreign currency.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Sale of Common Shares and ADSs</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A U.S. Holder generally will recognize gain or loss upon a sale or other disposition of common
shares or ADSs in an amount equal to the difference between the U.S. dollar value of the amount
realized on the sale or other disposition and the U.S. Holder&#146;s adjusted tax basis in the common
shares or ADSs. Such gain or loss generally will be capital
gain or loss and, in the case of certain non-corporate U.S.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Holders, may be subject to U.S. federal
income tax at a preferential rate where the U.S. Holder&#146;s holding period exceeds one year. Any
gain or loss recognized by a U.S. Holder on a sale or other disposition of common shares or ADSs
generally will be treated as United States source gain or loss for foreign tax credit purposes. A
U.S. Holder&#146;s ability to deduct capital losses in respect of common shares and ADSs is subject to
limitations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Securities Tax</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders should note that any Korean securities transaction tax will not be treated as a
creditable foreign tax for U.S. federal income tax purposes, although U.S. Holders may be entitled
to deduct such taxes, subject to applicable limitations under the Code.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Backup Withholding</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Backup&#148; withholding and information reporting requirements may apply to payments made within
the United States of dividends on common shares or ADSs and to
certain payments of proceeds of a sale or redemption of a common share or ADS paid to a U.S. Holder. hanarotelecom, our agent,
a broker, the Trustee or any paying agent, as the case may be, may be required to withhold tax from
any payment that is subject to backup withholding at a current rate of 28% (subject to reduction in
future years) of such payment if the U.S. Holder fails to furnish the U.S. Holder&#146;s taxpayer
identification number, to certify that such U.S. Holder is not subject to backup withholding, or to
otherwise comply with the applicable requirements of the backup withholding rules. If a U.S.
Holder is required to and does not provide a correct taxpayer identification number, the U.S.
Holder may be subject to penalties imposed by the IRS. Certain U.S. Holders (including, among
others, corporations) are not subject to the backup withholding and information reporting
requirements. Any amounts withheld under the backup withholding rules from a payment to a U.S.
Holder generally may be claimed as a credit against such U.S. Holder&#146;s U.S. federal income tax
liability or refundable to the extent it exceeds such liability, provided that the required
information is furnished to the U.S. Internal Revenue Service.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Estate and Gift Tax</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As discussed in &#147;&#151;Korean Tax Considerations&#151;Inheritance Tax and Gift Tax,&#148; Korea may impose
an estate tax on a descendent who owns our common shares (and possibly ADSs), even if the
descendent is a non-resident. Subject to certain conditions and limitations, the amount of any
inheritance tax paid to Korea may be eligible for credit against the amount of U.S. federal estate
tax imposed on the estate of a U.S. Holder. The Korean gift tax generally will not be treated as a
creditable foreign tax for U.S. tax purposes. Prospective purchasers should consult their personal
tax advisors regarding the consequences of the imposition of the Korean inheritance or gift tax.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>F. Dividends and Paying Agents</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>G. Statement by Experts</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>H. Documents on Display</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We file periodic reports and other information with the SEC. You may read and copy any
document that we file with the SEC at the SEC&#146;s public reference room at Room&nbsp;1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the SEC&#146;s regional offices. Please
call the SEC at 1-800-732-0330 for further information on the operation of its public reference
rooms. The SEC also maintains a web site that contains reports, proxy and information statements,
and other information regarding registrants that file electronically with the SEC
(http://www.sec.gov). You may also inspect our
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">SEC reports and other information at the New York
Stock Exchange, Inc., 20 Broad Street, New York, New York 10005. Some of this information may also
be found on our website at http://www.hanaro.com.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You may request a copy of these filings, at no cost, by writing or telephoning us at Asia One
Building, 17-7 Yeoido-dong, Yeongdeungpo-gu, Seoul, Korea, 150-874, Attention: Investor Relations
Team, telephone number: (&#043;82-2) 6266-4629.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>I. Subsidiary Information.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Please refer to discussion under &#147;Item&nbsp;4.C. Organizational Structure.&#148;
</DIV>

<DIV align="left">
<A name="113"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;11. Quantitative and Qualitative Disclosures about Market Risk.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are exposed to the impact of interest rate changes, foreign currency fluctuations and
changes in the estimated fair values of our investments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Interest Rate Risk</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our exposure to risk for changes in interest rates relates primarily to our short-term
investments and our syndicated loan which has a floating interest rate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investments in both fixed rate and floating rate interest earning investments carry some
interest rate risk. The fair value of fixed rate securities may fall due to a rise in interest
rates, while floating rate securities may produce less income than expected if interest rates fall.
Partly as a result of this, our future interest income may fall short of expectations due to
changes in interest rates or we may suffer losses in principal if we are forced to sell securities,
which have fallen in estimated fair value due to changes in interest rates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our cash and cash equivalents consist of cash on hand, passbook accounts and money market
deposit accounts. We do not expect any material loss with respect to our cash and cash equivalents
as a result of interest rate changes, and the estimated fair value of our cash and cash equivalents
approximates original cost.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our short-term financial instruments consist of time deposits, money market deposit accounts
and repurchase agreement securities. As our short-term financial instruments are readily
convertible to known amounts of cash and have short maturities, we do not expect material loss with
respect to our short-term financial instruments as a result of interest rate changes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The risk of exposure to variable interest rates has been hedged by entering into swap
contracts with Korea Development Bank and other banks under which we receive variable interest
rates and pay fixed interest rates. Therefore, we do not expect any material loss with respect to
our syndicated loan as a result of interest rate changes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Foreign Currency Risk</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Most of our expenses and all of our revenues are incurred in Korean Won, which is our
functional currency. As of December&nbsp;31, 2005, Won 705.0&nbsp;billion, representing 72.3% of our total
debt, is denominated in U.S. dollars. Of the Won 705.0&nbsp;billion of our U.S. dollar denominated
debt, Won 502.3&nbsp;billion relates to February&nbsp;2005 Notes and Won 202.7&nbsp;billion relates to borrowings
under the Senior Secured Credit Facility. We have entered into foreign currency swap contracts
with respect to all our U.S. dollar denominated debt.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Currently, we have no other significant foreign currency denominated liabilities. Because
substantially all of our revenues are denominated in Won, any significant changes in exchange rates
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">between the Won and the U.S. dollar will affect us due to the effect of such changes on the amount
of funds required by us to make interest and principal payments on our U.S. dollar denominated
debt. In December&nbsp;2003 and February&nbsp;2004 and on February&nbsp;1, 2005, we entered into foreign currency
swap contracts with Development Bank of Singapore, Korea Development Bank and other banks in
connection with the Senior Secured Credit Facility and the February&nbsp;2005 Notes to hedge the
exposure to changes in the foreign currency exchange rate. As a result, we do not expect to incur
any material losses with respect to the Senior Secured Credit Facility or the February&nbsp;2005 Notes
as a result of foreign exchange rate changes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We estimate that any losses we would incur from any depreciation of the Won against the U.S.
dollar resulting from unhedged U.S. dollar denominated liabilities would be negligible. This is
due to our policy that all foreign currency denominated liabilities be fully hedged.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Third Party Credit Risk</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It is our policy to limit the amount of our credit exposure to any one issuer. We are averse
to principal loss and seek to preserve our invested funds by limiting default risk, market risk and
reinvestment risk. We mitigate default risk by investing only in high credit quality securities
that we believe to be low risk and by positioning our portfolio to respond appropriately to a
significant reduction in the credit rating of any investment issuer or guarantor. In addition, it
is our policy that all foreign exchange investments be fully hedged. Substantially all of our
floating rate debt is hedged.
</DIV>
<DIV align="left">
<A name="114"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;12. Description of Securities Other Than Equity Securities.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>


<P align="center" style="font-size: 10pt">92
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART II</B>
</DIV>

<DIV align="left">
<A name="115"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;13. Defaults, Dividend Arrearages and Delinquencies.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
</DIV>
<DIV align="left">
<A name="116"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;14. Material Modifications of the Rights of Security Holders and Use of Proceeds.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
</DIV>
<DIV align="left">
<A name="117"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;15. Controls and Procedures.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Byung Moo Park, our Chief Executive Officer and Representative Director, and Ms.&nbsp;Janice
Lee, our Chief Financial Officer and Senior Executive Vice President, after evaluating the
effectiveness of our disclosure controls and procedures (as defined in the United States Exchange
Act Rule&nbsp;13a-15(e)) as of the end of the period covered by this Form 20-F, have concluded that, as
of such date, these controls and procedures were effective.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There have been no changes in internal control over financial reporting during the fiscal year
ended December&nbsp;31, 2005, that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting. During this period, however, we changed the
accounting treatment of certain lease and commission expenses, which were previously recorded on an
invoice basis, to an accrual basis. The financial results reported in this Form 20-F for prior
periods have been restated to reflect such accounting treatment correction.
</DIV>
<DIV align="left">
<A name="118"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;16. &#091;Reserved&#093;</B>
</DIV>

<DIV align="left">
<A name="119"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;16A. Audit Committee Financial Expert</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Audit Committee consists of three outside directors: Sung Kyou Park, Sun Woo Kim and
Peter Whang. Mr.&nbsp;Byung Moo Park resigned from our audit committee and was appointed as our
Representative Director at our annual shareholders&#146; meeting held on March&nbsp;24, 2006. Peter Whang was
appointed as a member of our audit committee at the annual shareholders&#146; meeting held on March&nbsp;24,
2006. All of the Audit Committee members comply with the requirements under applicable Korean law
and stock exchange rules. In addition, Sung Kyou Park and Sun Woo Kim are independent directors as
defined in Rule&nbsp;4200(15) of the NASDAQ Marketplace Rules.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors has determined that Mr.&nbsp;Sung Kyou Park is an &#147;audit committee financial
expert&#148; as defined in Item&nbsp;16A of Form 20-F, in light of his extensive experience with management
responsibilities for over 10&nbsp;years, and in particular, his experience in actively supervising
principal financial officers, controllers, accounting officer or persons performing similar functions in
preparing, auditing, analyzing and evaluating financial statements of companies. See &#147;Item&nbsp;6.
Directors, Senior Management and Employees&#148; for more information on Mr.&nbsp;Park&#146;s educational
background, qualifications and work experience.
</DIV>

<DIV align="left">
<A name="120"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;16B. Code of Ethics</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In April&nbsp;2003, we adopted a written code of ethics for our directors, officers and employees.
The original Korean version of our code of ethics is available on our website at www.hanaro.com.
There has been no amendment to our code of ethics since its inception except the change of our
corporate name from &#147;Hanaro Telecom Inc.&#148; to &#147;hanarotelecom incorporated&#148; effective from March&nbsp;30,
2005.
</DIV>
<DIV align="left">
<A name="121"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;16C. Principal Accountant Fees and Services</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deloitte HanaAnjin LLC (formerly known as Anjin Deloitte LLC), a member firm of Deloitte
Touche Tohmatsu, has served as our independent accountants for each of the fiscal years in the
three-year
</DIV>

<P align="center" style="font-size: 10pt">93
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">period ended December&nbsp;31, 2005. The following table presents the aggregate fees for
professional services and other services rendered by Deloitte HanaAnjin LLC to us in 2004 and 2005:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">(millions of Won)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(a)&nbsp;Audit Fees<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD align="right">Won 370</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">Won 410</TD>

</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(b)&nbsp;Audit-Related Fees<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(c)&nbsp;Tax Fees<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD colspan="2" align="right">&#151;</TD>

</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(d)&nbsp;All Other Fees<SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Audit Fees consist of aggregate fees billed by Deloitte HanaAnjin LLC in connection with the
audit of our annual financial statements and the review of our interim financial statements.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Audit-related Fees consist of aggregate fees billed by Deloitte HanaAnjin LLC for advisory
services relating to analyses of multiple accounting issues .</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Tax Fees consist of aggregate fees billed by Deloitte HanaAnjin LLC for the preparation of
income tax return and tax advisory services (of which there were none for 2004 and 2005).</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>All Other Fees include fees billed by Deloitte HanaAnjin LLC principally for due diligence
services relating to our call center and accounting assistance (of which there were none for
2004).</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Audit Committee reviews and pre-approves the scope and the cost of all audit and
permissible non-audit services performed by the independent accountants, other than those for de
minimus services which are approved by the Audit Committee prior to the completion of the audit.
</DIV>
<DIV align="left">
<A name="122"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;16D. Exemptions from the Listing Standards for Audit Committees</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a foreign private issuer, we are exempt from some corporate governance-related obligations
required by NASDAQ with respect to audit committees. NASDAQ Rule 4350(d) requires issuers to adopt
a formal written audit committee charter that includes certain specified provisions. Rule 4350(d)
further requires issuers to have an audit committee with at least three independent directors. We
follow Korean practices in lieu of certain NASDAQ requirements as set forth below:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NASDAQ Rule&nbsp;4350(d)(1) requires that issuers adopt a formal written audit committee charter
and that the audit committee review and reassess the adequacy of the formal written charter on an
annual basis. Korean law does not require a company&#146;s audit committee to adopt a written charter.
Furthermore, a formal written audit committee charter, if adopted by a Korean company, would become
null and void if it were to violate any Korean law or the articles of incorporation of the company.
Our board of directors has adopted the Audit Committee Regulations, or ACR, pursuant to our
Articles of Incorporation, but the ACR does not obligate our Audit Committee to review and reassess
the adequacy of the ACR on an annual basis. Our ACR, in our view, is not in violation of
applicable Korean laws or our Articles of Incorporation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NASDAQ Rule&nbsp;4350(d)(1) sets forth certain responsibilities of an audit committee in relation
to outside auditors that must be specified in the formal written charter of an issuer&#146;s audit
committee. Under Korean law, an audit committee has the statutory duty to examine the company&#146;s
financial statements and the business reports, and based on such examination, to report its opinion
to shareholders at the annual general meetings of shareholders. The audit committee also has the
statutory duty to oversee the administration of the company&#146;s affairs by the board of directors.
Consistent with Korean law, our ACR provides that the appointment of outside auditors is subject to
approval by the Audit Committee. Korean law does not impose specific responsibilities on an audit
committee in relation to outside auditors in the way that the NASDAQ Rule does, and our ACR has not
imposed any such responsibilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Furthermore, NASDAQ Rule&nbsp;4350 requires independent directors to serve various roles in the
Company&#146;s corporate governance practices, and Rule&nbsp;4200(15) defines the requirements for an
&#147;independent director.&#148; With respect to independent directors, we follow Korean practices in lieu
of certain NASDAQ requirements as set forth below:
</DIV>


<P align="center" style="font-size: 10pt">94
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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NASDAQ Rule&nbsp;4350(c)(1) requires a majority of a company&#146;s board of directors to be independent
directors. Under the Korean Commercial Code, or KCC, the Korean Securities and Exchange Act, or
KSEA, and related legislation, there is no legal concept which is the same as an independent
director within the meaning given by the NASDAQ Marketplace Rules. The KSEA does, however, set
forth requirements for outside directors. Under the KSEA, an outside director is defined as a
director who does not engage in the day-to-day business operations of the company and who is
appointed pursuant to the Section&nbsp;191-16 of the KSEA. Under the KSEA, individuals with special
relationships with a listed company which may interfere with the exercise of independent judgment,
are excluded from becoming outside directors of such company. The KSEA further requires that at
least one-quarter of the total number of directors of a company listed on the KRX Stock Market or
the KRX KOSDAQ Market be outside directors. Moreover, a company, such as ours, with total assets
of KRW 2 trillion or more as of the end of the most recent financial year must have outside
directors making up more than one-half of the total number of directors. Consistent with this
statutory requirement, our Articles of Incorporation require that more than half of the total
number of directors be outside directors and that an outside director satisfy the eligibility
standards under the KSEA or any other applicable statute. Six out of our ten directors were outside
directors as of May&nbsp;31, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NASDAQ Rule&nbsp;4350(c)(2) requires regularly scheduled meetings of independent directors at which
only independent directors are present. The KCC, KSEA or other corporate governance-related Korean
statutes do not require regular meetings attended solely by outside directors. Our outside
directors do not conduct regularly scheduled meetings at which only outside directors are present.
The failure to hold such meetings does not violate applicable Korean laws or regulations relating
to corporate governance.
</DIV>
<DIV align="left">
<A name="123"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There have been no purchases made by or on behalf of us or any affiliated purchaser of our
shares or ADSs.
</DIV>

<P align="center" style="font-size: 10pt">95
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART III</B>
</DIV>

<DIV align="left">
<A name="124"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;17. Financial Statements.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have elected to provide the financial statements and related information specified in Item
18 in lieu of 17.
</DIV>
<DIV align="left">
<A name="125"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;18. Financial Statements.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See pages starting on F-1 following Glossary.
</DIV>




<DIV align="left">
<A name="126"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;19. Exhibits.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following documents are filed as exhibits to this Annual Report:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Exhibits</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Description</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.1.</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Articles of Incorporation, as amended on March&nbsp;24, 2006 (English translation)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.1.</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Memorandum of Understanding between Celrun Inc. and Kim Young-min, hanarotelecom Inc. and
CelrunTV Inc., dated February&nbsp;6, 2006 (English translation)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.2.</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Business Cooperation Agreement among hanarotelecom, inc., Celrun Co., Ltd. and CelrunTV,
dated March&nbsp;6, 2006 (English translation)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">8.1.</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">List of hanarotelecom&#146;s significant subsidiaries. (See &#147;Item&nbsp;4.C. Organizational Structure.&#148;)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">11.1.</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Code of Ethics (English translation)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">12.1.</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Section&nbsp;302 Certification of Chief Executive Officer pursuant to Rule&nbsp;13a-14(a)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">12.2.</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Section&nbsp;302 Certification of Chief Financial Officer pursuant to Rule&nbsp;13a-14(a)</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">13.1.</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Section&nbsp;906 Certifications required by Rule&nbsp;13a-14(b) and 18 U.S.C. Section&nbsp;1350</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<P align="center" style="font-size: 10pt">96
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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Signature</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F
and that it has duly caused and authorized the undersigned to sign this Annual Report on its
behalf.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="49%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="46%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">hanarotelecom incorporated</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;/s/ Janice Lee</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Name:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Janice Lee</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Executive Vice President</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">and Chief Financial Officer</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Date: June&nbsp;29, 2006
</DIV>



<P align="center" style="font-size: 10pt">97
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="127"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Glossary</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set forth below are definitions of some of the terms used in this Offering Circular:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD align="left" valign="top">ADSL
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Asymmetric Digital Subscriber Line. ADSL is a technology
that allows more data to be sent over existing copper
telephone lines. ADSL supports data rates of 1.5 to 9.0
Mbps when receiving data (known as the downstream rate),
and 16 to 640 Kbps when sending data (known as the
upstream rate). ADSL requires a special ADSL modem.</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">ATM
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Asynchronous Transfer Mode. ATM is a high bandwidth,
low-delay, high-speed transmission technology. ATM is a
communication standard that provides for information
transfer in the form of fixed-length cells of 53 bytes
each. The ATM format can be used to deliver voice, video
and data traffic at varying rates.</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="left" valign="top">backbone
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">A centralized high-speed network that interconnects
smaller, independent networks.</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">bandwidth
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">The number of bits of information which can move over a
communication medium in a given amount of time. Typically
measured in Kbps and Mbps.</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="left" valign="top">bps
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Bits per second. A measure of digital information
transmission rates. A rate of one bps can transmit one
bit in a second.</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">cable modem
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">A modem designed to operate over HFC lines. Because HFC
lines generally provide much greater bandwidth than
telephone lines, a cable modem can be used to achieve
faster access to the world wide web.</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="left" valign="top">dedicated line
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Telecommunication lines dedicated or reserved for use by
particular subscribers along predetermined routes.</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">DSL
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Digital Subscriber Line. DSL is a technology for bringing
high bandwidth information to homes and small businesses
over ordinary copper telephone lines.</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="left" valign="top">Gbps
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Gigabits per second. A measure of digital information
transmission rates. One Gbps equals l,000 Mbps, one
million Kbps, or one billion bps.</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">GHz
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Gigahertz. A unit of frequency denoting one billion
cycles per second, used to measure band and bandwidth.</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="left" valign="top">HFC
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Hybrid Fiber Coaxial. HFC cable is used in broadband
telecommunication systems. HFC can transmit between 500
MHz to 1,000 MHz of bandwidth in both directions.</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">IDC
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Internet data center. IDC provides services such as
co-location, dedicated server hosting, security, backup,
storage hosting and network equipment rental services.</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">98
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD NOWRAP align="left" valign="top">IMT-2000
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">International Mobile Telecommunications 2000. IMT-2000,
or &#147;3G,&#148; is an initiative of the International
Telecommunication Union to unify the diverse
second-generation systems in the global wireless industry
that are currently largely incompatible by establishing
certain global standards for third-generation systems that
will provide a common air interface capable of offering
wireless multimedia service globally at transmission
speeds of up to 348 Kbps on the move and 2 Mbps when
stationary or indoors.</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">Internet
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">A global network connecting millions of computers. More
than 100 countries are linked into exchanges of data, news
and opinions.</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="left" valign="top">ISP
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Internet Service Provider. An ISP is a company that
provides access to the Internet. For a monthly fee, the
service provider provides a software package, user name,
password and access phone number. Equipped with a modem,
the user can then log on to the Internet and browse the
world wide web.</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">Kbps
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Kilobits per second. A measure of digital information
transmission rates. One Kbps equals 1,000 bps.</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="left" valign="top">KHz
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Kilohertz. A unit of frequency denoting one thousand
cycles per second, used to measure band and bandwidth.</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">LAN
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Local Area Network. A LAN is a group of computers and
associated devices that share a common communications line
and typically share the resources of a single processor or
server within a small geographic area (for example, within
an office building). Usually, the server has applications
and data storage that are shared in common by multiple
computer users.</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="left" valign="top">leased line
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">A permanent telephone connection between two points set up
by a network service provider. Typically, leased lines
are used by business to connect geographically distant
offices. The fee for the connection is usually a fixed
monthly rate.</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">Mbps
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Megabits per second. A measure of digital information
transmission rates. One Mbps equals 1,000 Kbps or one
million bps.</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="left" valign="top">MHz
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Megahertz. A unit of frequency denoting one million
cycles per second, used to measure band and bandwidth.</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">MIC
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ministry of Information and Communication of Korea.</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="left" valign="top">NSP
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Network Service Provider.</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">remote terminal
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">A system that multiplexes voice and data signals into
synchronous data streams and transmits them as optical
signals.</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="left" valign="top">router
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">A device that forwards data packets between interconnected
network segments.</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">99
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">VDSL
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Very high bit rate Digital Subscriber Line. VDSL is a
technology that allows final delivery of data over
existing copper telephone lines. VDSL supports data rates
of up to 52 Mbps when receiving data (known as the
downstream rate).</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="left" valign="top">VoIP
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Voice over Internet Protocol (that is, voice delivered
using the Internet Protocol) is a term used in Internet
Protocol telephony for a set of facilities for managing
the delivery of voice information using the Internet
Protocol. This means sending voice information in digital
form in discrete packets rather than in the traditional
circuit-committed protocols of the public switched
telephone network.</DIV></TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">WiBro
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">A 2.3 GHz wireless broadband technology.</DIV></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="left" valign="top">WLL
</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Wireless Local Loop. A local loop using fixed radio
access technology to provide low to medium speed Internet
services.</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">100
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><B>hanarotelecom incorporated AND SUBSIDIARIES</B>
</DIV>
<DIV align="left">
<A name="128"></A>
</DIV>


<DIV align="left" style="font-size: 12pt; margin-top: 6pt"><B>CONSOLIDATED FINANCIAL STATEMENTS<BR>
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2005<BR>
AND REPORT OF INDEPENDENT REGISTERED PUBLIC<BR>
ACCOUNTING FIRM</B>
</DIV>


<P align="center" style="font-size: 10pt">F-1
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 12pt; margin-top: 6pt"><B>Report of Independent Registered Public Accounting Firm</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 24pt">To the Shareholders and Board of Directors of<BR>
hanarotelecom incorporated:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 24pt">We have audited the accompanying consolidated balance sheets of hanarotelecom incorporated and its
subsidiaries (collectively referred to as the &#147;Company&#148;) as of December&nbsp;31, 2004 and 2005, and the
related consolidated statements of operations, shareholders&#146; equity and cash flows for each of the
three years in the period ended December&nbsp;31, 2005, all expressed in Korean won. These financial
statements are the responsibility of the Company&#146;s management. Our responsibility is to express an
opinion on these financial statements based on our audits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of its internal control
over financial reporting. Our audit included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the circumstances but
not for the purpose of expressing an opinion on the effectiveness of the Company&#146;s internal control
over financial reporting. Accordingly, we express no such opinion. An audit also 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In our opinion, the financial statements referred to above present fairly, in all material
respects, the financial position of hanarotelecom incorporated and its subsidiaries as of December
31, 2004 and 2005, and the results of their operations, changes in shareholders&#146; equity and their
cash flows for each of the three years in the period ended December&nbsp;31, 2005, in conformity with
financial accounting standards in the Republic of Korea.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our audits also comprehended the translation of Korean won amounts into U.S. dollar amounts and, in
our opinion, such translation has been made in conformity with the basis stated in Note 2. Such
U.S. dollar amounts are presented solely for the convenience of readers in the United States of
America.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Accounting practices used by the Company in preparing the accompanying financial statements conform
with generally accepted accounting principles in the Republic of Korea, but do not conform with
generally accepted accounting principles in the United States of America. The description of the
significant differences and the reconciliation of net loss and shareholders&#146; equity to U.S.
generally accepted accounting principles are set forth in Note 28.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 48pt">Deloitte Anjin LLC
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Seoul, Korea<BR>
April&nbsp;14, 2006
</DIV>


<P align="center" style="font-size: 10pt">F-2
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">hanarotelecom incorporated AND SUBSIDIARIES
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">CONSOLIDATED BALANCE SHEETS
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 12pt">AS OF DECEMBER 31, 2004 AND 2005
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Translation into</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Korean Won</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">U.S. Dollars (Note 2)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">ASSETS</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">(In millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(In thousands)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CURRENT ASSETS:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents (Note 3)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">168,346</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">154,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">153,384</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short-term financial instruments (Notes 4 and 5)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">193,716</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,119</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short-term investment securities (Note 6)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Trade receivables, net of allowance for doubtful accounts
of <strike>W</strike>62,216&nbsp;million in 2004 and <strike>W</strike>99,387
million in 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">205,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">221,259</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">219,068</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short-term loans, net of discount on present value of
<strike>W</strike>209&nbsp;million in 2004 and
<strike>W</strike>400&nbsp;million in 2005 (Note 9)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,631</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,260</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,158</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts receivable-other, net of allowance for doubtful
accounts of <strike>W</strike>55&nbsp;million in 2004 and <strike>W</strike>27,000&nbsp;million in
2005, and discount on present value of nil in 2004 and
<strike>W</strike>273&nbsp;million in 2005 (Note 20)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,306</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,820</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,733</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,083</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">758</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">750</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Prepaid expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,240</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,537</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,304</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Refundable income tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,037</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,224</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,192</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Advanced payments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,853</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,864</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">134</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">133</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">624,797</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">446,374</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">441,954</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">NON-CURRENT ASSETS:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term financial instruments (Notes 4 and 5)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,622</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,606</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term investment securities (Note 7)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,816</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,471</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,159</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term trade receivables, net of allowance for
doubtful accounts of <strike>W</strike>535&nbsp;million in 2004 and <strike>W</strike>981
million in 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,083</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,349</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,326</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term loans, net of allowance for doubtful accounts
of nil in 2004 and <strike>W</strike>2,487&nbsp;million in 2005, and discount
on present value of <strike>W</strike>2,709&nbsp;million in 2004 and <strike>W</strike>1,570
million in 2005 (Note 9)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,086</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,234</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,143</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term non-trade receivables, net of allowance for
doubtful accounts of nil in 2004 and <strike>W</strike>1,069&nbsp;million in
2005, and discount on present value of nil in 2004 and
<strike>W</strike>145&nbsp;million in 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,203</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,132</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Key-money deposits (Note 20)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72,193</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,359</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,603</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term prepaid expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,352</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,729</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,603</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred income tax assets (Note 19)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">607</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">193</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Property and equipment, net (Notes 10, 11, 13 and 24)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,372,845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,337,884</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,314,737</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Intangibles (Notes 12, 13 and 24)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,265</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">108,840</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107,762</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,560,315</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,587,886</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,562,264</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total Assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>

    <TD align="right">3,185,112</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>

    <TD align="right">3,034,260</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,004,218</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-left:30px; text-indent:-15px; font-size: 10pt">(Continued)
</DIV>

<P align="center" style="font-size: 10pt">F-3
</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">hanarotelecom incorporated AND SUBSIDIARIES
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">CONSOLIDATED BALANCE SHEETS (CONTINUED)
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 12pt">AS OF DECEMBER 31, 2004 AND 2005
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Translation into</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Korean Won</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">U.S. Dollars (Note 2)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">LIABILITIES AND SHAREHOLDERS' EQUITY</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">(In millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(In thousands)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CURRENT LIABILITIES:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Trade payables (Note 20)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>

    <TD align="right">28,803</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>

    <TD align="right">30,319</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">30,019</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">138,443</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">138,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136,684</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Advances received</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,983</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,564</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,450</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued expenses (Notes 20 and 28)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,490</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">144,479</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">143,049</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Withholdings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,263</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,715</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,520</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income tax payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">653</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current maturities of long-term debt, net of
discount on debentures of <strike>W</strike>6,543&nbsp;million in 2004
and <strike>W</strike>482&nbsp;million in 2005, and discount on present
value of nil in 2004 and <strike>W</strike>3,844&nbsp;million in 2005
(Notes 11 and 13)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">413,526</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">242,801</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">240,397</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Forward exchange contracts (Note 15)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,802</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,950</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest swap (Note 15)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,623</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,859</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,841</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred income tax liabilities (Note 19)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deposits received</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,924</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,856</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,838</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">742,510</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">638,176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">631,858</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">LONG-TERM LIABILITIES:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term debt, net of current portion (Note 13)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">399,154</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">244,979</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">242,554</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Debentures, net (Note 13)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">189,518</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">493,206</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">488,323</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term obligation under capital leases (Note 11)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,541</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,578</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term advances received</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,142</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,969</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,850</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued severance indemnities, net (Note 2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,932</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,698</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,374</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term deposits received</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,709</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,448</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,176</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">690,996</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">823,004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">814,855</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total Liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,433,506</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,461,180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,446,713</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">COMMITMENTS AND CONTINGENCIES (Note 21)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SHAREHOLDERS&#146; EQUITY (Note 1):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Capital stock (Note 16)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,310,676</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,310,676</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,287,799</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Paid-in capital in excess of par value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">341,033</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">340,917</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">337,542</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accumulated deficit (Note 28)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(887,158</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,096,222</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,085,368</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Capital adjustments:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Stock compensation (Note 17)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,227</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,351</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Valuation
gain (loss) on available-for-sale
securities, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,764</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,151</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Valuation loss on interest swap (Note 15)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(17,623</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,859</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,841</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Minority interests</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,215</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,920</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,871</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total Shareholders&#146; Equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,751,606</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,573,080</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,557,505</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total Liabilities and Shareholders&#146; Equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>

    <TD align="right">3,185,112</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>

    <TD align="right">3,034,260</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,004,218</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">See accompanying notes to consolidated financial statements.
</DIV>




<P align="center" style="font-size: 10pt">F-4
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center" style="font-size: 10pt; margin-top: 18pt">hanarotelecom incorporated AND SUBSIDIARIES
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">CONSOLIDATED STATEMENTS OF OPERATIONS
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Translation into</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Korean Won</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">U.S. Dollars (Note 2)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">(In millions, except per share amount)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(In thousands, except</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">per share amount)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">OPERATING REVENUE (Notes 20 and 24)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">1,383,486</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">1,449,569</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">1,589,345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,573,609</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">OPERATING EXPENSES (Notes 18 and 20)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,312,792</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,335,639</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,550,823</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,535,468</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">OPERATING INCOME (Note 24)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,694</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113,930</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,522</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,141</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">NON-OPERATING INCOME:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,497</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,637</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,472</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gain on disposal of short-term investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">315</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gain on disposal of long-term investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">439</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">435</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gain on disposal of investment securities using the
equity method</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,391</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,140</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gain on disposal of property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">885</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,962</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,923</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gain on foreign currency transactions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">267</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,404</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,881</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,793</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gain on foreign currency translation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,823</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,699</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,583</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gain on early redemption of debentures (Note 13)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">870</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gain on valuation of forward exchange contract</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">173</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gain on transaction of forward exchange contract
(Note 15)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">343</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">242</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,273</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,215</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,188</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,027</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,972</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,175</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83,197</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82,373</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">NON-OPERATING EXPENSES:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Interest expense (Note 13)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">139,330</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,882</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">98,814</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97,836</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Asset Backed Securities payable expense (Note 14)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">490</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss on foreign currency transactions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">354</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">264</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">261</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss on foreign currency translation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">138</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,092</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,081</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss on disposal of short-term investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss on disposal of long-term investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,381</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,367</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss on valuation of trading securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">307</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Impairment loss on short-term investment securities
(Note 6)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">940</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,109</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Impairment loss on long-term investment securities
(Note 7)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,385</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,539</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,045</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Donations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">306</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">312</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">309</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss on early redemption of debentures (Note 13)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">308</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">165</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">163</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss on early redemption of long-term debt (Note 13)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,235</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,213</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss on redemption of long-term obligation under
capital leases (Note 11)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss on valuation using the equity method (Note 8)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,142</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss on disposal of property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,326</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,246</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,154</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,133</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss on disuse of property and equipment (Note 10)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,726</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,586</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,986</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss on valuation of forward exchange contract
(Note 15)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,975</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,842</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,646</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss on transaction of forward exchange contract
(Note 15)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">173</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Impairment loss on intangibles (Note 12)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79,641</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78,852</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other bad debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,007</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Non-operating expense-other (Note 2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,513</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,039</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,821</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,147</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">931</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,528</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">258,578</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">162,256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">313,506</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">310,402</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Continued)
</DIV>

<P align="center" style="font-size: 10pt">F-5
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">hanarotelecom incorporated AND SUBSIDIARIES
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Translation into</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Korean Won</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">U.S. Dollars (Note 2)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">(In millions, except per share amount)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(In thousands, except</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">per share amount)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ORDINARY INCOME (LOSS)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">(160,912)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">13,849</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">(191,787)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(189,888</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">EXTRAORDINARY ITEMS (Note 25)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19,018</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18,830</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">INCOME (LOSS)&nbsp;BEFORE INCOME TAX</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(160,912</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,849</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(210,805</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(208,718</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">INCOME TAX EXPENSE (Note 19)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(302</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(495</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(434</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(430</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">MINORITY INTEREST SHARE OF LOSS (INCOME)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(85</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(308</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,921</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,902</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">NET INCOME (LOSS)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">(161,299)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">13,046</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">(209,318)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(207,246</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">BASIC AND DILUTED ORDINARY INCOME
(LOSS)&nbsp;PER SHARE (Note 2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">(502)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">(412)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.41</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">BASIC AND DILUTED NET INCOME (LOSS)
PER SHARE (Note 2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">(502)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">(453)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.45</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">See accompanying notes to consolidated financial statements.

</DIV>

<P align="center" style="font-size: 10pt">F-6
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">hanarotelecom incorporated AND SUBSIDIARIES
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">CONSOLIDATED STATEMENTS OF SHAREHOLDERS&#146; EQUITY
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="22" style="border-bottom: 1px solid #000000">Korean Won (In millions)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Common</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Capital</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Accumulated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Capital</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Minority</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">stock</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">surplus</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">deficit</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">adjustments</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">interests</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Total</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">1,396,613</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">689,758</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">(737,987)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">(5,546)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">145,477</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">1,488,315</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">914,063</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(348,173</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">565,890</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss for 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(161,299</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(161,214</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of changes in consolidated
subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(808</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">489</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(144,964</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(145,283</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Compensation expense related to
stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,375</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,375</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net unrealized loss on
available-for-sale securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,376</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,376</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net unrealized loss on
investment securities using the
equity method</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,557</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,564</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on valuation of interest swap</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,425</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,425</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign-based operations translation
Debit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,310,676</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">332,220</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(898,797</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,977</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">598</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,730,720</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income for 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,046</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">308</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,354</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of changes in consolidated
Subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(300</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,309</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,287</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Compensation expense related to
stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,311</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,311</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net
recognized gain included in earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,037</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,037</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net
unrealized gain on
available-for-sale securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of changes in investment
securities using the equity method</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,557</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,107</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,457</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on valuation of interest swap</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,565</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,565</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,310,676</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">341,033</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(887,158</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(16,160</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,215</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,751,606</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss for 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(209,318</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,921</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(211,239</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of changes in consolidated
subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(116</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,160</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,626</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,924</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Compensation expense related to
stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,238</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,238</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net
recognized gain included in earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,643</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net unrealized gain on
available-for-sale securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,144</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on valuation of interest swap</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,764</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">2,310,676</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">340,917</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">(1,096,222)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">12,789</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">4,920</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">1,573,080</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Translation into U.S. Dollars (In
thousands) (Note 2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,287,799</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">337,542</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1,085,368</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12,661</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,871</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,557,505</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">See accompanying notes to consolidated financial statements.

</DIV>

<P align="center" style="font-size: 10pt">F-7
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">hanarotelecom incorporated AND SUBSIDIARIES
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">CONSOLIDATED STATEMENTS OF CASH FLOWS
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Translation into</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Korean Won</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">U.S. Dollars (Note 2)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">(In millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(In thousands)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CASH FLOWS FROM OPERATING ACTIVITIES:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">(161,299)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">13,046</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">(209,318)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(207,246</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Addition of expenses not involving cash outflows:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Stock compensation expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,375</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,278</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,238</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,195</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Provision for severance indemnities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,444</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,095</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,770</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Amortization of discount on debentures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,857</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,698</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,631</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,555</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Amortization of discount on present value of
long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">408</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,983</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,743</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Recognition of long-term accrued interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">669</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">662</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Employee fringe benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">944</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">638</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">632</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">428,528</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">442,312</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">498,087</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">493,155</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss on foreign currency translation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">138</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,092</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,081</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Provision for doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,744</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,933</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,876</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss on valuation of trading securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">307</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss on disposal of property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,326</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,246</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,154</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,133</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Impairment loss on short-term investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">940</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,109</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Impairment loss on long-term investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,385</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,539</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,045</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss on disposal of short-term investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss on disposal of long-term investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,381</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,367</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss on valuation using the equity method</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,142</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss on disuse of property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,726</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,586</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,986</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss on early redemption of debentures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">308</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">165</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">163</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss on early redemption of long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,235</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,213</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss on early redemption of long-term obligation
under capital leases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss on valuation of forward exchange contract</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,975</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,842</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,646</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Impairment loss on intangibles</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79,641</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78,852</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other bad debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,007</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Extraordinary loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,870</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,743</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Minority interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">308</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Ordinary development cost and other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,330</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,300</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">589,195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">564,577</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">751,721</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">744,278</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deduction of revenues not involving cash inflows:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gain on disposal of short-term investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">315</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Amortization of present value discount</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,019</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,506</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,656</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,640</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gain on valuation of forward exchange contract</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">173</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gain on disposal of property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">885</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,962</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,923</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gain on disposal of long-term investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">439</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">435</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gain on disposal of investment securities using the
equity method</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,391</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,140</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gain on foreign currency translation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,823</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,699</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,583</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gain on early redemption of debentures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">870</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Minority interest loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,921</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,902</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">224</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,593</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,577</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,699</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,661</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,200</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Continued)
</DIV>

<P align="center" style="font-size: 10pt">F-8
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">hanarotelecom incorporated AND SUBSIDIARIES
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Translation into</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Korean Won</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">U.S. Dollars (Note 2)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">(In millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(In thousands)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Changes in assets and liabilities resulting from operations:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Decrease (Increase) in trade receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">(37,260)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">(24,643)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">5,726</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,669</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Decrease in long-term trade receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Decrease in accounts receivable-other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,693</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,494</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,036</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Decrease (Increase) in accrued income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,263</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,243</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,045</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Decrease (Increase) in prepaid expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,629</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(17,786</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(17,610</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Decrease (Increase) in refundable income tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,367</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(671</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,723</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,696</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Decrease (Increase) in advanced payments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,370</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(25,529</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">543</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Increase in inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(32,218</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(30,929</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(16,319</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(16,157</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Increase in forward exchange contract</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,888</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Decrease (Increase) in long-term prepaid expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,097</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">541</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(377</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(373</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Decrease (Increase) in deferred income tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(51</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(402</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">203</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">201</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Increase (Decrease) in trade payables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(38,320</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,316</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,565</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,550</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Increase (Decrease) in other accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(28,698</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,404</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,350</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Increase in advances received</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,349</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,306</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Increase (Decrease) in accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,512</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,948</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,569</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,217</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Increase (Decrease) in withholdings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,314</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,441</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,536</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,521</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Decrease in forward exchange contract</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,224</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,162</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Increase (Decrease) in income tax payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,436</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">474</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(208</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(206</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Decrease in long-term advances received</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,189</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,173</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,173</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,161</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Increase (Decrease) in deposits received</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">893</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(77</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">165</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Increase in long-term deposits received</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,013</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,219</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,326</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,292</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Increase (Decrease) in deferred income tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Increase in foreign based operations translation credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Decrease in payments to National Pension</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Payments of severance indemnities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(15,556</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,090</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19,666</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19,472</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:60px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(120,162</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(71,188</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,679</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,611</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:60px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net cash flows provided by operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">303,035</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">469,888</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">489,063</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">484,221</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:60px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CASH FLOWS FROM INVESTING ACTIVITIES:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Proceeds from disposal of short-term investment
securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">303</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">472</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">467</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Collection of short-term financial instruments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">842,882</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">778,170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">354,499</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">350,989</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Redemption of short-term loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,771</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,320</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,021</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Redemption of long-term loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,734</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,280</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,569</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,524</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Proceeds from disposal of long-term investment
securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">406</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,826</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,758</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Proceeds from disposal of investments in consolidated
subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,950</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Withdrawal of long-term financial instruments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Refund of key-money deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,152</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,642</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,741</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,486</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Proceeds from disposal of property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,304</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,218</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,447</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,403</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Withdrawal of severance insurance deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,424</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Acquisition of short-term financial instruments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(929,616</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(751,564</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(182,133</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(180,330</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Purchase of short-term investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(17,807</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(500</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(495</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Extension of short-term loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(614</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(417</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(694</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(687</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Purchase of long-term investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,132</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(190</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(198,447</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(196,482</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Continued)
</DIV>

<P align="center" style="font-size: 10pt">F-9
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">hanarotelecom incorporated AND SUBSIDIARIES
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Translation into</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Korean Won</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">U.S. Dollars (Note 2)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">(In millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(In thousands)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CASH FLOWS FROM INVESTING ACTIVITIES:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Acquisition of long-term financial instruments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">(131)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">(870)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(861</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Extension of long-term loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,404</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,755</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,449</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,435</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Extension of long-term non-trade receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(613</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(607</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Payment of key-money deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,324</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(42,083</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20,130</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19,931</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Acquisition of consolidated subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,734</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(249,110</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(246,644</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Acquisition of property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(196,053</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(212,522</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(311,676</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(308,589</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Payment of intangibles</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,118</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12,163</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,268</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,137</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Payment of severance insurance deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(124</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,659</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,778</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,760</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net cash flows used in investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(250,793</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(209,181</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(574,625</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(568,936</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CASH FLOWS FROM FINANCING ACTIVITIES:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Proceeds from short-term borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">338,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Proceeds from long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">148,329</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">322,549</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">281,697</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">278,908</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Proceeds from issuance of debentures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">261,013</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">503,544</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">498,558</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Proceeds from issuance of common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">565,889</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Proceeds from long-term deposits received</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,487</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Repayment of short-term borrowings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(230,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(163,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Repayment of long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,096,800</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(421,961</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(833,607</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(825,353</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Decrease in Asset Backed Securities payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(122,972</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(32,510</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net cash flows used in financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(135,054</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(294,922</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(48,366</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(47,887</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">INCREASE (DECREASE)&nbsp;FROM CHANGES IN
CONSOLIDATED SUBSIDIARIES</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(23,758</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,013</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119,307</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">NET DECREASE IN CASH AND CASH
EQUIVALENTS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(106,570</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(31,202</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,428</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,295</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">306,118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">199,548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">168,346</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">166,679</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CASH AND
CASH EQUIVALENTS, END OF YEAR</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">199,548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">168,346</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">154,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">153,384</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Continued)
</DIV>

<P align="center" style="font-size: 10pt">F-10
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">hanarotelecom incorporated AND SUBSIDIARIES
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Translation into</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Korean Won</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">U.S. Dollars (Note 2)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">(In millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(In thousands)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CASH PAID FOR INTEREST</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">125,291</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">82,453</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">78,573</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">77,795</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CASH PAID FOR INCOME TAX</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,030</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">186</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">184</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">TRANSACTIONS NOT INVOLVING CASH:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Transfer of long-term loans to current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,759</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,032</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,933</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Transfer of inventories to property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,801</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,480</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,242</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,051</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Transfer of debentures to current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">264,688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">306,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">190,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">188,119</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Transfer of long-term debt to current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103,271</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72,956</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,948</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,543</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Transfer of long-term obligation under capital
lease to current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">87,297</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,108</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,255</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,866</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Transfer of Asset Backed Securities payable to
current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,510</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Recognition of loss on valuation of
available-for-sale securities as capital
adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">681</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Recognition of income on valuation of
available-for-sale securities as capital
adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,738</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,701</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Transfer of construction in progress to property
and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">125,045</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,698</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">130,869</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">129,573</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Acquisition of property and equipment under long-term lease obligation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">98,230</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,731</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Transfer of construction in progress to intangibles</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,479</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,445</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Transfer of short-term loans to long-term loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,855</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,807</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Transfer of trade receivables to long-term trade
receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,142</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,121</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Transfer of advanced payments to inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,193</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,181</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Transfer of advanced payments to long-term
investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,940</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,693</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Transfer of refundable income tax to accounts
receivables-other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,012</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,982</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Transfer of advances received from proceeds from
disposal of investments in consolidated subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,168</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Receivable from disposal of consolidated subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,564</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Transfer of prepaid expenses to long-term present
value discount</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,561</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,317</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,245</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Transfer of provision for severance indemnities to
construction in progress</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">620</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">790</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">782</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Transfer of other current liabilities to long-term
deposits received</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">See accompanying notes to consolidated financial statements.

</DIV>

<P align="center" style="font-size: 10pt">F-11
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">hanarotelecom incorporated AND SUBSIDIARIES
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">DECEMBER 31, 2003, 2004 AND 2005
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">1. <U>GENERAL:</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(1)&nbsp;hanarotelecom incorporated
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">hanarotelecom incorporated (&#147;hanaro&#148;) was incorporated on September&nbsp;26, 1997 pursuant to the laws
of the Republic of Korea (&#147;Korea&#148;). hanaro was formed following its selection by the Ministry of
Information and Communication (&#147;MIC&#148;) on June&nbsp;13, 1997 as the second carrier to provide local
telephony services in Korea. On November&nbsp;11, 1998, hanaro was listed on the Korea Securities
Dealers Automated Quotation System (&#147;KOSDAQ&#148;). hanaro issued American Depository Receipts (&#147;ADRs&#148;)
on April&nbsp;4, 2000, which are traded on the National Association of Securities Dealers Automated
Quotation System (&#147;NASDAQ&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">hanaro commenced providing local call and high-speed data access, internet and multimedia access on
April&nbsp;1, 1999 and is providing services in 83 cities, including Seoul, Busan, Ulsan and Incheon,
and 53 counties as of December&nbsp;31, 2005. On December&nbsp;12, 2002, hanaro received a license to
provide domestic long-distance calls and international calls from the MIC, and commenced providing
the service from July&nbsp;1, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">hanaro&#146;s headquarters is located in Yoido-dong, Seoul. hanaro has 26 domestic branches and also
has invested in several companies such as Korea Thrunet Co., Ltd., Hanaro Realty Development &#038;
Management Co., Ltd., Hanaro Telephone &#038; Internet Information, Inc. and Hanaro Dream Inc. in order
to facilitate and strengthen its services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of December&nbsp;31, 2005, the shareholders of hanaro are as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Number of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Percentage of</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">shares</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">ownership (%)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Newbridge Asia HT, L.P.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,535,799</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.72</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">AIF II NT, Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,456,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SSB - AOF NT, Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,721,875</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.35</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">United Classic Investment Limited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,392,746</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.41</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">HT Holding V, L.P.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,418,330</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.04</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">HT Holdings VI, L.P.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,325,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.59</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">HT Holdings VII, L.P.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,156,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.98</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">HT Holdings VIII, L.P.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,987,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.38</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">HT Holdings IX, L.P.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,818,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.77</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SK Telecom</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,090,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.78</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Daewoo Securities Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.60</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dacom Corporation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,964,561</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.94</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Hong Kong &#038; Shanghai Banking Corp.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,630,778</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.65</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Credit Suisse Financial</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,054,513</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">LG Telecom</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,397,574</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">NTC-SAUDI ARAB MON</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,999,155</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.08</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Employee stock ownership association</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,229,232</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.48</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">209,956,867</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45.43</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">462,135,180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The major shareholder of hanaro is AIG-Newbridge-TVG Consortium, which has 182,812,500 shares,
39.56% of ownership of the Company.
</DIV>



<P align="center" style="font-size: 10pt">F-12
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 18pt">(2)&nbsp;Consolidated Subsidiaries
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The consolidated financial statements include the accounts of hanaro and its controlled
subsidiaries (collectively referred to as the ''Company&#146;&#146;). Controlled subsidiaries include
majority-owned entities and entities of which hanaro owns more than 30&nbsp;percent of the total
outstanding voting stock and is the largest shareholder. Significant inter-company accounts and
transactions have been eliminated in the consolidation. The ownership percentages disclosed in the
following table relate to the period that such entities were consolidated.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="35%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Year</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Ownership</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">control was</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">percentage (%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Subsidiaries</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">obtained</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Primary business</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Hanaro Realty Development &#038;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">1999</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99.99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99.99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Property management of</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Management Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="margin-left:15px; text-indent:-0px">hanarotelecom incorporated</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Hanaro Telephone &#038; Internet</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">2002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99.99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99.99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Customer Q &#038; A and service</TD>

</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Information, Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Hanaro WEB(n)TV</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">2000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Broadcasting &#038; telecommunication</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Media Holdings, Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Investment in broadcasting company</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Hanaro Dream, Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Distribution industry of internet</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="margin-left:15px; text-indent:-0px">digital contents</DIV></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Korea Thrunet Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Internet and multimedia access</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="margin-left:15px; text-indent:-0px">service</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">hanaro purchased Korea Thrunet Co., Ltd.&#146;s stocks during 2005 and included it in the consolidated
financial statements. Also, hanaro excluded Hanaro Web(n)TV and Media Holdings, Inc. from the
consolidated financial statements due to disposal as of December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">2. <U>SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: </U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Basis of Presentation</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">hanaro and its domestic subsidiaries maintain their official accounting records in Korean won and
prepare statutory consolidated financial statements in the Korean language (Hangul) in conformity
with the accounting principles generally accepted in the Republic of Korea (&#147;Korean GAAP&#148;).
Certain accounting principles applied by the Company and its domestic subsidiaries that conform
with financial accounting standards and accounting principles in the Republic of Korea may not
conform with generally accepted accounting principles in other countries. Accordingly, these
financial statements are intended for use by those who are informed about Korean accounting
principles and practices. The accompanying financial statements have been condensed, restructured
and translated into English with certain expanded descriptions from the Korean language financial
statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying financial statements are stated in Korean Won, the currency of the country in
which hanaro is incorporated and operates. The translation of Korean Won amounts into U.S. dollar
amounts is included solely for the convenience of the readers outside of the Republic of Korea and
has been made at the rate of <STRIKE>W</STRIKE>1,010.00 to US$1.00, the noon buying rate in the City of New York
for cable transfers in Won as certified for customs purposes by the Federal Reserve Bank of New
York on December&nbsp;31, 2005. Such translations should not be construed as representations that the
Korean Won amounts could be converted at that or any other rate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The significant accounting policies followed by the Company in preparing the accompanying
consolidated financial statements are summarized as follows:
</DIV>


<P align="center" style="font-size: 10pt">F-13
</DIV>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 18pt"><U>Use of Estimates</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The preparation of financial statements in accordance with Korean GAAP requires management to make
estimates and assumptions that affect the amounts reported in the consolidated financial statements
and accompanying notes. The most significant estimates and assumptions relate to revenue
recognition, allowance for doubtful accounts, depreciation, investments in non-listed equity
securities and deferred income taxes. Actual results could differ from those estimates and may
affect amounts reported in future periods. Management believes that the estimates are reasonable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Revenue Recognition </U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Revenue related to installation of service and sale of customer premises equipment is recognized
when equipment is delivered and installation is completed. Revenue from monthly recurring service
is recognized in the month the service is provided.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Cash and Cash Equivalents</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cash and cash equivalents are bank deposits and short-term money market instruments that can be
easily converted into cash and whose risk of value fluctuation arising from changes of interest
rates is not material. Only investments with maturities of three months or less from the
acquisition date are included in cash equivalents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Short-term Financial Instruments</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Short-term financial instruments primarily consist of time deposits with original maturities of
less than one year and repurchase agreements that invest in short-term highly liquid securities.
Short-term financial instruments are recorded at cost. Interest income on short-term financial
instruments is accrued as earned.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Allowance for Doubtful Accounts </U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The allowance for doubtful accounts is provided based on the estimated collectibility of individual
accounts and historical bad debt experience.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Changes in allowance for doubtful accounts of trade receivables, accounts receivable-other,
long-term trade receivables, long-term loans and long-term non-trade receivables for the years
ended December&nbsp;31, 2003, 2004 and 2005 are as follows (won in millions):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">21,170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">41,089</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">62,806</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,744</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,933</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,192</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Write-offs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,569</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,969</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(27,219</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Changes in consolidated subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,256</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">753</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,145</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">End of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">41,089</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">62,806</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">130,924</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company reclassified the trade receivables from Onse Telecom into long-term trade receivables
due to the court arrangement of debt and accordingly, recorded the difference between the trade
receivables and the discounted present value as allowance for doubtful accounts in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Also, in 2004, in accordance with the adoption of SKAS No.&nbsp;13, the Company reclassified the
discount on present value of <STRIKE>W</STRIKE>686&nbsp;million of the receivables from Onse Telecom incurred during
2003 into allowance for doubtful accounts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Inventories </U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Inventories consist primarily of modems and local area network equipment to be leased to customers.
Inventories are stated at the lower of cost or net realizable value, cost being determined by the
average cost method. If the net realizable value of inventories is lower than cost, inventories
are adjusted to net realizable value and the difference between cost and revalued amount is charged
to current operations.
</DIV>


<P align="center" style="font-size: 10pt">F-14
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 18pt"><U>Investment Securities Other than those Accounted for Using the Equity Method</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(1)&nbsp;Classification of Securities
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At acquisition, the Company classifies securities into one of three categories: trading,
held-to-maturity or available-for-sale. Trading securities are those that were acquired
principally to generate profits from short-term fluctuations in prices. Held-to-maturity securities
are those with fixed and determinable payments and fixed maturity that an enterprise has the
positive intent and ability to hold to maturity. Available-for-sale securities are those not
classified as either held-to-maturity or trading securities. Trading securities are classified as
short-term investment securities, whereas available-for-sale securities and held-to-maturity
securities are classified as long-term investment securities, except for those maturity dates or
whose likelihood of being disposed of are within one year from the balance sheet date, which are
classified as short-term investment securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(2)&nbsp;Valuation of Securities
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Securities are recognized initially at cost, which includes the market value of the consideration
given and incidental expenses. If the market price of the consideration given is not available, the
market prices of the securities purchased are used as the basis of measurement. If neither the
market price of the consideration given nor those of the acquired securities are available, the
acquisition cost is measured at the best estimates of its fair value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">After initial recognition, held-to-maturity securities are valued at amortized cost. The difference
between their acquisition costs and face values is amortized over the remaining term of the
securities by applying the effective interest method and added to or subtracted from the
acquisition costs and interest income of the remaining period. Trading securities are valued at
fair value, with unrealized gains or losses included in current operations. Available-for-sale
securities are also valued at fair value, with unrealized gains or losses included in capital
adjustments, until the securities are sold or if the securities are determined to be impaired and
the lump-sum cumulative amount of capital adjustments are reflected in current operations. However,
available-for-sale securities that are not traded in an active market and whose fair values cannot
be reliably estimated are accounted for at acquisition costs. For those securities that are traded
in an active market (marketable securities), fair values refer to the quoted market prices, which
are measured as the closing price at the balance sheet date. The fair values of non-marketable debt
securities are measured at the discounted future cash flows by using the discount rate that
appropriately reflects the credit rating of the issuing entity assessed by a publicly reliable
independent credit rating agency. If application of such measurement method is not feasible,
estimates of the fair values may be made using a reasonable valuation model or quoted market prices
of similar debt securities issued by entities conducting similar
business in similar industries. Securities are evaluated at each balance sheet date to determine whether there is any objective
evidence of impairment loss. When any such evidence exists, unless there is a clear
counter-evidence that recognition of impairment is unnecessary, the Company estimates the
recoverable amount of the impaired security and recognizes any impairment loss in current
operations. The amount of impairment loss of held-to-maturity security or non-marketable equity
security is measured as the difference between the recoverable amount and the carrying amount.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The recoverable amount of held-to maturity security is the present value of expected future cash
flows discounted at the securities&#146; original effective interest rate. For available-for-sale debt
or equity security stated at fair value, the amount of impairment loss to be recognized in the
current period is determined by subtracting the amount of impairment loss of debt or equity
security already recognized in prior period from the amount of amortized cost in excess of the
recoverable amount for debt security or from the amount of acquisition cost in excess of fair value
for equity security. For non-marketable equity securities accounted for at acquisition costs, the
impairment loss is equal to the difference between the recoverable amount and the carrying amount.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If the realizable value subsequently recovers, in case of a security stated at fair value, the
increase in value is recorded in current operations, up to the amount of the previously recognized
impairment loss, while with securities stated at amortized cost or acquisition cost, the increase
in value is recorded in current operations, so that its recovered value does not exceed what its
amortized cost would be as of the recovery date if there had been no impairment loss.
</DIV>


<P align="center" style="font-size: 10pt">F-15
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 18pt">(3)&nbsp;Reclassification of Securities
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">When transfers of securities between categories are needed because of changes in an entity&#146;s
intention and ability to hold those securities, such transfer is accounted for as follows: trading
securities cannot be reclassified into available-for-sale and held-to-maturity securities, and vice
versa, except when certain trading securities lose their marketability. Available-for-sale
securities and held-to-maturity securities can be reclassified into each other after fair value
recognition. When a held-to-maturity security is classified into available-for-sale security, the
difference between fair value and book value is recorded as a capital adjustment. Whereas, in the
case of an available-for-sale security is reclassified into held-to-maturity securities, the
difference is recorded as a capital adjustment and amortized using the effective interest rate
method for the remaining periods.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Investment Securities Using the Equity Method</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Investments in equity securities in companies in which the Company is able to exercise significant
influence over the operating and financial policies of the investees are accounted for using the
equity method. The change in the Company&#146;s portion of an investee&#146;s net equity resulting from a
change in an investee&#146;s net equity is reflected in the Company&#146;s net income (loss), retained
earnings and capital adjustments, in accordance with the causes of the change, which consist of the
investee&#146;s net income (loss), changes in retained earnings and changes in capital surplus and
capital adjustments. Unrealized gain (loss)&nbsp;arising from the transactions of assets between the
Company and equity method investees is eliminated according to the ownership percentage.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Valuation of Assets and Liabilities at Present Value</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Long-term receivables and long-term payables are valued at their present value as discounted at an
appropriate discount rate. Discounts are amortized using the effective interest rate method and
recognized as interest expense or interest income over the term of the related accounts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Property and Equipment </U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Property and equipment are stated at cost. Expenditures incurred after the acquisition of the
property and equipment that increase the future economic benefits beyond the property&#146;s most
recently measured performance are capitalized as addition to property and equipment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Depreciation is computed using the straight-line method based on the estimated useful lives of the
assets as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Estimated useful lives</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Buildings, building facilities and structures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">40~50 years</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Machinery</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">3~15 years</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Vehicles and other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">4~8 years</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company changed the useful lives of tangible assets, effective from January&nbsp;1, 2004, to improve
financial soundness and usefulness of accounting information, considering the rapid changes of
technologies in the telecommunication industry, the Company&#146;s accumulated business experience and
the average useful lives used by companies in the same industry. Such changes in accounting
estimates increased the Company&#146;s depreciation by
<STRIKE>W</STRIKE>8&nbsp;million for the year ended December&nbsp;31, 2004,
in comparison with the calculation applying the previous useful lives.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The changes in the estimated useful lives are as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Previous useful lives</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Revised useful lives</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Buildings and structures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="right">50
years&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">40 years</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Machinery (duct line)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="right">8 years&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">15 years</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Machinery (terminal equipment)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="right">8 years&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">6 years</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Vehicles and other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="right">5~8 years&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">4 years</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">F-16
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 18pt"><U>Capitalization of Financing Costs</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Interest expense, discount and other financial charges, including certain foreign exchange
translation gain and loss on borrowings associated with the manufacture, purchase, or construction
of property and equipment, incurred prior to the completion of the acquisition, were capitalized
until the year ended December&nbsp;31, 2002, and are no longer capitalized from January&nbsp;1, 2003 in
compliance with SKAS No.&nbsp;7.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Long-Lived Assets</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Long-lived assets are subject to review for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. An impairment loss is
recognized when estimated undiscounted future net cash flows expected to result from the use of the
asset and its eventual disposition are less than its carrying amount. If such assets are
considered to be impaired, the impairment to be recognized is measured as the amount by which the
carrying amount of the assets exceeds the fair value of the assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Leases</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Lease agreements that include a bargain purchase option, result in the transfer of ownership by the
end of the lease term, have a term equal to at least 75% of the estimated economic life of the
leased property or where the present value of the minimum lease payments at the beginning of the
lease term equals or exceeds 90% of the fair value of the leased property are accounted for as
financial or capital leases. All other leases are accounted for as operating leases. Assets and
liabilities related to financial leases are recorded as property and equipment and long-term debt,
respectively, and the related interest is calculated using the effective interest rate method. In
respect to operating leases, the future minimum lease payments are expensed ratably over the lease
term while contingent rentals are expensed as incurred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Intangibles</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Intangibles are stated at cost, net of amortization. Amortization is computed using the
straight-line method, based on the estimated useful lives of the assets as described below.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Estimated Useful Lives</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">4~5 years</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property rights of industry</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">5~10 years</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cable line usage rights</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">15~20 years</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Land rights</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">20 years</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Development costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">1 year</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other intangibles</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">3~5 years</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Discounts on Debentures</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Discounts on debentures are amortized over the redemption period of the debenture using the
effective interest rate method. Amortization of discounts is recognized as interest expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Accrued Severance Indemnities </U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">All employees with more than one year of service are entitled to receive a lump-sum payment upon
termination of their employment with the Company, based on their length of service and rate of pay
at the time of termination. The severance indemnities that would be payable assuming all employees
were to resign amount to <STRIKE>W</STRIKE>36,348&nbsp;million and <STRIKE>W</STRIKE>36,022&nbsp;million as of December&nbsp;31, 2004 and 2005,
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Before April&nbsp;1999, the Company and its employees paid 3&nbsp;percent and 6&nbsp;percent, respectively, of
monthly pay (as defined) to the National Pension Fund in accordance with the National Pension Law
of Korea. The Company paid half of the employees&#146; 6&nbsp;percent portion and is paid back at the
termination of service by offsetting the receivable against the severance payments. Such
receivables, with a balance of <STRIKE>W</STRIKE>127&nbsp;million and <STRIKE>W</STRIKE>82&nbsp;million as of December&nbsp;31, 2004 and 2005,
respectively, are presented as a deduction from accrued severance indemnities. Starting April
1999, the Company and its employees each pay 4.5&nbsp;percent of monthly pay to the National Pension
Fund under the revised National Pension Law of Korea.
</DIV>


<P align="center" style="font-size: 10pt">F-17
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 18pt">The Company has entered into a severance insurance plan in accordance with the Labor Standard Law
of Korea promulgated in 2000. This plan restricts severance payments directly to the eligible
employees and directors, and meets the funding requirement for tax deduction purposes. The amount
funded under this severance insurance plan of <STRIKE>W</STRIKE>3,289&nbsp;million and <STRIKE>W</STRIKE>3,242&nbsp;million as of December
31, 2004 and 2005, respectively, is presented as a deduction from accrued severance indemnities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Changes in accrued severance indemnities for the years ended December&nbsp;31, 2003, 2004 and 2005 are
as follows (Won in millions):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">28,027</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">25,649</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">36,348</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Severance payments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(15,556</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,090</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19,666</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,224</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,142</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Changes in consolidated subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,046</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">673</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,198</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,649</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,022</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">National Pension Fund for employees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(149</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(127</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(82</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Severance insurance deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,624</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,289</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,242</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">End of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">23,876</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">32,932</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">32,698</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company paid early retirement allowance to <STRIKE>W</STRIKE>4,513&nbsp;million and <STRIKE>W</STRIKE>22,039&nbsp;million in addition to
the normal severance payment for the years ended December&nbsp;31, 2003 and 2005, respectively. The
retirement bonus was recorded as non-operating expense-other.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Accounting for Foreign Currency Transactions and Translation</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company maintains its accounts in Korean won. Transactions in foreign currencies are recorded
in Korean won based on the prevailing rates of exchange on the transaction date. Monetary accounts
with balances denominated in foreign currencies are recorded and reported in the accompanying
financial statements at the exchange rates prevailing at the balance sheet date and the translation
gains or losses are reflected in current operations. The balances have been translated using the
rate announced by the Korea Exchange Bank, which was <STRIKE>W</STRIKE>1,035.00 and <STRIKE>W</STRIKE>1,004.50 to US$1.00 at
December&nbsp;31, 2004 and 2005, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Income Tax Expense </U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The provision for income tax consists of the corporate income tax and resident surtax currently
payable and the changes in deferred income taxes for the period. The Company recognizes deferred
income taxes arising from temporary differences between amounts reported for financial accounting
and income tax purposes. Deferred income taxes will be offset against those incurred in the
future, if any. Deferred income taxes are recalculated based on the actual tax rate in effect at
each balance sheet date (See Note 19). Deferred tax assets and liabilities are classified as
current or non-current based on the classification of the related assets or liabilities for
financial reporting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Stock Compensation Expense </U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company values stock options granted in 2004 and 2005 using the fair value method (binomial
option pricing model). Also, the Company records the difference between the present value of the
exercise price and the stock price at the grant date as compensation expense with a corresponding
credit to the capital adjustment account (minimum value method) for the stock options granted in
2000. The computed deferred compensation expenses are allocated over the contracted vesting
period. When the stock options are exercised with the issuance of new shares, the difference
between the exercise price plus the stock option cost recorded in the capital adjustment account
and the par value of the new shares issued is recorded as additional paid-in capital. However, for
the stock options granted in 1999, compensation expense was calculated as the difference between
the stock price at year-end and the exercise price multiplied by the number of stock options (See
Note 17).
</DIV>


<P align="center" style="font-size: 10pt">F-18
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 18pt"><U>Net Income (Loss) per Share and Ordinary Income (Loss) per Share</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net income (loss)&nbsp;per share and ordinary income (loss)&nbsp;per share are computed by dividing net
income (loss)&nbsp;and ordinary income (loss)&nbsp;for common stock, by the weighted average number of common
shares outstanding during the period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net income (loss)&nbsp;per share and ordinary income (loss)&nbsp;per share for the years ended December&nbsp;31,
2003, 2004 and 2005 are computed as follows (Won in millions except per shares amounts):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">(161,299</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">13,046</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">(209,318</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividend for preferred stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)&nbsp;for common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">(161,299</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">13,046</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">(209,318</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Extraordinary item</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19,018</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ordinary income (loss)&nbsp;for common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">(161,299</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">13,046</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">(190,300</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">The weighted average number of common shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">321,309,739</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">462,135,180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">462,135,180</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic and diluted net income (loss)&nbsp;per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">(502</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">(453</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic and diluted ordinary income (loss)&nbsp;per
share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">(502</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">(412</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net income (loss)&nbsp;per share and ordinary income (loss)&nbsp;per share were not diluted for the years
ended December&nbsp;31, 2003, 2004 and 2005, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Adoption of Newly Effective Statements of Korea Accounting Standards </U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Korea Accounting Standards Board (&#147;KASB&#148;) has published a series of Statements of Korea
Accounting Standards (&#147;SKAS&#148;), which replace the existing financial accounting standards,
established by the Korean Financial and Supervisory Board. The Company prepared its financial
statements as of December&nbsp;31, 2005 in accordance with Financial Accounting Standards and SKAS in
the Republic of Korea.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The
Company newly adopted SKAS No.&nbsp;15&#151;&#147;Investment in
Associates&#148;, No.&nbsp;16&#151;&#147;Income Taxes&#148; and No.
17&#151;&#147;Provisions, Contingent Liabilities and Contingent Assets&#148;, effective from January&nbsp;1, 2005, and
certain amounts and accounts of prior year&#146;s financial statements are reclassified to conform to
the current year&#146;s presentation. This reclassification does not affect the net income and net
assets of the prior period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">3. <U>CASH AND CASH EQUIVALENTS:</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cash and cash equivalents as of December&nbsp;31, 2004 and 2005 are as follows (Won in millions):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Interest rate per annum (%)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash on hand</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Passbook accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,045</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,291</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Specified fund trusts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">3.1 ~ 5.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,557</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Time deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">3.64</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commercial paper</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,586</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Money Market Funds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">3.4 ~ 4.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96,762</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119,321</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Money Market Deposit Accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">1.6 ~ 3.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,896</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,698</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Repurchase agreements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">3.65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,046</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Certificate of deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">3.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">168,346</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">154,918</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-19
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 18pt">4. <U>SHORT-TERM AND LONG-TERM FINANCIAL INSTRUMENTS</U>:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(1)&nbsp;Short-term financial instruments as of December&nbsp;31, 2004 and 2005 are as follows (Won in
millions):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Interest rate per annum (%)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Time deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">3.3 ~ 4.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">144,005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">17,255</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Repurchase agreements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">3.4 ~ 4.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,521</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,095</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commercial paper</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Certificate of deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">193,716</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">23,350</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(2)&nbsp;Long-term financial instruments as of December&nbsp;31, 2004 and 2005 are as follows (Won in
millions):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Interest rate per annum (%)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deposits for checking accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Repurchase agreements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">3.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">504</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Time deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">3.05 ~ 4.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,104</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">1,622</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">5. <U>RESTRICTED DEPOSITS:</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of December&nbsp;31, 2004 and 2005, the following deposits are subject to withdrawal restriction as
guarantee for the payment of borrowings, checking accounts and other reasons (Won in millions).
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Short-term financial instruments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">117,267</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">22,709</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term financial instruments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,445</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">117,335</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">24,154</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">6. <U>SHORT-TERM INVESTMENT SECURITIES:</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Short-term investment securities as of December&nbsp;31, 2004 and 2005 are as follows (Won in millions):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Acquisition cost</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Book value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Acquisition cost</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Book value</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Held-to-maturity securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Collateralized bond obligation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">1,570</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">1,120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">1,120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Government bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">1,571</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">1,121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">1,120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company recorded <STRIKE>W</STRIKE>940&nbsp;million, <STRIKE>W</STRIKE>450&nbsp;million and &#163;&#220;1,120&nbsp;million of impairment loss on
short-term investment securities for the years ended December&nbsp;31, 2003, 2004 and 2005,
respectively.
</DIV>


<P align="center" style="font-size: 10pt">F-20
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">7. <U>LONG-TERM INVESTMENT SECURITIES:</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(1)&nbsp;Long-term investment securities as of December&nbsp;31, 2004 and 2005 consist of the following
(Won in millions):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Ownership</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Ownership</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">percentage (%)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">percentage (%)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Available-for-sale securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Listed equity securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">LG Telecom, Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">0.37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">4,143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Netsecure Technology, Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">0.38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">C.C.S., Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">7.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,698</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">7.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,842</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Dong Bu Securities Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">0.67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,345</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,859</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,187</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Non-listed equity securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Dreamline Corp.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">14.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,935</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">11.54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,935</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Korea Information Assurance, Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">0.47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">0.47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">CCR Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">2.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">484</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">2.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">185</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Dauinternet, Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">0.71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">0.71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Korea Digital Cable Media Center</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">4.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">4.21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">HeyAnita Korea Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">15.58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">828</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Saeronet Broadcasting Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">8.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,151</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Powercomm Corporation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">0.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">CJ Cablenet Haeundae-Kijjang Corp.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">20.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,118</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Rent House Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">20.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Korea.com Communications Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">53.47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:75px; text-indent:-15px">TG Edunet Co., Ltd</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">27.59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,099</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,280</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,196</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,136</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Money Market Funds:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Dong Yang Investment Bank</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Prudential Investment &#038; Securities Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">145</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">179</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Investments in funds:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Engineering Benevolent Association</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">0.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">0.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">KDBC Hanaro Interventure Fund</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">31.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,598</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center">31.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,598</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">MIC99-7 Venture Investment Association</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">134</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Korea Equipment Financial Cooperative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Information &#038; Communication Financial
Cooperative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Electric Contractors&#146; Financial Cooperative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Korea Electric Engineers Association</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Korea Specialty Contractor Financial
Cooperative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,741</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,956</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,796</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,458</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Held-to-maturity securities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Government and municipal bond</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">G.P.S. Korea Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">28,816</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">31,471</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-21
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(2)&nbsp;Listed equity securities as of December&nbsp;31, 2004 and 2005 are as follows (won in millions):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Acquisition cost</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Fair value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Acquisition cost</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Fair value</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">LG Telecom Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">5,396</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">4,143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Netsecure Technology, Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,399</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">C.C.S., Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,740</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,698</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,740</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,842</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dong Bu Securities Co.,
Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">201</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,345</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">11,535</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">5,859</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">4,941</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">5,187</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Above listed equity securities are recorded at market price and the difference between acquisition
cost and fair value is accounted for as capital adjustments. However, when the listed equity
securities&#146; market price declined and is not expected to recover, the Company records the
difference between market price and acquisition cost as impairment loss on long-term investment
securities. The Company recorded <STRIKE>W</STRIKE>3,009&nbsp;million of impairment loss on long-term investment
securities (listed equity security) for the year ended December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(3)&nbsp;Non-listed equity securities as of December&nbsp;31, 2004 and 2005 are as follows (won in
millions):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Acquisition</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Net asset</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Book</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Acquisition</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Net asset</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Book</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">cost</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">cost</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">value</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dreamline Corporation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">39,530</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">18,837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">16,935</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">39,530</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">18,165</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">16,935</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Korea Information Assurance, Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CCR Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">277</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">484</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">185</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">185</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dauinternet, Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Korea Digital Cable Media Center</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">469</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">384</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">HeyAnita Korea Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,568</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">828</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">828</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Saeronet Broadcasting Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,719</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,151</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Powercomm Corporation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">CJ Cablenet Haeundae-Kijjang Corp.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,118</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Rent House Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Korea.com Communications Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">TG Edunet Co., Ltd</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,351</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,099</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,204</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,280</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">51,232</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">21,035</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">20,196</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">100,439</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">24,083</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">23,136</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Non-listed equity securities of which net asset value declined and is not expected to recover were
adjusted to net asset value or fair value, with the valuation loss on long-term investment
securities charged to current operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company recorded <STRIKE>W</STRIKE>3,385&nbsp;million, <STRIKE>W</STRIKE>2,539&nbsp;million and <STRIKE>W</STRIKE>1,036&nbsp;million of impairment loss on
long-term investment securities (non-listed equity security) for the years ended December&nbsp;31, 2003,
2004 and 2005, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">CJ Cablenet Haeundae-Kijjang Corp. is subject to be accounted for using the equity method because
the Company&#146;s ownership percentage is 20%, but is excluded from using the equity method because the
Company&#146;s influence over the investee&#146;s operation is limited as majority shareholder of the
investee holds 80% ownership.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Also, Rent House Co., Ltd. and TG Edunet Co., Ltd. are subject to be accounted for using the equity
method the Company&#146;s ownership percentage is over 20%, but are excluded from using the equity
method because the investee&#146;s operation is under court&#146;s control after bankruptcy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition, Korea.com Communications Co., Ltd. is subject to be accounted for using the equity
method and consolidated subsidiaries, but is excluded from using the equity method and consolidated
subsidiaries because the Company can not actually exercise significant influence over the operating
and financial policies of the investee according to legal management.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Furthermore, ownership percentage of the Company in Korea.com Communications Co., Ltd. is reduced
to 0.96% after the reduction of capital (20:1) subsequent to consolidated balance sheet date.
</DIV>



<P align="center" style="font-size: 10pt">F-22
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(4)&nbsp;Money market funds as of December&nbsp;31, 2004 and 2005 are as follows (Won in millions):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Acquisition cost</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Book value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Acquisition cost</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Book value</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dong Yang Investment Bank</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prudential Investment &#038;
Securities Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">134</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">145</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">163</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">179</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">Above money market funds are recorded at market price and the difference between acquisition cost
and fair value is accounted for as capital adjustments.</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(5)&nbsp;Debt securities as of December&nbsp;31, 2004 and 2005 are as follows (Won in millions):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Acquisition cost</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Book value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Acquisition cost</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Book value</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Government and municipal bonds:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Corporate bonds:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">G.P.S. Korea Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">8. <U>INVESTMENT SECURITIES USING THE EQUITY METHOD:</U>
</DIV>


<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">(1)&nbsp;The Company reclassified investment securities of Dreamline Corporation into long-term
investment securities from investment securities using the equity method due to the decrease of
ownership percentage to less than 20% as of December&nbsp;31, 2004.</DIV>


<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">(2)&nbsp;Loss on valuation using the equity method for the year ended December&nbsp;31, 2003 is as follows
(won in millions):</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Loss on valuation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Changes in</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Net asset</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">using the equity</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">consolidated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Capital</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Book</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Acquisition cost</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Value</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Beginning of period</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">method</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">subsidiaries</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">adjustment</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Value</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dreamline
Corporation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">39,530</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">24,894</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">(23,142</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">41,272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">(8,565</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">9,565</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">9. <U>LOANS TO EMPLOYEES:</U>
</DIV>


<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">Short-term and long-term loans to employees as of December&nbsp;31, 2004 and 2005 are as follows (Won in
millions):</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Interest per</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">annum (%)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Short-term</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Long-term</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Short-term</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Long-term</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loans to employees for stock purchase</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">4,486</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">8,634</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">8,087</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">1,742</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loans to employees for housing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,524</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,409</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,210</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,138</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,631</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,994</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Less: discount on present value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(149</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,495</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(366</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,361</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">5,989</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">14,656</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">9,265</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">7,633</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-23
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 12pt">10. <U>PROPERTY AND EQUIPMENT:</U>
</DIV>


<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">Changes in property and equipment for the years ended December&nbsp;31, 2004 and 2005 are as follows
(Won in millions):</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>2004:</U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Changes in</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Beginning of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">consolidated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">year</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Increase</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Decrease</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">subsidiaries</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">End of year</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Land</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">157,962</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">7,584</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">165,546</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Buildings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">304,749</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,999</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">177</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">312,571</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Structures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">246</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">246</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Machinery</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,293,862</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">259,718</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,973</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,503,432</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Vehicles</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">431</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">440</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,831</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,435</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Construction in progress</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,848</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,551</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,698</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,701</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Machinery in transit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">394</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">194</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">261</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,828,168</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">353,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">133,059</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,051,632</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: Accumulated
depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Buildings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,069</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,544</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,598</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Structures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Machinery</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,228,566</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">408,119</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">273</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,612,856</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Vehicles</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">202</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">362</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,376</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,384</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,314</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">474</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,920</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,277,247</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">433,262</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,469</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">747</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,678,787</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">2,550,921</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">2,372,845</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>2005:</U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Changes in</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Beginning of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">consolidated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">year</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Increase</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Decrease</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">subsidiaries</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">End of year</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Land</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">165,546</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">1,234</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">11,386</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">178,166</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Buildings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">312,571</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,847</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,894</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">333,312</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Structures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">246</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(54</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">192</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Machinery</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,503,432</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">323,020</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">409,052</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">615,752</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,033,152</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Vehicles</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">440</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">273</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(134</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,435</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,983</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,919</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,990</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,489</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Construction in progress</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,701</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">127,755</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">137,920</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,522</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,058</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Machinery in transit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">261</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,051,632</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">462,928</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">567,514</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">654,356</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,601,402</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: Accumulated
depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Buildings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,598</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,890</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,492</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Structures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(31</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Machinery</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,612,856</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">469,988</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">339,016</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">449,162</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,192,990</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Vehicles</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">362</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">273</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(56</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,920</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,778</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,362</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,642</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,978</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,678,787</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">483,661</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">356,651</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">457,721</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,263,518</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">2,372,845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">2,337,884</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">Depreciable assets are insured against fire and other casualty losses up to <STRIKE>W</STRIKE>2,301,912&nbsp;million and
<STRIKE>W</STRIKE>2,018,302&nbsp;million as of December&nbsp;31, 2004 and 2005, respectively.</DIV>


<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">The market value of the Company&#146;s land based on the official price of land (published by the
Ministry of Construction and Traffic) is <STRIKE>W</STRIKE>180,809&nbsp;million and <STRIKE>W</STRIKE>233,886&nbsp;million as of December&nbsp;31,
2004 and 2005, respectively.</DIV>


<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">The Company recorded <STRIKE>W</STRIKE>61,333&nbsp;million, <STRIKE>W</STRIKE>20,726&nbsp;million and <STRIKE>W</STRIKE>60,586&nbsp;million of loss on disuse of
property and equipment for the years ended December&nbsp;31, 2003, 2004 and 2005, respectively, due to
discontinuance of service, decrease of customer demands and deteriorations of certain machinery.</DIV>


<P align="center" style="font-size: 10pt">F-24
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">11. <U>LEASES</U>:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company has operating lease agreements for the rights to use automobiles with Avis Rent A
Car Co. The payment schedule for the operating leases is as follows (Won in millions):</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">

<TD nowrap align="left" style="border-bottom: 1px solid #000000">Year</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">623</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">186</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">832</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company also has capital lease agreements with Korea HP Financial Service Co., LG Card
Services Corp., and Cisco Systems Capital Korea Ltd. for certain machinery and equipment. As
of December&nbsp;31, 2004 and 2005, the acquisition cost of machinery and equipment under capital
leases was <STRIKE>W</STRIKE>175,336&nbsp;million and <STRIKE>W</STRIKE>108,719&nbsp;million, respectively, and depreciation expense
related to these capital leases for the years ended December&nbsp;31, 2003, 2004 and 2005 amounts
to <STRIKE>W</STRIKE>20,071&nbsp;million, <STRIKE>W</STRIKE>19,719&nbsp;million and <STRIKE>W</STRIKE>13,590&nbsp;million, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company early repaid a portion of capital leases and recorded <STRIKE>W</STRIKE>58&nbsp;million of loss on early
redemption of obligations under capital leases for the year ended December&nbsp;31, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The future annual payments under these capital lease agreements as of December&nbsp;31, 2005 are as
follows (Won in millions):</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Year</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Principal</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Interest</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Total</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">26,719</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">1,447</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">28,166</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,271</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">323</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,594</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">433</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">437</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,423</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">1,774</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">41,197</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: Current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(26,719</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">12,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In relation to these lease agreements, the Company has provided one blank promissory note as
collateral to LG Card Services Corp. (See Note 21).</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">12. <U>INTANGIBLES:</U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Intangibles as of December&nbsp;31, 2004 and 2005 are as follows (Won in millions):</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>2004:</U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Acquisition cost</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Amortization</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Impairment</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Book value</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">23,619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">17,844</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">5,775</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property rights of industry</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cable line usage rights</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,967</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,219</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,748</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Land rights</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Development costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,775</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,309</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,466</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other intangibles</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,184</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">931</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,167</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">118,795</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">62,444</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">56,265</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>2005:</U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Acquisition cost</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Amortization</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Impairment</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Book value</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">136,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">14,851</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">79,168</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">42,685</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property rights of industry</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">161</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">142</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cable line usage rights</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75,255</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,405</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Land rights</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Development costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,079</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,402</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,677</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other intangibles</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,546</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">559</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,996</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">258,378</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">69,811</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">79,727</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">108,840</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-25
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Changes in intangibles for the years ended December&nbsp;31, 2004 and 2005 are as follows (Won in
millions):</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>2004:</U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Changes in</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Beginning</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">consolidated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">of year</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Acquisition</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Amortization</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">subsidiaries</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">End of year</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">3,287</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">6,343</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">3,855</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">5,775</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property rights of industry</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cable line usage rights</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,397</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,969</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,748</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Land rights</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Development costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,716</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,375</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,625</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,466</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other intangibles</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">323</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,167</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">51,481</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">13,035</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">9,438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">1,187</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">56,265</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>2005:</U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Changes in</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Beginning</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">consolidated</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">of year</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Acquisition</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Amortization</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">subsidiaries</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">End of year</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">5,775</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">128,233</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">91,323</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">42,685</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property rights of industry</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cable line usage rights</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,748</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,526</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,338</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,405</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Land rights</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Development costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,466</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,304</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,093</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,677</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other intangibles</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,089</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,996</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">56,265</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">139,302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">99,061</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">12,334</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">108,840</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company recorded <STRIKE>W</STRIKE>86&nbsp;million and <STRIKE>W</STRIKE>79,641&nbsp;million of impairment on intangibles for the
years ended December&nbsp;31, 2004 and 2005, respectively.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(4)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><STRIKE>W</STRIKE>4,891&nbsp;million, <STRIKE>W</STRIKE>3,960&nbsp;million and <STRIKE>W</STRIKE>4,403&nbsp;million of ordinary research and development
costs were charged to expense as incurred for the years ended December&nbsp;31, 2003, 2004 and
2005, respectively.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">13. <U>LONG-TERM DEBT AND DEBENTURES: </U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Long-term debt in local currency as of December&nbsp;31, 2004 and 2005 is as follows (Won in
millions):</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Interest rate per annum (%)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Information promotion fund</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">66,651</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">General loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Syndication loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102,304</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79,847</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">208,955</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79,847</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: Current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(66,756</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Discount on present value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,691</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,362</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">139,508</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">76,485</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On April&nbsp;18, 2002, the Company transferred the beneficiary certificates of <STRIKE>W</STRIKE>207,000
million for the trust amount of <STRIKE>W</STRIKE> 226,800&nbsp;million issued by Kookmin Bank to Hana Dream
Limited Co. (&#147;Hanadream&#148;) in exchange for the right to receive certain of the Company&#146;s
future trade receivables, which are expected to be incurred from April&nbsp;2002 to April&nbsp;2004.
Hanadream issued Asset Backed Loans (&#147;ABL&#148;) amounting to <STRIKE>W</STRIKE> 207,000&nbsp;million on April&nbsp;25,
2002, of which the subordinate loan of <STRIKE>W</STRIKE>7,000&nbsp;million was loaned by the Company and <STRIKE>W</STRIKE>
200,000&nbsp;million was loaned by the banks. The proceeds of <STRIKE>W</STRIKE>200,000&nbsp;million were remitted
to the Company. In relation to the issuance of ABL, the Company recognizes the difference
between the trade receivables and the reduced long-term debt as interest expense. The ABL
repayment was completed as of December&nbsp;31, 2004 and <STRIKE>W</STRIKE>398&nbsp;million was recorded as interest
expense for the year ended December&nbsp;31, 2004.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-26
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Long-term debt in foreign currency as of December&nbsp;31, 2004 and 2005 is as follows (Won in
millions, dollar in thousands):</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Interest rate</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">per annum (%)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">U.S. dollars</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Won equivalent</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Syndication loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">258,568</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">201,809</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">267,618</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">202,718</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: Current
portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(30,271</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(30,408</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Discount
on
present
value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,703</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,798</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,972</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,816</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">250,865</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">167,740</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">259,646</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">168,494</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company early repaid a portion of long-term debt and recorded <STRIKE>W</STRIKE>2,235&nbsp;million of loss on
early redemption of long-term debt for the year ended December&nbsp;31, 2005.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(3)&nbsp;Debentures as of December&nbsp;31, 2004 and 2005 are as follows (Won in millions):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Interest rate per annum (%)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Due</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Won</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">U.S. dollars</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Won equivalent</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">19-2<SUP style="font-size: 85%; vertical-align: text-top">nd</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2002~2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">20<SUP style="font-size: 85%; vertical-align: text-top">th</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2002~2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">21<SUP style="font-size: 85%; vertical-align: text-top">st</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2002~2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">170,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">23<SUP style="font-size: 85%; vertical-align: text-top">rd</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2003~2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">190,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">190,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">24<SUP style="font-size: 85%; vertical-align: text-top">th</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2003~2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2005~2012</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">500,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">502,250</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">496,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">500,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">692,250</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: Current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(306,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(190,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Discount on
present value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(482</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,880</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,044</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">189,518</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">491,120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">493,206</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>According to the covenants, debentures of 23<SUP style="font-size: 85%; vertical-align: text-top">rd</SUP> require the Company to keep the debt
ratio lower than 300&nbsp;percent and the Company should not dispose of its property and equipment
more than the <STRIKE>W</STRIKE>1,000&nbsp;billion in each fiscal year. The Company complied with the covenants&#146;
requirements as of December&nbsp;31, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As of December&nbsp;31, 2005, for the warrants on the bonds with stock warrants (&#147;13<SUP style="font-size: 85%; vertical-align: text-top">th</SUP>
debenture&#148;), US$ 62,000 thousand (15,322,680 shares) has been exercised and US$ 38,000 thousand
(9,391,320 shares) remains unexercised and exercisable until February&nbsp;6, 2006.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The warrants on the bonds with stock warrants (&#147;18<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> debenture&#148;) is US$ 15,000
thousand (3,963,600 shares) and are exercisable until January&nbsp;26, 2007. The exercise price per
one share is <STRIKE>W</STRIKE>5,000 at an exchange rate of <STRIKE>W</STRIKE>1,321.20 to US$1.00.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company early repaid a portion of debentures and recorded <STRIKE>W</STRIKE>308&nbsp;million and <STRIKE>W</STRIKE>165&nbsp;million of
loss on early redemption of debentures for the years ended December&nbsp;31, 2003 and 2005. Also,
The Company recorded <STRIKE>W</STRIKE>870&nbsp;million of gain on early redemption of debentures for the year ended
December&nbsp;31, 2003.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">F-27
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(4)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The repayment schedule of debentures and long-term debt as of December&nbsp;31, 2005 is as follows
(Won in millions and dollar in thousands):</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Debentures in</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Long-term debt in</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Debentures</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">foreign currency</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Long-term</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">foreign currency</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">in local</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Won</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">debt in local</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Won</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Year</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">currency</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">U.S. Dollar</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">equivalent</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">currency</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">U.S. Dollar</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">equivalent</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Total</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">190,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">30,271</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">30,408</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">220,408</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,163</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,724</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,087</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,250</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,357</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,814</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91,223</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113,580</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,551</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,551</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,776</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,776</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2012</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">500,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">502,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">502,250</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">190,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">500,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">502,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">79,847</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">201,809</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">202,718</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">974,815</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(5)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On April&nbsp;21, 2005, the Company entered into a syndicated loan agreement with Development Bank
of Singapore, JP Morgan Chase, Deutsche Bank, Korea Development Bank and other financial
institutions. The loan agreement approximates <STRIKE>W</STRIKE>720&nbsp;billion (Won currency loan of <STRIKE>W</STRIKE>310,048
million and US$ currency loan of US$ 409,952 thousand), which includes a term loan of <STRIKE>W</STRIKE>660
billion with a maturity of five years and a revolving loan of <STRIKE>W</STRIKE>60&nbsp;billion. The outstanding
balance of this syndicated loan as of December&nbsp;31, 2005 is <STRIKE>W</STRIKE>282,564&nbsp;million (long-term debt
in local currency of <STRIKE>W</STRIKE>79,847&nbsp;million and long-term debt in foreign currency of <STRIKE>W</STRIKE>202,718
million).</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(6)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In relation to the above syndicated loan up to <STRIKE>W</STRIKE>720&nbsp;billion, the Company&#146;s buildings are
pledged as collateral up to <STRIKE>W</STRIKE>542,799&nbsp;million; machinery of which book value is <STRIKE>W</STRIKE>1,702,960
million as of September&nbsp;30, 2004 are provided as assignable mortgage and some intellectual
property rights are pledged as collateral.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">14. <U>ASSET BACKED SECURITIES PAYABLE:</U>
</DIV>


<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">In October&nbsp;2001, the Company transferred the beneficiary certificates of <STRIKE>W</STRIKE>309,000&nbsp;million for the
trust amount of <STRIKE>W</STRIKE>341,000&nbsp;million issued by a trustee bank to Hanafos Securitization Speciality
Co., Ltd. (&#147;Hanafos&#148;) in exchange for the right to receive certain of the Company&#146;s future trade
receivables, which are expected to be incurred from October&nbsp;2001 to April&nbsp;2004. Hanafos then
issued Asset Backed Securities (&#147;ABS&#148;) amounting to <STRIKE>W</STRIKE>309,000&nbsp;million on October&nbsp;31, 2001 and the
ABS repayment was completed as of December&nbsp;31, 2004 and <STRIKE>W</STRIKE>9,028&nbsp;million and <STRIKE>W</STRIKE>490&nbsp;million were
recorded as asset backed securities payable expense for the years ended December&nbsp;31, 2003 and 2004,
respectively.</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">15. <U>DERIVATIVES: </U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(1)&nbsp;Swap Contract
</DIV>


<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">With reference to the Company&#146;s issuance of the syndication loan in foreign currency, the Company
entered into swap contracts (fixed interest rate) with Korea Development Bank (KDB)&nbsp;to hedge the
risk of floating interest rates. In relation to the valuation of these swap contracts, the Company
recorded <STRIKE>W</STRIKE>17,623&nbsp;million and <STRIKE>W</STRIKE>1,859&nbsp;million of valuation loss as capital adjustments and
liabilities as of December&nbsp;31, 2004 and 2005, respectively. The outstanding swap contracts as of
December&nbsp;31, 2005 are as follows (Won in millions and dollar in thousands):</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Valuation loss</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Financial</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">on interest swap</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">institution</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Contract period</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Floating rate (%)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Fixed rate (%)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Contract amount</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">IBK</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2002.5~2005.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center">Government bond rate&#043;1.95</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">100,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">1,496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">KDB</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2003.12~2008.11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">LIBOR&#043;3.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.72</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">63,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,556</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">691</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">KDB etc</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2004.2~2008.11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">LIBOR&#043;3.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">138,744</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,325</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,168</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">KDB etc</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2004.9~2008.11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">LIBOR&#043;3.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">56,759</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,246</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">17,623</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">1,859</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-28
</DIV>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(2)&nbsp;Forward Exchange Contract
</DIV>


<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">The Company entered into foreign currency forward contracts, relating to debentures and syndicated
loan in foreign currency, with Development Bank of Singapore (DBS)&nbsp;and Korea Development Bank (KDB)
to hedge the exposure to changes in the foreign currency exchange rate. The Company recorded
<STRIKE>W</STRIKE>33,975 and <STRIKE>W</STRIKE>19,842&nbsp;million of loss on forward exchange valuation for the years ended December
31, 2004 and 2005 and <STRIKE>W</STRIKE>33,802&nbsp;million and <STRIKE>W</STRIKE>47,420&nbsp;million of forward exchange contracts (current
liabilities) as of December&nbsp;31, 2004 and 2005, respectively (Dollar in thousands).</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Contract period</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Fixed exchange rate</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Contract amount</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2003.12~2008.11</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,190.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">63,065</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:21px; text-indent:-15px">2004.2~2008.11</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,166.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">138,744</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:26px; text-indent:-15px">2005.2~2012.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,026.5~1,035.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">500,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">701,809</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">Also, the Company recorded <STRIKE>W</STRIKE>343&nbsp;million and <STRIKE>W</STRIKE>242&nbsp;million of gain on transaction of forward
exchange contract for the years ended December&nbsp;31, 2003 and 2004, respectively, and <STRIKE>W</STRIKE>173&nbsp;million
of loss on transaction of forward exchange contract for the year ended December&nbsp;31, 2004.</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">16. <U>SHAREHOLDERS&#146; EQUITY: </U>
</DIV>


<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">The Company has authorized 700,000,000 shares of <STRIKE>W</STRIKE>5,000 par value, of which 462,135,180 shares
have been issued as of December&nbsp;31, 2005.</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">17. <U>STOCK OPTION PLAN:</U>
</DIV>


<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">The Company entered into stock option agreements with the Chief Executive Officer, senior managers
and employees of the Company. The details of the stock options granted as of December&nbsp;31, 2005 are
as follows (Won in millions):</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Number of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Exercise</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Grant company</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Grant date</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">shares</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">price/share</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Methods</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Exercise period</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">hanarotelecom
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">1999. 3. 1</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">50,000</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom"><STRIKE>W</STRIKE></TD>
    <TD align="right" valign="bottom">5,630</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">New stock issue
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">2002.3.1~2007.2.28</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">incorporated
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">1999.10. 1</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">120,000</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">19,910</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">New stock issue
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">2002.10.1~2007.9.30</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">2000. 3.17</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">1,413,591</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">17,750</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">New stock issue
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">2003.3.18~2008.3.17</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">2004.12.16</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">19,772,890</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">5,000</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">New stock issue or<BR>
cash payment
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">2006.12.17~2011.12.16</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">2005.3.25</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">610,000</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">5,000</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">New stock issue or<BR>
cash payment
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">2007.3.26~2012.3.25</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Hanaro Dream, Inc.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">2003.1.16</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">30,000</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom">8,000</TD>
    <TD nowrap valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">New stock issue
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">2005.1.16~2007.1.15</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">The Company values stock options granted in 2004 and 2005 using the fair value method (binomial
option-pricing model) and in relation to the stock options granted in 2000, the Company values
stock options granted based on the minimum value method (See Note 2). Total compensation expense
of <STRIKE>W</STRIKE>16,872&nbsp;million was allocated over the vesting period, and the compensation expense charged to
operations for the years ended December&nbsp;31, 2003, 2004 and 2005 was <STRIKE>W</STRIKE>1,375&nbsp;million, <STRIKE>W</STRIKE>1,278
million and <STRIKE>W</STRIKE>4,238&nbsp;million, respectively and <STRIKE>W</STRIKE>7,227&nbsp;million and <STRIKE>W</STRIKE>11,465&nbsp;million was recorded as
capital adjustments as of December&nbsp;31, 2004 and 2005, respectively. Also, in relation to the stock
options granted in 1999, the Company did not recognize compensation expense, which was calculated
as the difference between the stock price at year-end and the exercise price multiplied by the
number of stock options, due to downward movement of the stock price.</DIV>



<P align="center" style="font-size: 10pt">F-29
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">The schedule of compensation expense for the stock options as of December&nbsp;31, 2005 is as follows
(Won in millions):</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">

<TD nowrap align="left" style="border-bottom: 1px solid #000000"><DIV style="margin-left:80px; text-indent:-15px">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Carried forward from prior period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">7,227</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">2005.1 ~ 2005.12</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,238</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">2006.1 ~ 2006.12</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,774</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">2007.1 ~ 2007.12</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,593</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">2008.1 ~ 2008.12</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">2009.1 ~ 2009.12</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">16,872</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">The principal assumptions in relation to estimation of the stock compensation expense are as
follows:</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Granted in 2000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Granted in 2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Granted in 2005</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Risk-free interest rate (%)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" nowrap>3.35 ~ 3.43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" nowrap>4.11 ~ 4.38</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected lives (years)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3 ~ 7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2 ~ 3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2 ~ 4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected forfeitures per year (%)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.09</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.09</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Volatility (%)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" nowrap>53.8 ~ 85.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" nowrap>34.3 ~ 50.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted-average exercise price
(won)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">17,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">5,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">5,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted-average fair value (won)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">457</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">385</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">Had the compensation cost for the Company&#146;s stock option plans, which were granted in 2000, been
determined based on the fair value method at the grant dates for awards, the Company&#146;s ordinary
income (loss), net income (loss), ordinary income (loss)&nbsp;per share and net income (loss)&nbsp;per share
would have been reduced (increased)&nbsp;as follows (Won in millions, except per share amount):</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ordinary income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">(162,657</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">12,695</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">(192,489</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">(163,044</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">11,893</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">(210,020</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ordinary income (loss)&nbsp;per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">(506</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">(417</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)&nbsp;per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">(507</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">(455</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">The fair value of the option grant is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions used for grants in 2000:
dividend yield of nil, expected volatility of 93.8&nbsp;percent, risk-free interest rate of 9.0&nbsp;percent,
expected exercise lives of 3 to 7&nbsp;years and expected forfeitures per year of 3%. Total
compensation cost based on the fair value method was calculated as <STRIKE>W</STRIKE>18,389&nbsp;million.</DIV>



<P align="center" style="font-size: 10pt">F-30
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 12pt">18. <U>OPERATING EXPENSES:</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Significant accounts of operating expenses for the years ended December&nbsp;31, 2003, 2004 and 2005 are
as follows (won in millions):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Salaries and wages</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">92,370</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">103,030</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">122,839</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for severance indemnities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,444</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,095</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,918</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Welfare</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,380</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,994</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,971</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Rent</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,746</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,339</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Taxes and dues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,449</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,245</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">428,528</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">442,312</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">498,087</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Advertising</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,457</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,514</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,110</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ordinary research and development cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,960</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,403</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Utilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,487</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,800</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Telecommunication equipment lease expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">165,716</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">140,820</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">164,439</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bad debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,744</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,933</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,065</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Maintenance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,583</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,451</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,255</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,408</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,791</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,821</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales commissions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">195,997</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">178,380</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">249,740</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interconnection charges</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">131,114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">141,964</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">164,677</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commissions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,859</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68,460</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,618</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outsourcing services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,519</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,722</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,816</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,277</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,666</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,680</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">1,312,792</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">1,335,639</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">1,550,823</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">19. <U>INCOME TAX EXPENSE AND DEFERRED INCOME TAXES:</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Income Tax Expense</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The statutory corporate income tax rate (including resident surtax) applicable to the Company is
approximately 29.7%, 29.7% and 27.5% in 2003, 2004 and 2005, respectively. Income tax is
calculated as follows (won in millions):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income taxes currently payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">341</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">806</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">245</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Changes in temporary differences</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(39</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(311</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">189</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">434</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Deferred Income Taxes</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Deferred income taxes reflect the tax effects on prior years&#146; tax losses, tax credits, and
temporary differences between the carrying amount of assets and liabilities for financial
accounting purposes and the amounts used for income tax purposes.
</DIV>

<P align="center" style="font-size: 10pt">F-31
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Accumulated temporary differences and deferred taxes as of December&nbsp;31, 2004 and 2005 are as
follows (Won in millions):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrued severance indemnities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">22,154</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">26,402</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bad debts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96,789</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Present value discount</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,387</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impairment loss on long-term investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,489</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96,183</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,690</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on disuse of property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,840</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,800</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on valuation of forward exchange contract</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,975</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,842</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,771</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impairment loss on intangibles</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,109</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unearned income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,067</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(758</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Valuation gain on available-for-sale securities, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,184</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Present value discount</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,663</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,022</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on foreign currency translation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,887</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Severance insurance deposits and other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,665</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,710</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">154,482</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">332,412</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss carryforward</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">703,695</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,289,173</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: Temporary differences excluded</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(855,970</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,620,949</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,207</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">636</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tax rate (%)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">27.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">27.5</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred income tax assets, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">607</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">175</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company(excluding subsidiary) did not recognize deferred income tax assets for temporary
differences due to the uncertainty of future realization of the deferred tax benefits of
<STRIKE>W</STRIKE>855,970&nbsp;million and <STRIKE>W</STRIKE>1,620,949&nbsp;million as of December&nbsp;31, 2004 and 2005, respectively.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">20. <U>RELATED PARTY TRANSACTIONS</U>:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Significant transactions and outstanding balances with subsidiaries for the years ended and
as of December&nbsp;31, 2004 and 2005 are as follows (Won in millions):</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="41%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">

<TD nowrap align="left" style="border-bottom: 0px solid #000000"><FONT STYLE="FONT-SIZE:10PT"><U>2004</U></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Receivables</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Payables</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Key-money</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Accounts</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Trade</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Accrued</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Revenue</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Expenses</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">deposits</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Receivables</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">payables</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">expenses</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Hanaro Realty Development &#038;
Management Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">19,181</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">1,409</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">142</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">433</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">366</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Hanaro Telephone &#038; Internet
Information, Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,457</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">188</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,047</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Hanaro Web(n)TV</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">155</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,980</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Hanaro Telecom America, Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">512</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">HanaroDream Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">636</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,360</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,300</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">3,651</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">72,568</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">1,507</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">907</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">3,157</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">4,713</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-32
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="36%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR style="font-size: 10pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000"><u>2005</u></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Receivables</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Payables</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Key-money</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Accounts</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Trade</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Accrued</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Revenue</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Expenses</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">deposits</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Receivables</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">payables</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">expenses</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Hanaro Realty
Development &#038;
Management Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">165</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">20,568</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">509</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">142</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">339</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">398</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Hanaro Telephone &#038;
Internet Information,
Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,194</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,939</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Korea Thrunet Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,352</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,126</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,339</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">626</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">HanaroDream Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,361</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,507</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">624</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">821</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,448</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">18,896</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">87,395</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">509</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">7,603</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">2,499</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">5,411</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Transactions with shareholders for the years ended December&nbsp;31, 2004 and 2005 are as follows
(won in millions):</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Revenues:</U></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Transaction</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Samsung</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">Service fee</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dacom Corporation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">&#148;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,472</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,656</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SK Telecom</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">&#148;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,844</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,581</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">LG</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center">&#148;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,058</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,090</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">34,419</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">40,327</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Purchases:</U></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="52%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Transaction</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Samsung</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Purchase of machinery and equipment, other</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">10,789</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dacom Corporation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Interconnection charges, other</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,896</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,780</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SK Telecom</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Interconnection charges, other</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,367</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,530</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">LG</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Purchase of machinery and equipment, other</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,853</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,346</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">103,905</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">87,656</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Balances with shareholders as of December&nbsp;31, 2004 and 2005 are as follows (won in millions):</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Assets</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Liabilities</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Samsung</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">7,784</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dacom Corporation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">783</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">530</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">447</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SK Telecom</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,457</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,237</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,186</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,496</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">LG</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">288</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">666</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,064</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,342</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">3,528</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">5,433</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">29,049</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">15,285</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">21. <U>COMMITMENTS AND CONTINGENCIES</U>:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company has been provided US$ 100 thousand, as a maximum, of payment guarantees by the
Korea Exchange Bank in connection with the international telephone service arrangement
contract with SingTel.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company has been provided US$ 1,000 thousand of payment guarantees by the National
Agriculture Cooperative Federation in connection with the issuance of letters of credit.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company has provided one blank promissory note as collateral to LG Card Services Corp. in
connection with its lease agreements (See Note 11).</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-33
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(4)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company has entered into the network supply agreements for the right to use various
underground facilities to house its fiber-optic cable network, leased lines, telecommunication
equipments with Seoul Metropolitan Subway Corporation, Seoul Metropolitan Rapid Transit Corp.,
Powercomm Corp., Dacom Corp., Korea Electric Power Corporation, Dreamline Corp. and others,
and the related rental expenditure is recorded as telecommunication equipment lease expenses.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(5)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company has to comply with the covenants&#146; requirements in relation to its debentures (See
Note 13).</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">22. <U>SUPPLEMENTARY INFORMATION FOR COMPUTATION OF VALUE ADDED:</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accounts and amounts needed for calculation of value added for the years ended December&nbsp;31,
2003, 2004 and 2005 are as follows (Won in millions):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="59%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ordinary income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">(160,912</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">13,849</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">(191,787</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Salaries and wages</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92,370</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103,030</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">122,839</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provisions for severance indemnities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,444</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,095</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,918</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Employee benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,380</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,994</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,971</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120,865</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82,386</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82,177</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Rent</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,746</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,339</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Taxes and dues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,449</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,245</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">428,528</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">442,312</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">498,087</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">536,693</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">694,190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">569,789</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">23. <U>LITIGATIONS:</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of December&nbsp;31, 2005, the Company is a defendant in 12 lawsuits claiming damages for payments
amounting to <STRIKE>W</STRIKE>3,131&nbsp;million and is a plaintiff in 5 lawsuits claiming for payments amounting to
<STRIKE>W</STRIKE>24,026&nbsp;million. The final outcome of the above lawsuits cannot presently be determined. However,
management believes that the ultimate disposition of those litigations will not have a materially
adverse impact on the operations or financial position of the Company.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">24. <U>SEGMENT INFORMATION:</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s reportable segments are strategic business units that offer different products and
services. The segments are managed separately based on the difference in products and services,
technology and marketing strategies. The Company has three reportable operating segments; voice
services, lease line and broadband services. Voice services include all services provided to fixed
line customers, including local services. Lease line services consist of the leasing of dedicated
fiber optic lines over which customers transmit voice and data. Broadband services include
high-speed data transmission services over Asymmetrical Digital Subscriber Line (ADSL), hybrid
fiber coaxial (HFC)&nbsp;cable lines and internet access services. The operations of all other
operating segments, which fall below the reporting thresholds, are included in the other segment
below and include entities providing real estate management services and customer services. The
accounting policies of the segments are the same as those described in Note 2.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Segment informations for the years ended December&nbsp;31, 2003, 2004 and 2005 are as follows (won in
millions):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Voice</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Leased Line</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Broadband</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Others</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Total</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">248,964</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">37,992</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">982,693</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">113,837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">1,383,486</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,577</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,986</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">118,937</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(44,652</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,694</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tangible and intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">558,446</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,652</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,743,778</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">283,526</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,602,402</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital expenditures and
advanced payments for
property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,581</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,064</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">245,711</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,603</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">350,959</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,298</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,657</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">315,208</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,365</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">428,528</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-34
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Voice</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Leased Line</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Broadband</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Others</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Total</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">291,186</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">39,717</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">985,428</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">133,238</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">1,449,569</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(23,552</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,775</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,978</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(16,271</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113,930</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tangible and intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">452,215</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,627,321</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">282,611</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,429,110</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital expenditures and
advanced payments for
property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,392</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,042</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">208,122</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,113</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">294,669</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,889</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">323,676</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,037</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">442,312</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="41%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Voice</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Leased Line</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Broadband</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Others</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Total</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">375,253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">44,255</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">1,074,387</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">95,450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">1,589,345</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(76,581</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,376</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">125,147</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,668</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,522</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tangible and intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">581,981</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,482</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,638,395</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">160,866</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,446,724</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital expenditures and
advanced payments for
property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">194,393</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,416</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135,976</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,711</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">341,496</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,371</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">347,410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,610</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">498,087</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Capital expenditures and advanced payments for property and equipment include increase of property
and equipment by capital lease obligation, which is <STRIKE>W</STRIKE>98,230&nbsp;million and <STRIKE>W</STRIKE>37,731&nbsp;million for the
years ended December&nbsp;31, 2003 and 2004, respectively.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">25. <U>EXTRAORDINARY ITEMS</U>:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At the board of directors&#146; meeting held on September&nbsp;14, 2005, hanaro resolved to merge with Korea
Thrunet Co., Ltd. on January&nbsp;1, 2006. Accordingly, the network unification of hanaro and Korea
Thrunet Co., Ltd. is in progress and accounted for the expenses occurred in relation to this
unification as extraordinary item, which amount to <STRIKE>W</STRIKE>14,119&nbsp;million for the year ended December&nbsp;31,
2005. Also, impairment loss on property and equipment is accounted as extraordinary item, which
amount to <STRIKE>W</STRIKE>4,899&nbsp;million for the year ended December&nbsp;31, 2005.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">26. <U>MERGER</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Effective January&nbsp;1, 2006, Korea Thrunet Co., Ltd., the Company&#146;s affiliate, was merged into the
Company. Details of the merger are as follows:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(1)&nbsp;Purpose of the merger
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company merged Korea Thrunet Co., Ltd., which is engaged in broadband internet access services,
to maximize its business value by strengthening its competitiveness, taking advantage of the
synergy effect and concentrating its business resources.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(2)&nbsp;General information of the merger
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="32%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="32%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">hanarotelecom</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Korea Thrunet</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Date of establishment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">September          26, 1997</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">July 30, 1996</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Chief executive officer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Soon-Yub Kwon</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Soon-Yub Kwon</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Location</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Yoido-dong, Youngdeungpo,</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Yoido-dong, Youngdeungpo,</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Seoul</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Seoul</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Type of the company</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Public company (listed in</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Non-listed company</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">KOSDAQ)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Number of outstanding
shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">462,135,180 shares</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">103,134,426 shares</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><STRIKE>W</STRIKE>2,310,676 million</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><STRIKE>W</STRIKE>257,836 million</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Closing date</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">December 31</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">December 31</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Number of investment
shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">99,240,000 shares</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ownership percentage</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">96.22%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Status</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Surviving company</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Extinct company</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">F-35
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(3)&nbsp;The method of the merger
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company merged with Korea Thrunet Co., Ltd. through a more convenient method (&#145;small business
merger&#146;), allowed by the Commercial law in the Republic of Korea.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(4)&nbsp;Exchange ratio of Korea Thrunet Co., Ltd.&#146;s stock
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The stock exchange ratio of the Company and Korea Thrunet Co., Ltd. in the merger was determined by
ratio of the asset value of the Company and appraisal value of Korea Thrunet Co., Ltd. based on the
tax code.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">hanarotelecom</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Korea Thrunet</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Asset value (appraisal value)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">3,826</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">1,366</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exchange rate of stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3570308</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Face value of the stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">5,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">2,500</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(5)&nbsp;The schedule of the merger
</DIV>

<P>
<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">

<TD width="1%" nowrap align="left"><B>(1)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Contract date of company valuation: September&nbsp;5, 2005</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(2)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Resolution date of board of directors&#146; meeting: September&nbsp;14, 2005</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(3)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Date of merger contract: September&nbsp;22, 2005</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">

<TD width="1%" nowrap align="left"><B>(4)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Submission date of merger application: September&nbsp;14, 2005</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(5)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Confirm date of shareholders for general meeting of shareholders for approving the merger: September&nbsp;7, 2005</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(6)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Shareholders meeting date for approving the merger: November&nbsp;7, 2005</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(7)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Effective date of the merger: January&nbsp;1, 2006</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(8)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Registration date of merger: January&nbsp;9, 2006</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>(9)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Listing date of newly issued shares: January&nbsp;18, 2006</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(6)&nbsp;Newly issued stocks and grant for the merger are as follows (Won in millions):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">New stock</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Grant</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">New stock (shares)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,217,832</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Increase of common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">6,089</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(7)&nbsp;Accounting method of the merger
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company accounted for Korea Thrunet Co., Ltd.&#146;s net asset value as its fair value, according to
&#147;Accounting Standards for Consolidated Financial Statements&#148;.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Details of goodwill are as follows (Won in millions):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fair value of net assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">126,666</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of purchasing</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">249,221</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">122,555</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company has acquired 99,240,000 shares of Korea Thrunet Co., Ltd.&#146;s common stock with the
ownership percentage of 96.22% on June&nbsp;3, 2005. However, the Company&#146;s control over Korea
Thrunet Co., Ltd. was obtained on June&nbsp;23, 2005 with the formal declaration of the end of
corporate reorganization proceedings on that date and valued Korea Thrunet Co., Ltd.&#146;s net asset
value as of June&nbsp;30, 2005, which is the designated effective date. Management does not believe
the net income effect from June&nbsp;23, 2005 through June&nbsp;30, 2005 is material.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The purchase price of KRW 249, 221&nbsp;million was allocated as follows (Won in millions):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Amount</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">167,030</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tangibles</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">190,479</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">122,555</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,780</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets acquired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">508,844</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 10px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total liabilities assumed</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(259,623</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net assets acquired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">249,221</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">F-36
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">All goodwill acquired are allocated to broadband services as the main business of Thrunet was
providing of broadband service.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(8)&nbsp;Summarized financial statements of hanarotelecom and Korea Thrunet
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Summarized financial statements of hanarotelecom and Korea Thrunet Co., Ltd. for the years ended
and as of December&nbsp;31, 2004 and 2005 are as follows (Won in millions):
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Summarized balance sheets</U><BR>
(As of December&nbsp;31, 2004)

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">hanarotelecom</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Korea Thrunet</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Quick assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">609,293</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">149,348</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,841</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">611,134</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">149,348</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-current assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">144,348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,389</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,362,686</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">233,596</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,266</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,383</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,561,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">265,368</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">3,172,434</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">414,716</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">737,081</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">94,525</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">687,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">401,492</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,424,221</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">496,017</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,310,676</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,507</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Paid-in capital in excess of par value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">344,642</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">388,578</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accumulated deficit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(891,264</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(489,472</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(15,841</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,748,213</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(81,301</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total liabilities &#038; shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">3,172,434</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">414,716</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Summarized balance sheets</U><BR>
(As of December&nbsp;31, 2005)

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">hanarotelecom</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Korea Thrunet</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Quick assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">343,654</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">102,292</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">343,770</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102,292</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-current assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">384,881</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,849</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,188,805</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">141,807</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,645</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,493</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,636,331</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">167,149</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">2,980,101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">269,441</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">595,691</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">47,734</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">816,823</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">145,354</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,412,514</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">193,088</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,310,676</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">257,836</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Paid-in capital in excess of par value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">344,642</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">397,146</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accumulated deficit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,100,104</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(579,325</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,373</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">696</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,567,587</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,353</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total liabilities &#038; shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">2,980,101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">269,441</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-37
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Summarized statements of operations</U><BR>
(For the year ended December&nbsp;31, 2004)

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">hanarotelecom</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Korea Thrunet</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">1,436,485</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">349,772</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,322,464</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">346,927</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114,021</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,845</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,903</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,724</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(165,431</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(107,642</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ordinary income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,493</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(74,073</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Extraordinary items</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">153,403</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income before income tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,493</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79,330</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">10,493</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">79,330</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Summarized statements of operations</U><BR>
(For the year ended December&nbsp;31, 2005)

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">hanarotelecom</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Korea Thrunet</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">1,444,411</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">298,411</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,391,183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">315,305</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,228</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(16,894</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92,457</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,146</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(348,377</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(82,235</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ordinary loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(202,692</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(76,983</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Extraordinary items</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,148</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12,870</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss before income tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(208,840</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(89,853</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">(208,840</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><STRIKE>W</STRIKE></TD>
    <TD align="right">(89,853</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">27. <U>EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE</U>:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>At the board of directors&#146; meeting on January&nbsp;31, 2006, the Company resolved to acquire the
Celrun TV&#146;s stocks for <STRIKE>W</STRIKE>5,500&nbsp;million (780,000 shares, 65% of ownership), and acquired in
March.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>At the board of directors&#146; meeting on February&nbsp;8, 2006, the Company resolved to issue
26<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> local debentures of <STRIKE>W</STRIKE> 100,000&nbsp;million for the refinancing of current debt,
and issued in February.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>At the board of directors&#146; meeting on February&nbsp;22, 2006, the Company declared equal (2:1)
capital reduction to improve financial structure with the effective date on May&nbsp;2, 2006.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(4)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>At the board of directors&#146; meeting on February&nbsp;22, 2006, the Company resolved to have its
stocks in United States of America delisted as the average daily trading volume of its stocks
in NASDAQ has became so low.</TD>
</TR>

</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-38
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">28. <U>RECONCILIATION TO ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES:</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Accounting practices used by the Company in preparing the accompanying financial statements conform
with accounting principles generally accepted in the Republic of Korea (&#147;Korean GAAP&#148;), but do not
conform with accounting principles generally accepted in the United States of America (&#147;U.S.
GAAP&#148;). The significant differences applicable to the Company are described below. Other
differences do not have a significant effect on either net income (loss)&nbsp;or shareholders&#146; equity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(1)&nbsp;Consolidation of Special-Purpose Entities (&#147;SPE&#148;)
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Under Korean GAAP, Hanafos and Hanadream, the SPEs described in Notes 13(1) and 14, are excluded
from the consolidation as hanaro does not have control over the SPEs&#146; management and operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Under U.S. GAAP, the operations of Hanafos and Hanadream are included in the consolidation of the
Company in accordance with Statement of Financial Accounting Statements (&#147;SFAS&#148;) No.140-
&#147;Accounting for Transfer and Servicing of Financial Assets and Extinguishments of Liabilities&#148;
since the asset transfers were not qualified as a true sale.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Hanafos and Hanadream were liquidated during 2004 and summarized financial information of Hanafos
and Hanadream as of and for the year ended December&nbsp;31, 2003 is as follows (won in millions):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">42,314</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,201</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">100,515</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">86,104</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,417</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">103,521</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><strike>W</strike></TD>
    <TD align="right">(3,006</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">15,742</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,566</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,697</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(2)&nbsp;Licensing Cost
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In August&nbsp;1997, the Company&#146;s shareholders (members of the Consortium Agreement) collectively paid
<strike>W</strike>45,000&nbsp;million to the Ministry of Information and Communication (&#147;MIC&#148;) representing a one-time
charge to obtain a perpetual license to provide fixed-link local telephone service on a nationwide
basis in Korea. Under Korean GAAP, such fees paid by the major shareholders on behalf of the
Company are not required to be recorded. Under U.S. GAAP, such transaction is a capital
contribution by the shareholders. Under U.S. GAAP, the license was capitalized as an intangible
asset and amortized over its estimated economic useful life of 20&nbsp;years. In connection with the
adoption of SFAS No.&nbsp;142 &#091;See Note 28(6)&#093;, licensing cost is deemed to have an indefinite life. A
deferred tax liability calculated using the Company&#146;s statutory income tax rate of 27.5% has also
been recorded, as the license asset has no tax basis to the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company understands that an entity&#146;s estimate of the useful life of an intangible asset shall
be based on an analysis of all pertinent factors, in particular: (a)&nbsp;the expected use of the asset
by the entity, (b)&nbsp;the intangible asset may relate, (c)&nbsp;any legal, regulatory, or contractual
provisions that may limit the useful life, (d)&nbsp;any legal, regulatory, or contractual provisions
that enable renewal or extension of the asset&#146;s legal or contractual life without substantial
cost, (e)&nbsp;level of maintenance expenditures required to obtain the expected future cash flows from
the asset.
</DIV>
<P align="center" style="font-size: 10pt">F-39
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Under the Korean Telecommunications Business Law, the telecommunications services that Network
Service Providers, which are facilities-based telecommunications service providers, may provide
are restricted to those for which they have received a license from the Ministry of Information
and Communication (&#147;MIC&#148;).
In October&nbsp;1997, the Company received a perpetual license to provide fixed-link local telephone
service on a nationwide basis in Korea. Such license does not need to be renewed. The formal
document from the Minister of the MIC that granted the license to the Company sets forth the
conditions under which the license would be revoked, which consist of the following: (a)&nbsp;failure
to make payment of information promotion fund, (b)&nbsp;supplement of personnel from small business
entities. The Company has no reason to believe that any of these conditions would be applicable
to the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(3)&nbsp;Interest Capitalization
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As explained in Note 2, under Korean GAAP, starting from January&nbsp;1, 2003, interest expense is no
longer capitalized. However, under U. S. GAAP, the Company&#146;s policy is to capitalize interest in
the amount that would have theoretically been avoided had expenditures not been made for assets
which require a period of time to get them ready for their intended uses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(4)&nbsp;Investment Securities
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Information included in short-term and long-term investment securities as of December&nbsp;31, 2004 and
2005 is as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="30" style="border-bottom: 1px solid #000000">Korean won</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Unrealized gains</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Unrealized losses</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Impaired losses</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Acquisition</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Over 12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Under 12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Over 12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Under 12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Over 12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Under 12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Fair</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">cost</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">months</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">months</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">months</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">months</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">months</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">months</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">value</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="30">(In millions)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2004:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(1)&nbsp;Short-term investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">
Debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">1,571</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">1,121</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,571</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,121</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(2)&nbsp;Long-term investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD nowrap><DIV style="margin-left:30px; text-indent:-15px">
Available-for-sale securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Listed</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,535</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,758</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,859</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Non-listed</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,232</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,497</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,539</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,196</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,741</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,741</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,508</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,758</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,497</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,539</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,796</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,528</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,758</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,497</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,539</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,816</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">67,099</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">5,758</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">28,497</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">2,989</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">29,937</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="30" style="border-bottom: 1px solid #000000">Korean won</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Unrealized gains</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Unrealized losses</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Impaired losses</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Acquisition</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Over 12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Under 12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Over 12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Under 12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Over 12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Under 12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Fair</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">cost</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">months</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">months</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">months</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">months</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">months</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">months</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">value</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="30">(In millions)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(1)&nbsp;Short-term investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">
Debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">1,120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">1,120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">(2)&nbsp;Long-term investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD nowrap><DIV style="margin-left:30px; text-indent:-15px">
Available-for-sale securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Listed</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,941</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">164</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,187</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Non-listed</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,439</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,267</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,036</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,136</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">MMF</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">163</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">179</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,956</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,956</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">108,499</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">164</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,267</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,036</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,458</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">108,512</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">164</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,267</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,036</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,471</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">109,632</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">164</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">76,267</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">2,156</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">31,471</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Under U.S. GAAP, if the decline in fair value is judged to be other than
temporary, the cost basis of the individual securities is written down to fair value as a new cost basis and the amount of the
write-down is included in current earnings. Other than temporary impairment is determined based on evidence-based judgment about
a recovery of fair value up to (or beyond) the cost of investment by considering the severity and duration of the impairment
in relation to forecasted recovery of fair value.  Under Korean GAAP, if the collectible value from the securities is less
than acquisition costs with objective evidence of impairment such as bankruptcy of investees, an impairment loss is
recognized. In addition, the duration of the impairment in relation to the forecasted recovery of fair value is not considered
for Korean GAAP purposes.  Due to such differences, for U.S. GAAP purpose, losses on impairment of investment securities for
the year ended December 31, 2005 increased by KRW 3,009 million, when compared to that under Korean GAAP.
</DIV>

<P align="center" style="font-size: 10pt">F-40
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(5)&nbsp;Development Costs
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Development costs are deferred under Korean GAAP. Under U.S.GAAP, development costs are charged
to expenses when incurred and are classified as operating expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(6)&nbsp;Goodwill and Other Intangibles
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Under Korean GAAP, all intangibles including goodwill are amortized over their estimated useful
lives and an impairment loss is recognized when their carrying amount exceeds their fair value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Under U.S. GAAP, following the introduction of SFAS No.&nbsp;142- &#147;Goodwill and Intangible Assets&#148;,
intangible assets with finite lives continue to be amortized over their useful economic lives.
Goodwill and intangible assets with indefinite lives are not amortized, but tested for
impairment, at least annually, in accordance with SFAS No.142.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s intangible assets with finite lives and intangible assets with indefinite lives
including goodwill explained in Note 12 as of December&nbsp;31, 2004 and 2005 are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Intangible assets with finite lives
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Property rights of industry</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Cable line usage rights</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Land right</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Other</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Intangible assets with indefinite lives
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Goodwill</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Licensing cost &#091;see Note 28(2)&#093;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Under Korean GAAP, goodwill, which represents the excess of the acquisition cost over the fair
value of net identifiable assets acquired, is amortized on a straight line basis over its
estimated useful life, up to 40&nbsp;years, and an impairment loss is recognized immediately when it
is no longer probable that goodwill will be recovered from expected future economic benefits or
its carrying amount exceeds its fair value. All intangibles are amortized over their estimated
useful lives and an impairment loss is recognized when their carrying amount exceeds their fair
value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Under US GAAP, in accordance with SFAS No.&nbsp;142, intangible assets with finite lives continue to
be amortized over their useful economic lives. Goodwill and intangible assets with indefinite
lives are not amortized, but tested for impairment at least once a year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In compliance with SFAS No.&nbsp;142, the Company has adopted a two-step test for goodwill
impairment. In the first step of the test, which identifies potential impairment, the Company
compares the fair value of a reporting unit with its carrying amount. If the carrying amount
exceeds the fair value, the Company performs the second step of the test, which measures the
amount of impairment loss, by comparing the impaired fair value of reporting unit goodwill with
the carrying amount. If the carrying amount exceeds the implied fair value of that goodwill,
the Company recognizes an impairment loss in an amount equal to that excess. The Company
determines the implied fair value of goodwill in the same manner as it determines the amount of
goodwill recognized in a business combination, by determining the excess of the fair value of a
reporting unit over the amounts assigned to its assets and liabilities.
</DIV>
<P align="center" style="font-size: 10pt">F-41
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(7)&nbsp;Bonds with Stock Warrants
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Under Korean GAAP, for the detachable warrants on bonds issued before December&nbsp;31, 2002, all the
proceeds from the issuance of bonds with stock warrants are accounted for as debt securities,
regardless of whether the warrants are detachable or non-detachable. However, the proceeds
from issuance of debt securities with detachable warrants from January&nbsp;1, 2003 are allocated
between the warrants and the debt securities based on their relative fair values at time of
issuance. For debt securities with non-detachable warrants, the warrants are recorded as the
difference between the issuance amount of debt securities with non-detachable warrants and the
reference amount of debt securities without warrants in similar market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Under U.S.GAAP, the proceeds from the issuance of bonds with detachable stock warrants are
allocated between the debt securities and the warrants based on their relative fair values at
the time of issuance. The portion allocated to warrants is accounted for as paid-in capital.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(8)&nbsp;Stock Compensation Expense
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A summary of status of hanaro and Hanaro Dream, Inc.&#146;s stock option plans as of December&nbsp;31, 2003,
2004 and 2005, and the changes during the years ended on those dates are presented below.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">hanaro:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Weighted-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Weighted-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Weighted-</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #ffffff">Shares</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">average</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #ffffff">Shares</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">average</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #ffffff">Shares</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">average</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">exercise price</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">exercise price</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">exercise price</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding at beginning
of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,810,642</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">17,558</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,721,153</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">17,549</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,494,043</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">6,005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,772,890</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">610,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cancelled</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(89,489</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(137,562</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,750</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,721,153</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,549</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,494,043</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,966,481</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,903</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options exercisable at
year-end</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,721,153</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,721,153</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,583,591</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted-average fair
value of options
granted during
the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">457</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">385</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Hanaro Dream, Inc.:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Weighted-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Weighted-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Weighted-</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #ffffff">Shares</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">average</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #ffffff">Shares</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">average</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #ffffff">Shares</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">average</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">exercise price</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">exercise price</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">exercise price</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding at beginning
of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">8,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">8,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cancelled</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(50,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding at end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options exercisable at
year-end</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted-average fair
value of options
granted during
the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,108</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes information about hanaro and Hanaro Dream, Inc.&#146;s stock
options as of December&nbsp;31, 2005.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">hanaro:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="34%">&nbsp;</TD>

    <TD width="5%">&nbsp;</TD>

    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>

    <TD width="5%">&nbsp;</TD>

    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>

    <TD width="5%">&nbsp;</TD>

    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Weighted-average</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center">Ranges of exercise</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Number of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">remaining contractual</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Weighted-average</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #ffffff">price</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">options outstanding</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #ffffff">life (years)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">exercise price</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px"><STRIKE>W</STRIKE>5,000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,382,890</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">5,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px"><STRIKE>W</STRIKE>5,630</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,630</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px"><STRIKE>W</STRIKE>17,750 to <STRIKE>W</STRIKE>19,910</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,533,591</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,905</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px"><STRIKE>W</STRIKE>5,000 to <STRIKE>W</STRIKE>19,910</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,966,481</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,903</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Hanaro Dream, Inc.:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="34%">&nbsp;</TD>

    <TD width="5%">&nbsp;</TD>

    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>

    <TD width="5%">&nbsp;</TD>

    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>

    <TD width="5%">&nbsp;</TD>

    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Weighted-average</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center">Ranges of exercise </TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Number of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">remaining contractual</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Weighted-average</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #ffffff">price</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">options outstanding</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #ffffff">life (years)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">exercise price</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px"><STRIKE>W</STRIKE>8,000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><STRIKE>W</STRIKE></TD>
    <TD align="right">8,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-42
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(9)&nbsp;Interest Rate Swap
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company has entered into interest rate swap contracts in order to hedge the exposure to
variability in cash flows from a forecasted transaction of floating rate notes. Under Korean
GAAP, the Company records the valuation loss as capital adjustment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Under U.S. GAAP, SFAS No.&nbsp;133-&#147;Accounting for Derivatives instruments and Hedging Activities&#148;,
for a derivative designated as hedging the exposure to variability in expected future cash
flows that is attributable to a particular risk, the effective portion is reported in other
comprehensive income and the ineffective portion is reported in earnings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(10)&nbsp;Loans to Employees
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Under Korean GAAP, loans to employees for purposes of purchasing the Company&#146;s common stock are
recorded as assets. Under U.S.GAAP, such transactions are recorded as a reduction in
shareholders&#146; equity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(11)&nbsp;Advanced Payments
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Under Korean GAAP, advanced payments, which relate to purchases of property and equipment, are
included in current assets. Under U.S.GAAP, such advanced payments are included in non-current
assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(12)&nbsp;Revenue Recognition
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Under Korean GAAP, activation fees and service installation service fees are recorded as revenues
when billed and the related direct incremental acquisition cost are expensed as incurred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Under U.S.GAAP, such amount should be deferred and recognized over the period of customer
relationship.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(13)&nbsp;Minority Interests in Consolidated Subsidiaries
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Under Korean GAAP, minority interests in consolidated subsidiaries is presented as a component of
shareholders&#146;
equity in the consolidated balance sheets. Under U.S. GAAP, minority interests in consolidated
subsidiaries are not included in shareholders&#146; equity; rather, it is presented between liability
and shareholders&#146; equity in the consolidated balance sheets.
</DIV>




<P align="center" style="font-size: 10pt">F-43
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(14)&nbsp;Comprehensive Income
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Under Korean GAAP, there is no requirement to present comprehensive income. Under U.S.GAAP,
effective for fiscal years beginning after December&nbsp;15, 1997, comprehensive income and its
components must be presented in the financial statements. Comprehensive income includes all
changes in shareholders&#146; equity during a period except those resulting from investment by, or
distribution to, owners, including certain items not included in the current year&#146;s results of
operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Comprehensive income (loss)&nbsp;for the years ended December&nbsp;31, 2003, 2004 and 2005 is summarized as
follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Korean Won</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">(In millions)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)&nbsp;in accordance with U.S.GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><strike>W</strike></TD>
    <TD align="right">(161,598</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">14,849</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><strike>W</strike></TD>
    <TD align="right">(203,212</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other comprehensive income (loss), net of tax :</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrealized gains (losses)&nbsp;on investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,062</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,087</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,591</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Less : reclassification adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,321</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,038</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,643</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net unrealized gains (losses)&nbsp;on investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,383</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,049</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,948</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Foreign-based operations translation credit (debit)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Less : reclassification adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net foreign-based operations translation credit (debit)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net interest rate swap</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,425</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,565</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,763</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Comprehensive income (loss)&nbsp;in accordance with U.S.GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><strike>W</strike></TD>
    <TD align="right">(171,404</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">11,355</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><strike>W</strike></TD>
    <TD align="right">(178,501</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(15)&nbsp;Statements of Cash Flows
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Statements of cash flows for the year ended December&nbsp;31, 2003 under Korean GAAP do not include cash
flows of Hanafos and Hanadream, which are included in the consolidation under U.S. GAAP.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Under Korean GAAP, cash flows from refundable deposits are reported as investing activities, which
are reported as operating activities under U.S. GAAP. Summarized cash flows data by operating,
investing and financing activities in accordance with U.S.GAAP for the years ended December&nbsp;31,
2003, 2004 and 2005 are set out below.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Korean Won</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">(In millions)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by (used in):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">306,198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">444,230</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">496,833</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(269,837</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(183,523</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(582,395</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(118,106</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(294,922</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(48,366</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Decrease due to changes in consolidated
subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(39,277</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Decrease in cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(81,745</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(73,492</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,428</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents, beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">323,583</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">241,838</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">168,346</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents, end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">241,838</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">168,346</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">154,918</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(16)&nbsp;Recently Issued Accounting Pronouncements
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In October&nbsp;2005, the Financial Accounting Standards Board (&#147;FASB&#146;&#146;) issued FASB Staff
Position(&#147;FSP&#146;&#146;) 13-1, &#147;Accounting for Rental Costs Incurred during a Construction Period&#146;&#146;
(&#147;FSP 13-1&#146;&#146;). FSP13-1 requires rental costs associated with ground or building operating leases
that are incurred during a construction period be recognized as rental expense and included in
income from continuing operations. FSP13-1 is effective for fiscal periods beginning after
December&nbsp;15, 2005. The provisions of FSP 13-1 are not expected to have a material impact on the
Company&#146;s consolidated financial statements.
</DIV>

<P align="center" style="font-size: 10pt">F-44
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">In December&nbsp;2004, the FASB issued SFAS No.&nbsp;123 (Revised 2004), &#147;Share-Based Payment&#148; (&#147;SFAS 123R&#148;).
SFAS 123R replaces SFAS No.123, &#147;Accounting for Stock-Based Compensation&#148; and supersedes APB
Opinion No.25, &#147;Accounting for Stock Issued to Employees.&#148; SFAS 123R requires all share-based
payments to employees to be recognized in the financial statements based on their fair value. The
Company will adopt SFAS 123R effective January&nbsp;1, 2006 using the modified prospective method of
transition. This method requires SFAS 123R to be applied to new awards and awards modified,
repurchased or cancelled after the effective date. Additionally, compensation expense attributable
to any unvested awards outstanding at the date of adoption must be recognized over the remaining
requisite service period. As the Company previously adopted the fair value recognition provisions
of SFAS No.123, the Company does not expect the adoption of SFAS 123R to have a significant impact
on the Company&#146;s financial position, operating results or cash flows.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In December&nbsp;2004, the FASB issued SFAS No.153, &#147;Exchange of Nonmonetary Assets, an amendment of APB
Opinion No.29, Accounting for Nonmonetary Transaction.&#148; SFAS No.153 amends the APB Opinion No.29
exception to fair value measurement for nonmonetary exchanges to apply only to those exchanges
which lack commercial substance, as defined in the standard. SFAS No.&nbsp;153 is effective for
nonmonetary asset exchanges that the Company enters into on or after July&nbsp;1, 2005. The adoption of
this standard is not expected to have a material impact on the Company&#146;s financial position,
operating results or cash flows.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In July&nbsp;2004, the EITF issue No.&nbsp;02-14, &#147;Whether an Investor Should Apply the Equity Method of
Accounting to Investments Other Than Common Stock if the Investor Has the Ability to Exercise
Significant Influence over the Operating and Financial Policies of the Investee.&#148; EITF Issue
No.02-14 was effective for reporting periods beginning after September&nbsp;15, 2004 and requires the
use of the equity method of accounting for investments that are in-substance common stock when the
investor has the ability to exercise significant influence over the investee. The adoption of this
guidance is not expected to have a material impact on the Company&#146;s financial position, operating
results or cash flows.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In March&nbsp;2004, the EITF supplement EITF Issue No.03-1, &#147;The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments.&#148; EITF Issue No.03-1 provides guidance for
evaluating whether an investment is other-than-temporarily impaired and requires disclosures about
unrealized losses on available for sale debt and equity securities. In September&nbsp;2004, the FASB
issued FASB Staff Position (&#147;FSP&#148;) EITF Issue 03-1-1, &#147;Effective Date of Paragraphs 10-20 of EITF
Issue 03-1,&#148; which deferred the effective date of the recognition and measurement provisions of the
consensus until further guidance is issued. The impact on future earnings, if any, of the
recognition and measurement provisions of EITF Issue No.03-1 will not be known until the FASB
issues its guidance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(17)&nbsp;Fair Value of Financial Instruments
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following methods and assumptions were used to estimate the fair value of each class of
financial instruments.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Cash and cash equivalents, short-term investment securities, short-term borrowings:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The carrying amount approximates fair value because of the nature or short maturity of those
instruments.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Other investments:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The fair value of market-traded investments is estimated based on the
quoted market prices for those or similar investments. For other investments
for which there are no quoted market prices, net asset value proportionate to
the Company&#146;s ownership percentage is used as estimated fare value. However, a
reasonable estimate of fair value could not be made without incurring excessive
costs. Additional information pertinent to the fair value of unquoted
investments is provided below.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(iii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Long-term debt, debentures and long-term obligation under capital lease:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The fair values of long-term debt and debentures are estimated based on the
quoted market prices for the same or similar issues or on the current rates
offered for the debt of the same remaining maturities.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-45
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The estimated fair values of the Company&#146;s financial instruments as of December&nbsp;31 are summarized
as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000">Korean Won</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Carrying amount</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Fair value</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Carrying amount</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Fair value</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15">(In millions)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents and short-term
investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><strike>W</strike></TD>
    <TD align="right">169,467</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><strike>W</strike></TD>
    <TD align="right">169,467</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><strike>W</strike></TD>
    <TD align="right">154,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><strike>W</strike></TD>
    <TD align="right">154,918</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Short-term financial instruments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">193,716</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">193,716</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,350</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term financial instruments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,622</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,622</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,816</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,655</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,471</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,418</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term debt, including current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">465,910</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">466,922</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">271,061</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">271,061</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Debentures, including current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">488,975</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">502,972</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">683,206</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">684,496</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term obligations under capital
lease, including current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79,854</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79,285</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,423</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,110</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest rate swap</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,623</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,623</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,859</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,859</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(18)&nbsp;Classification of income and expenses as operating income
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A reconciliation of the operating income or loss accounts under Korean GAAP to the approximate
amounts determined under US GAAP pursuant to FASB Concepts Statement No.6 and S-X Reg. 210.5-03 for
the years ended December&nbsp;31, 2003, 2004 and 2005 is as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Translation into</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Korean Won</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">U.S. Dollars(Note 2)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(In millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(In thousands)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income based on
Korean GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">70,694</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">113,930</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">38,522</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right"> 38,141</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">U.S. GAAP adjustments:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gain on disposal
of property and
equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">885</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,962</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,923</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Donations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(800</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(306</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(312</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(309</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss on disposal
of property and
equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,326</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,246</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,154</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,133</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss on disuse of
property and
equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(61,333</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20,726</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(60,586</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(59,986</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,444</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">416</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,326</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,214</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income(loss)
based on U.S. GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">11,781</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">92,953</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><strike>W</strike></TD>
    <TD align="right">(9,242</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right"> (9,150</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Other adjustments represent other US GAAP reconciliation items affecting operating income, which
include development costs, revenue recognition, error corrections and amortization of goodwill.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(19)&nbsp;Extraordinary item
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Certain items of income and expense considered as extraordinary items under Korean GAAP would be
considered non extraordinary items under U.S. GAAP. However, this reclassification would have no
impact on consolidated equity, net income (loss).
</DIV>


<P align="center" style="font-size: 10pt">F-46
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(20)&nbsp;Effect on Net Income(Loss) and Shareholders&#146; Equity
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The approximate effects of the significant adjustments to net loss and shareholders&#146; equity, that
are required if U.S.GAAP were applied instead of Korean GAAP, are summarized as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Translation into</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Korean Won</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">U.S. Dollars (Note 2)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 0px solid #000000">(In millions, except per share amount)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(In thousands, except</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">per share amount)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)&nbsp;under Korean GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><strike>W</strike></TD>
    <TD align="right">(161,299</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">13,046</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><strike>W</strike></TD>
    <TD align="right">(209,318</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(207,246</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Adjustments:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Development costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,717</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(211</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(209</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest capitalization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,168</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,387</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,541</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,526</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Revenue recognition</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">346</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">282</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Bonds with stock warrants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,066</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Consolidation of SPE</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">155</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Amortization of goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">425</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">738</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,767</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,750</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Error corrections</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,854</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Losses on impairment of investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD nowrap></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,979</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred tax effect of current
year&#146;s U.S. GAAP adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,545</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(852</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(844</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Valuation allowance against
deferred tax assets created by
U.S. GAAP adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(89</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,545</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">852</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">844</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(299</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,803</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,106</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,046</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss under U.S. GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><strike>W</strike></TD>
    <TD align="right">(161,598</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">14,849</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><strike>W</strike></TD>
    <TD align="right">(203,212</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(201,200</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic and diluted net income (loss)&nbsp;per
share under U.S. GAAP (in Korean
won and U.S. dollars)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><strike>W</strike></TD>
    <TD align="right">(1,006</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">64</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><strike>W</strike></TD>
    <TD align="right">(879</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.871</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic and diluted ordinary income
(loss)&nbsp;per share under U.S. GAAP (in
Korean won and U.S. dollars)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><strike>W</strike></TD>
    <TD align="right">(1,006</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">64</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><strike>W</strike></TD>
    <TD align="right">(879</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.871</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shareholders&#146; equity under Korean GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">1,730,720</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">1,751,606</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">1,573,080</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,557,505</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Adjustments:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Licensing cost paid by shareholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">35,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">35,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">35,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">34,900</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Development costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,716</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,465</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,676</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,659</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest capitalization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,168</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,096</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,036</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loans to employees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12,574</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12,067</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,386</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,293</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Consolidation of SPE</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,314</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Revenue recognition</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(282</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,589</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,356</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,323</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Error corrections</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">922</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(932</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred tax effect of U.S. GAAP
adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,728</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,724</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(11,832</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,715</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Valuation allowance against
deferred tax assets created by
U.S. GAAP adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,724</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,832</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,715</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Changes in minority interest
applying U.S. GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(598</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,215</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,920</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,871</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Minority interests under U.S. GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,315</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,715</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,720</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,436</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shareholders&#146; equity under U.S. GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">1,757,035</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">1,775,321</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">1,601,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,585,941</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Basic and diluted net (ordinary)&nbsp;income (loss)&nbsp;per share under U.S. GAAP for the years ended
December&nbsp;31, 2003, 2004 and 2005, respectively, was calculated reflecting the effect from the
reverse stock split occurred on May&nbsp;3, 2006.
</DIV>


<P align="center" style="font-size: 10pt">F-47
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(21)&nbsp;Reconciliation of the Balance Sheet Accounts
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The reconciliation of the significant balance sheet accounts under Korean GAAP except for the
shareholders&#146; equity items shown above, to the approximate amounts determined under U.S.GAAP as of
December&nbsp;31 is as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Translation into</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">Korean Won</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">U.S. Dollars (Note 2)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">(In millions)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(In thousands)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current assets under Korean GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">624,797</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">446,374</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">441,954</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">U.S. GAAP adjustments:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Short-term loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,373</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,757</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,680</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Prepaid expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,585</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,424</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,400</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Deferred income tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">244</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">242</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current assets under U.S. GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">624,179</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">441,285</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">436,916</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Non-current assets under Korean GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,560,315</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,587,886</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,562,264</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">U.S. GAAP adjustments:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Long-term loans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,694</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,629</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,613</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Long-term prepaid expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,488</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,453</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Intangibles</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,374</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,930</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,564</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Interest capitalization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,096</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,036</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Deferred income tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,213</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,049</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,930</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Non-current assets under U.S. GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,607,973</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,644,820</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,618,634</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets based on U.S. GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">3,232,152</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">3,086,105</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,055,550</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current liabilities under Korean GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">742,510</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">638,176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">631,858</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">U.S. GAAP adjustments:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Unearned income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,585</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,424</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,400</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Error corrections</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">932</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Deferred income tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">244</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">242</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current liabilities under U.S. GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">747,197</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">640,844</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">634,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term liabilities under Korean GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">690,996</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">823,004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">814,855</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">U.S. GAAP adjustments:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Unearned income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,488</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,453</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Deferred income tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,213</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,049</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,930</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term liabilities under U.S. GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">706,419</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">838,541</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">830,238</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total liabilities based on U.S. GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">1,453,616</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">1,479,385</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,464,738</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minority interests based on U.S. GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">3,215</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">4,920</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,871</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-48
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">(22)&nbsp;Tax Effects of Temporary Differences
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The tax effects of temporary differences that resulted in significant portions of the deferred tax
assets and liabilities at December&nbsp;31, computed under U.S.GAAP, and the description of the
financial statement items that created these differences are as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000">Korean Won</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Current</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Non-current</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Current</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Non-current</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14">(In millions)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Development costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">403</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">461</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Error correction</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total deferred income tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">659</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">461</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(489</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,213</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(217</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,049</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net deferred income tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,213</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">244</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,049</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">License fee</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,694</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,694</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest capitalization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(170</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,082</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(244</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,432</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(437</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(923</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total deferred income tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(170</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,213</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(244</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12,049</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net deferred income tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2004 and 2005, the Company has available loss carryforwards of <strike>W</strike> 1,289,173&nbsp;million
and <strike>W</strike> 703,781&nbsp;million, respectively, which may be applied against future taxable income through
2009 and 2010, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The income tax expenses under U.S.GAAP for the years ended December&nbsp;31, 2003, 2004 and 2005 are as
follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Korean Won</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">(In millions)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax currently
payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">354</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">806</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">245</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(52</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(311</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">189</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">434</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The deferred income tax consequences of temporary differences in reporting items for financial
statement and income tax purposes are recognized, if appropriate. Realization of the future tax
benefits related to the deferred income tax assets is dependent on several factors, including the
Company&#146;s ability to generate taxable income within the period during which the temporary
differences reverse, the outlook for the Korean economic environment and the overall industry
outlook. Management has considered these factors in reaching its conclusion as to the valuation
allowance for financial reporting purposes. Such valuation allowance is reviewed periodically.
</DIV>


<P align="center" style="font-size: 10pt">F-49
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The difference between the actual income tax expense and the tax benefit computed by applying the
statutory Korean corporate income tax rates to income before income tax for 2003, 2004 and 2005 is
attributable to the following:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Korean Won</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10">(In millions)</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax benefit at statutory Korean
corporate income tax rate of 29.7%, 29.7% and
27.5% in 2003, 2004 and 2005, respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><strike>W</strike></TD>
    <TD align="right">(49,184</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">5,199</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><strike>W</strike></TD>
    <TD align="right">(57,120</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-deductible meals and entertainment and other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,241</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Change in valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,928</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,325</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">651</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(352</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Actual income tax expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><strike>W</strike></TD>
    <TD align="right">434</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">F-50
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXHIBIT INDEX</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Exhibits</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Description</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.1.</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Articles of Incorporation, as amended on March&nbsp;24, 2006 (English translation)</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.1.</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Memorandum of Understanding with between Celrun Inc. and Kim Young-min, hanarotelecom Inc.
and CelrunTV Inc., dated February&nbsp;6, 2006 (English translation)</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.2.</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Business Cooperation Agreement among hanarotelecom, inc., Celrun Co., Ltd. and CelrunTV,
dated March&nbsp;6, 2006 (English translation)</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">8.1.</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">List of hanarotelecom&#146;s significant subsidiaries (See &#147;Item&nbsp;4.C. Organizational Structure.&#148;)</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">11.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Code of Ethics (English translation)</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">12.1.</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Section&nbsp;302 Certification of Chief Executive Officer pursuant to Rule&nbsp;13a-14(a)</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">12.2.</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Section&nbsp;302 Certification of Chief Financial Officer pursuant to Rule&nbsp;13a-14(a)</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">13.1.</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Section&nbsp;906 Certifications required by Rule&nbsp;13a-14(b) and 18 U.S.C. Section&nbsp;1350</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>


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{"company-data": {"conformed-name": "hanarotelecom inc", "cik": "0001108838", "assigned-sic": "4813", "irs-number": "000000000"}, "filing-values": {"form-type": "20-F", "act": "34", "file-number": "001-15012", "film-number": "06931874"}, "business-address": {"street1": "17-7, YEOUIDO-DONG", "street2": "YEONGDEUNGPO-GU", "city": "SEOUL", "state": "M5", "zip": "100-733", "phone": "011-822-6266-4319"}, "mail-address": {"street1": "17-7, YEOUIDO-DONG", "street2": "YEONGDEUNGPO-GU", "city": "SEOUL", "state": "M5", "zip": "100-733"}, "former-company": {"former-conformed-name": "HANARO TELECOM INC", "date-changed": "20000309"}}
Hanarotelecom Incorporated
Table of Contents
As filed with the Securities and Exchange Commission on June 29, 2006
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________
FORM 20-F
o
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
þ
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2005
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to
OR
o
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report
Commission file number 001-15012
hanarotelecomChushikHoesa
(Exact name of Registrant as specified in its charter)
hanarotelecom incorporated
(Translation of Registrant's name into English)
The Republic of Korea
(Jurisdiction of incorporation or organization)
17-7 Yeouido-dong
Yeongdeungpo-gu, Seoul 150-874
Korea
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act: None
Securities registered or to be registered pursuant to Section 12(g) of the Act:
Title of each class
Name of each exchange on which registered
Common shares, par value Won 5,000 per share
The KRX KOSDAQ Market
American depositary shares, each of which represents one common share
The NASDAQ National Market
Securities for which there is a reporting obligation pursuant to Section 15(d) of the
Act: None
Indicate the number of outstanding shares of each of the issuer's classes of capital or common
stock as of the close of the period covered by the annual report:
As of December 31, 2005, 462,135,180 common shares were issued and outstanding.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act.
Yes
þ
No
¨
If this report is an annual or transition report, indicate by check mark if the registrant is
not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934.
Yes
¨
No
þ
Note — Checking the box above will not relieve any registrant required to file reports
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under
those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such short period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days:
Yes
þ
No
¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated
filer" in Rule 12b-2 of the Exchange Act. (Check one):
Large
accelerated filer
þ
Accelerated filer
¨
Non-accelerated filer
¨
Indicate by check mark which financial statement item the registrant has elected to follow:
Item 17
¨
Item 18
þ
If this is an annual report, indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act):
Yes
¨
No
þ
TABLE OF CONTENTS
Page
Forward-Looking Statements
3
Item 1. Identity of Directors, Senior Management and Advisers
4
Item 2. Offer Statistics and Expected Timetable
4
Item 3. Key Information
4
Item 4. Information on the Company
16
Item 4A. Unresolved Staff Comments
39
Item 5. Operating and Financial Review and Prospects
39
Item 6. Directors, Senior Management and Employees
56
Item 7. Major Shareholders and Related Party Transactions
64
Item 8. Financial Information
67
Item 9. The Offer and Listing
69
Item 10. Additional Information
72
Item 11. Quantitative and Qualitative Disclosures about Market Risk
91
Item 12. Description of Securities Other Than Equity Securities
92
Item 13. Defaults, Dividend Arrearages and Delinquencies
93
Item 14. Material Modifications of the Rights of Security Holders and Use of Proceeds
93
Item 15. Controls and Procedures
93
Item 16. [Reserved]
93
Item 16A. Audit Committee Financial Expert
93
Item 16B. Code of Ethics
93
Item 16C. Principal Accountant Fees and Services
93
Item 16D. Exemptions from the Listing Standards for Audit Committees
94
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
95
Item 17. Financial Statements
96
Item 18. Financial Statements
96
Item 19. Exhibits
96
Glossary
98
Consolidated Financial Statements
F-1
EX-1.1 Articles of Incorporation
EX-4.1 Memorandum dated Feb 6, 2006
EX-4.2 Business Cooperation Agreement
EX-11.1 Code of Ethics
EX-12.1 Section 302 Certification of CEO
EX-12.2 Section 302 Certification of CFO
EX-13.1 Section 906 Certifications of Sec 1350
Unless the context otherwise requires, when we refer in this Annual Report to "hanarotelecom,"
"we," "us" and "our," we mean hanarotelecom incorporated and its consolidated subsidiaries. All
references to "Korea" and the "Republic" contained in this Annual Report shall mean The Republic of
Korea. All references to the "Government" shall mean the government of The Republic of Korea. All
references to the "MIC" shall mean the Ministry of Information and Communication of Korea. All
other capitalized terms used but not defined in this Annual Report have the meanings given to them
in the "Glossary."
We publish our financial statements in Korean Won. In this Annual Report, references to
"Korean Won," "Won" or "W" are to the currency of Korea, and references to "U.S. dollars," "U.S.$"
or "$" are to the currency of the United States. This Annual Report contains translations of
Korean Won amounts into U.S. dollar amounts, solely for your convenience. You should not construe
these translations as representations that the Korean Won amounts actually represent such U.S.
dollar amounts or could have been or could be converted into U.S. dollars at the rates indicated or
at any other rates.
2
Table of Contents
Forward-Looking Statements
We may from time to time make written or oral forward-looking statements. Written
forward-looking statements may appear in documents filed with the SEC, including this Annual
Report, and other reports to shareholders and other communications.
The U.S. Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for
forward-looking information to encourage companies to provide prospective information about
themselves without fear of litigation so long as the information is identified as forward looking
and is accompanied by meaningful cautionary statements identifying important factors that could
cause actual results to differ materially from those projected in the information. We rely on this
safe harbor in making these disclosures.
Forward-looking statements appear in a number of places in this Annual Report and include
statements regarding our intent, belief and current expectations and the current belief or current
expectations of our management with respect to our future results of operations and financial
condition. In many, but not all cases, we use words such as "anticipate," "aim," "believe,"
"estimate," "expect," "intend," "plan," "probability," "risk" and similar expressions, as they
relate to us or our management, to identify forward-looking statements. These statements reflect
our current views with respect to future events and are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those which are anticipated,
believed, estimated, expected, intended or planned. We do not intend to update these
forward-looking statements.
Our forward-looking statements are not guarantees of future performance and involve risks and
uncertainties. Actual results may differ from those in the forward-looking statements as a result
of various factors. We identify in this Annual Report, in "Item 3.D. Risk Factors," "Item 4.B.
Business Overview," "Item 5. Operating and Financial Review and Prospects" and elsewhere some, but
not necessarily all, of the important factors that could cause these differences.
We are under no obligation, and disclaim any obligation, to update or alter our
forward-looking statements, whether as a result of new information, future events or otherwise.
3
Table of Contents
PART I
Item 1. Identity of Directors, Senior Management and Advisers.
Not applicable.
Item 2. Offer Statistics and Expected Timetable.
Not applicable.
Item 3. Key Information.
A. Selected Financial Data
Our selected consolidated financial data should be read in conjunction with the audited
consolidated balance sheets as of December 31, 2004 and 2005, and the related audited consolidated
statements of operations, shareholders' equity and cash flows for the fiscal years ended December
31, 2003, 2004 and 2005, and the notes to the consolidated financial statements, and with "Item 5.
Operating and Financial Review and Prospects," included in this Annual Report. The selected
consolidated financial data set forth below for the fiscal years ended December 31, 2001, 2002 and
2003 are also derived from our audited consolidated financial statements.
Our consolidated financial statements are prepared in accordance with accounting principles
generally accepted in Korea, or Korean GAAP, which differ in significant respects from U.S. GAAP.
See note 28 to our consolidated financial statements.
Year ended December 31
2001
2002
2003
2004
2005
(millions of Won, except number of shares and per share data)
Statements of Operations Data:
Korean GAAP:
Operating revenue
Won
830,721
Won
1,417,854
Won
1,383,486
Won
1,449,569
Won
1,589,345
Voice revenue
(1)
114,529
210,664
248,964
291,186
375,253
Leased line revenue
(2)
17,706
111,813
37,992
39,717
44,255
Broadband revenue
(3)
641,544
969,635
982,693
985,428
1,074,387
Other
56,942
125,742
113,837
133,238
95,450
Operating expenses
1,012,924
1,396,426
1,312,792
1,335,639
1,550,823
Operating income (loss)
(182,203
)
21,428
70,694
113,930
38,522
Non-operating expenses, net
(78,194
)
(149,106
)
(231,606
)
(100,081
)
(230,309
)
Ordinary income (loss) before
income tax
(260,397
)
(127,678
)
(160,912
)
13,849
(210,805
)
Income tax expense
(35
)
(1,083
)
(302
)
(495
)
(434
)
Minority interest share of loss
(income)
2,941
3,736
(85
)
(308
)
1,921
Net income (loss)
Won
(257,491
)
Won
(125,025
)
Won
(161,299
)
Won
13,046
Won
(209,318
)
Weighted average number of
shares outstanding (in
thousands) — Basic
285,440
298,251
321,310
462,135
462,135
Weighted average number of
shares outstanding (in
thousands) — Diluted
285,440
298,251
321,310
462,135
462,135
Basic and diluted earnings
(loss) per share of common
share and ADS
(4)
Won
(902
)
Won
(419
)
Won
(502
)
Won
28
Won
(453
)
Dividends declared
—
—
—
—
—
U.S. GAAP:
Net income (loss)
Won
(251,382
)
Won
(167,179
)
Won
(161,598
)
Won
14,849
Won
(203,212
)
Basic and diluted earnings
(loss) per share of common share
and ADS
(4)
Won
(1,762
)
Won
(1,122
)
Won
(1,006
)
Won
64
Won
(879
)
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Table of Contents
As of December 31
2001
2002
2003
2004
2005
(millions of Won)
Balance Sheet Data:
Korean GAAP:
Working capital
(5)
Won
(331,119
)
Won
(882,991
)
Won
(144,797
)
Won
(117,713
)
Won
(191,802
)
Property and equipment, net
3,146,589
3,134,314
2,550,921
2,372,845
2,337,884
Total assets
4,104,265
4,104,785
3,386,548
3,185,112
3,034,260
Net assets
1,541,209
1,488,315
1,730,720
1,751,606
1,573,080
Long-term indebtedness
(6)
1,896,839
2,128,703
1,157,582
1,034,739
993,690
Capital stock
1,320,000
1,396,613
2,310,676
2,310,676
2,310,676
Total shareholders' equity
1,541,209
1,488,315
1,730,720
1,751,606
1,573,080
Dividends declared
—
—
—
—
—
U.S. GAAP:
Property and equipment, net
2,727,091
2,703,850
2,554,089
2,377,399
2,343,979
Total assets
3,672,451
3,678,342
3,461,727
3,232,152
3,086,105
Total shareholders' equity
1,450,686
1,368,938
1,757,035
1,775,321
1,601,800
(1)
Voice revenue consists of revenue derived from services provided to fixed line customers.
(2)
Leased line revenue consists of revenue derived from services that give the subscriber the
right to use a private line exclusively.
(3)
Broadband revenue consists of revenue derived from high-speed data transmission services and
Internet access services.
(4)
Earnings (loss) per share is calculated by dividing net income (loss) by the weighted average
number of shares outstanding. For comparability purposes, the weighted average number of
common shares for the years ended December 31, 2001 and 2002 was recalculated to reflect the
issuance of new shares in 2003 at a price below market. Basic and diluted earnings (loss) per
share under U.S. GAAP for the years ended December 31, 2001, 2002, 2003, 2004 and 2005,
respectively, were calculated reflecting the effect from the reverse stock split that occurred
on May 3, 2006.
(5)
Working capital means current assets minus current liabilities.
(6)
Long-term indebtedness includes long-term debt in local and foreign currencies, debentures,
long-term obligations under capital leases, current portion of Asset-Backed Securities payable
and current maturities of long-term debt.
As of December 31,
As of
April 30,
2001
2002
2003
2004
2005
2006
Other Data:
Subscribers
(1)
2,747,768
3,817,378
3,727,144
4,162,207
4,294,276
5,157,881
Corporate leased lines
(2)
3,216
6,709
6,480
6,057
7,958
8,080
Employees
1,519
1,576
1,489
1,532
1,461
1,467
Network route kilometers-owned
(3)
.
8,804
12,425
15,317
17,051
19,826
20,258
Network route kilometers-leased
(4)
2,991
5,487
5,821
7,429
5,485
9,487
Office buildings connected with fiber optic
lines
1,608
2,978
3,131
3,216
3,466
3,544
Apartment complexes connected with fiber
optic lines
4,972
6,470
7,291
7,899
9,028
9,109
Switches installed (voice)
37
38
38
43
45
45
Switches installed (data)
(5)
156
161/140
161/149
161/168
161/161
161/267
(1)
Subscribers include broadband Internet and voice subscriber numbers. As of the end of 2005,
the number of residential and corporate subscribers was 3,986,462 and 307,814, respectively.
Since 2006, we have counted subscribers without classifying
them into residential and corporate subscribers. Subscriber numbers for previous years reflect
this new counting method.
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Table of Contents
(2)
The 7,958 leased lines in service as of December 31, 2005 included 3,060 individual Internet
dedicated lines connected to corporate subscribers and 4,898 individual traditional leased
lines connected to corporate subscribers. The 8,080 leased lines in service as of April 30,
2006 included 3,215 individual Internet dedicated lines connected to corporate subscribers and
4,865 individual traditional leased lines connected to corporate subscribers.
(3)
Network route kilometers—owned includes owned fiber optic lines within cities we service,
including fiber optic last-mile connections.
(4)
Network route kilometers—leased includes leased fiber optic lines within cities we service,
including portions of our backbone, but does not include inter-city connections.
(5)
Information as of December 31, 2002, 2003, 2004, 2005 and April 30, 2006 represents the
number of ATM/routers installed. The 267 routers as of April 30, 2006 included 110 routers
previously used by Thrunet, with which we merged on January 1, 2006.
Exchange Rate Information
The following table sets forth, for the periods and dates indicated, information concerning
the noon buying rate for Korean Won announced by the Federal Reserve Bank of New York, expressed in
Korean Won per U.S.$1.00. We do not intend to imply that the Won or U.S. dollar amounts could have
been or could be converted into U.S. dollars or Won, as the case may be, at any particular rate, or
at all. On June 26, 2006, the noon buying rate was $1.00 per Won 959.20 and the inverse noon
buying rate was Won 1,000 per $1.04.
Year ended December 31,
At End of Period
Average Rate
(1)
High
Low
(Won per U.S.$1.00)
2001
Won
1,313.50
Won
1,293.40
Won
1,369.00
Won
1,234.00
2002
1,186.30
1,242.00
1,332.00
1,160.60
2003
1,192.00
1,193.00
1,262.00
1,146.00
2004
1,035.10
1,139.30
1,195.10
1,035.10
2005
1,010.00
1,023.20
1,059.80
997.00
2006 (through June 26)
959.20
958.08
1,002.90
927.40
Month ending
At end of period
High
Low
(Won per U.S.$1.00)
December 31, 2005
Won
1,010.00
Won
1,036.90
Won
1,009.00
January 31, 2006
958.90
1,002.90
958.90
February 28, 2006
970.90
976.30
962.00
March 31, 2006
971.40
981.95
966.80
April 30, 2006
942.80
970.40
939.60
May 31, 2006
945.30
951.50
927.40
(1)
The average of the noon buying rates on the last date of each month (or a portion thereof)
during the period.
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
Investing in our securities involves a high degree of risk. You should carefully consider the
risks described below as well as all the other information in this Annual Report, including our
consolidated
6
Table of Contents
financial statements and related notes and "Item 11. Quantitative and Qualitative Disclosure
about Market Risk."
Our business, operating results and financial condition could be materially adversely affected
by any of the factors discussed below. The trading price of our securities could decline due to
any of these factors. This Annual Report also contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from those anticipated in
these forward-looking statements as a result of various factors, including the risks faced by us
described below and elsewhere in this Annual Report. See "Forward-Looking Statements."
Risks Related to the Telecommunications Industry and Our Business
We are subject to intense competition in all of the markets in which we operate, which may
subject us to intense price competition and could affect our revenues
The telecommunications industry is highly competitive. KT Corporation is our main competitor
in both the broadband Internet access services and local telephony services markets. As of April
30, 2006, KT had market share of approximately 49.9%, in the broadband services market in Korea and
market share of approximately 92.9% in the local telephony services market. KT has significantly
greater capital resources and owns significantly more fixed assets (including an integrated
telecommunications network throughout Korea) than we do. With respect to the broadband services
market, KT has an extensive fiber optic backbone network throughout Korea and is upgrading its
last-mile connections and related transmission facilities to provide DSL services to its
subscribers at speeds comparable to ours. We believe KT is focusing its upgrading process and
marketing efforts on targeted high density and high demand areas. With respect to the telephony
services market, KT was the sole provider of local telephony services prior to the commencement of
our operations in April 1999 and operates an extensive fixed-line network in Korea. We remain KT's
main competitor in this market with a relatively small market share. Dacom Corporation, the only
other local telephony licensee, has also been offering commercial local telephony services since
January 2005. In addition, certain telecommunications business operators and facilities-based
telecommunications operators were granted licenses to provide newly established Internet telephony
services and began to provide services through interconnections with existing local and mobile
telephony service providers. Continued upgrading or other competitive pressure by KT, Dacom or
Internet telephony service providers could have a negative effect on our financial condition and
results of operations.
We are also facing competition from others in the broadband Internet access services market.
In particular, since the MIC granted Powercomm, a subsidiary of Dacom, a network service provider,
or NSP, license to provide retail broadband Internet access service, Powercomm has launched
aggressive marketing activities to acquire new subscribers for 100Mbps optical LAN services and
10Mbps cable modem services using its own network. As of the end of April 2006, Powercomm had a
market share of approximately 4.4% and plans to attract approximately 1.3 million subscribers by
the end of 2006. Since late 2004, Dacom has been strengthening its retail broadband Internet access
business by using the network facilities of Powercomm Corporation, a subsidiary of Dacom, and
launching LAN-based Internet services. Dacom's market share was 1.4% as of the end of April 2006.
We are also facing competition from cable television network system operators and relay operators
who have a market share of 10.6% as of the end of April 2006. Entries by competitors such as
Powercomm in the broadband Internet access market are further intensifying competition in our
market. Due to this intensifying competition, our market share fell to 28.5% at the end of April
2006, a 0.7 percentage point decrease from the end of January 2006.
As a result of having to compete with KT in all of our markets and new competitors such as
Powercomm in the broadband Internet access services market, we currently encounter significant
pricing pressure and other forms of competitive pressures. Increased price or other competition
could adversely affect our revenues per subscriber, the overall profitability of our business and
our financial condition and results of operations. We cannot assure you that we will have the
financial resources, technical expertise or marketing and support capabilities to compete
successfully. In addition, future acquisitions, business combinations and alliances in the
telecommunications industry may create additional competitors with resources greater than ours or
strengthen existing competitors. For example, in January 2005, Dacom
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Table of Contents
announced that it intends to merge its operations with Powercomm. The integration synergies
generated from that merger may significantly increase the competitive strength of that combined
entity. Any significant changes to the market share or resources of our competitors could have a
material adverse effect on our business, financial condition and results of operations.
Targeted benefits from our merger with Korea Thrunet Co., Ltd., or Thrunet, may not be
achieved if the remaining integration work does not proceed as planned or if an unexpected change
in the regulatory environment occurs
We completed the merger transaction with Thrunet as of January 1, 2006. We also finished the
integration of the computer systems of both companies. We plan to finalize the integration of call
centers and the transfer of some Thrunet subscribers who had used a leased network to our own
network by the end of the second quarter of 2006. However, if the remaining integration work is
delayed or if an unexpected change in the regulatory environment occurs, the benefits targeted from
the merger with Thrunet may be smaller than previously expected.
We may not be able to maintain our current broadband subscriber base which amounts to about
3.6 million subscribers because of severe competition in Korea's broadband market
The Korean telecommunications industry is one of the most developed in Asia, particularly in
terms of broadband penetration. According to data derived from the MIC, the broadband penetration
rate, as a percentage of Korean households with broadband Internet access, had reached 80% as of
April 30, 2006, and broadband subscribers increased from approximately 3.9 million as of December
31, 2000 to approximately 12.5 million as of April 30, 2006. With the rapid growth of broadband
penetration, broadband Internet subscriber growth has decreased significantly. As a result, it may
be difficult for us to maintain our 3.6 million subscriber base amid competition with KT, which is
the dominant player in the market, Powercomm, which has entered the broadband Internet market using
its own network, and cable television network system operators, which are in an advantageous
position in terms of local market recognition and price. Accordingly, our ability to generate
additional revenues from our broadband operations will depend substantially on our ability to
retain our existing broadband subscribers and increase the usage of our services by providing
competitive and technologically up-to-date broadband and value-added services. The profitability
of our broadband business and our overall financial condition may be adversely affected if we fail
to retain our existing subscribers or increase the usage of our services, or develop other sources
of revenue, in a cost-effective manner.
The telecommunications industry is capital intensive and subject to rapid changes in
technology
The telecommunications industry is capital intensive and subject to rapid and ongoing
technological changes. In particular, Korea is experiencing the beginning of convergence between
voice, data and broadcasting, and fixed line and mobile, technologies. Government initiatives or
policies, changing market demands and consumer trends and new technological advances may require us
to adopt new technologies which could render our existing technology less competitive or obsolete.
For example, the Government is currently envisioning a Broadband Converged Network which will
combine broadband and mobile technologies and include terrestrial and satellite video broadcasting.
This rapid technological evolution has had, and will continue to have, a significant impact on the
speed and quality of our services and, in turn, the pricing of our services. In addition, we may
require substantial capital expenditure and access to related and enabling technologies in order to
develop and integrate any new technology with existing platforms and to comply with new industry
standards, including any implementation of the Broadband Converged Network. We may be unable to
integrate new technology into our network infrastructure in a timely and cost-effective manner,
which could have a material adverse effect on the value of our network, business, financial
condition and results of operations and on our ability to compete with other operators who
implement the new technology more successfully. There can also be no assurance that new technology
adopted by us will be profitable.
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Table of Contents
The Government has had, and continues to have, significant control and influence over the
development of the telecommunications industry in Korea
The Government has had, and continues to have, significant control and influence over the
development of the telecommunications industry in Korea. Under Korean law, the Government,
primarily through the MIC, has authority to regulate the telecommunications industry. The MIC is
responsible for, among other things, licensing telecommunications operators, monitoring the rates
charged by some telecommunications operators, including us, and setting standards and policies
which affect pricing, competition, marketing, foreign investment, frequency allocation, technology
choices, recommended levels of research and development spending, interconnection fee and other
arrangements. Each agreement for interconnection with other service providers is subject to
approval by, or reporting requirements to, the Korea Communications Commission. In addition, if
the Communications Commission finds that we are engaged in unfair business practices, including the
implementation of a pricing structure that restricts fair competition or which is against the
interests of our service users, it may order us to take corrective measures or impose an
administrative fine of up to 3% of our average annual revenues for the three years preceding the
violation. The Government also regulates the Internet exchanges through which all broadband
networks are connected to the Internet. See "Item 4.B. Business Overview—Korean
Telecommunications Laws and Regulations" for a description of the regulatory environment in Korea.
No assurance can be given that the Government will not change existing regulations, or impose
additional regulations, that will have an adverse effect on our business and results of operations,
particularly in light of increasing technological convergence.
For example, the Presidential Enforcement Decree of the Telecommunications Business Law
prohibits any telecommunications service provider from offering bundled sales of telecommunications
services or products that the MIC determines to be adverse to consumer interests. In making this
determination, the MIC may weigh the advantages of cost-savings or increased convenience for the
consumer as a result of the bundling against the disadvantages of any anti-competitive effects of
the bundling. If the MIC determines our bundled sales to be adverse to consumer interests and the
MIC were to exercise its discretion to prohibit us from offering bundled services, this could have
a material adverse effect on our financial condition and results of operations.
In general, the MIC has promoted, and continues to promote, fair and effective competition in
the telecommunications industry and we have benefited significantly from such policy initiatives.
The MIC's facilities provision policy, which requires dominant operators to provide their essential
facilities to competitors upon request, and local loop unbundling regulations, under which we can
use KT's local loop facilities, have allowed us and other competitors to compete more effectively
with dominant operators which may have more capital resources than we do. In particular, the MIC's
designation of KT as a dominant operator in both the local telephony services and the Internet
access services markets has been effective in preventing KT from exercising its market power. As a
dominant operator, KT is subject to more stringent regulations and restrictions on its ability to
change its local telephony rates and Internet access rates. There can be no assurance that the MIC
will continue to promote competition in the telecommunications industry and any reduction in the
MIC's support for competition could have a material adverse effect on our results of operations and
financial condition.
Our licenses from the MIC are subject to certain conditions and may be subject to future
conditions imposed by the MIC
We operate our telecommunications businesses pursuant to various licenses granted by the MIC.
See "Item 4.B. Business Overview—Licensing." The MIC may suspend or revoke our licenses or
impose fines on us under certain circumstances, including the violation of telecommunications laws
and regulations and the breach of any conditions of the relevant license. Although we believe we
are in general compliance with telecommunications laws and regulations and the conditions of our
licenses, suspension or revocation of any license required for us to operate any of our
telecommunications businesses would have a material adverse effect on our business, financial
condition and results of operations.
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Table of Contents
We outsource a significant portion of our sales force needs. Our lack of direct control over
our outsourced sales force's actions may materially affect our sales and marketing efforts
As of April 30, 2006, we had 463 employees in our marketing and sales department. However, in
order to rapidly expand the coverage of our marketing and sales efforts in a cost-efficient manner,
we outsource a significant portion of our sales force needs. In 2005, we acquired about 91% of our
new broadband services subscribers and about 68% of our new voice services subscribers through our
outside sales force. The outside sales force and its employees are not employees of hanarotelecom
and the amount of control we exercise over their activities is necessarily limited. If our
training, compensation and monitoring programs fail to ensure the quality and performance of our
outside sales force, our sales and marketing efforts will be materially affected and our
performance, including the number of new subscribers, could suffer.
Certain major shareholders have a significant influence over our management and operations
A consortium of investors comprised of companies or partnerships which are directly or
indirectly controlled and managed by the AIG Asian Infrastructure Fund II, the AIG Asian
Opportunity Fund, Newbridge Capital, Inc. and TVG Capital Partners, Ltd., owned an aggregate of
39.56% of our outstanding common shares as of December 31, 2005. See "Item 7.A. Major
Shareholders." Pursuant to an investment agreement between us and those principal shareholders, we
have agreed not to take certain significant corporate actions without the consent of those
principal shareholders so long as they and their affiliates continue to hold an aggregate of at
least 15% or more of our outstanding common shares. In addition, pursuant to certain other
agreements, certain of the principal shareholders have the right, among other things, to nominate
directors to our board, to nominate our chief financial officer, to make proposals to our board of
directors and to discuss our business and affairs with our board of directors, officers and
independent accountants. The interests of those principal shareholders may, in certain
circumstances, differ from the interests of the other holders of our securities.
The inability to lease networks from third parties could materially affect our ability to
provide services
We lease a substantial portion of our network from third parties including telecommunications
operators. We lease from Korea Electric Power Corporation, or KEPCO, ancillary facilities such as
electric poles and conduit ducts for use in building our own local fiber optic network and our own
HFC networks. Our agreement with KEPCO to lease its ancillary facilities allows us to expand our
network coverage at a lower cost. Accordingly, the termination of the lease agreements with KEPCO
could have a material adverse effect on our operations. Furthermore, any failure by KEPCO to
properly maintain its ancillary facilities could result in service disruptions or reduced data
transmission quality.
In areas that are not covered by our network, we have entered into non-exclusive network lease
agreements with cable television network system operators, relay operators and Powercomm. Our
competitors also have, or are trying to establish, relationships with these cable television
network system operators, relay operators or Powercomm. We may not be able to maintain our
relationships with these cable television network system operators, relay operators and Powercomm.
In particular, in connection with Dacom's marketing of LAN-based Internet services, cable modem
services and VDSL services, Dacom uses Powercomm's network. In addition, in August 2005, the MIC
granted Powercomm, a subsidiary of Dacom, an NSP license to provide retail broadband Internet
access service. Dacom's focus on the retail broadband Internet access market in conjunction with
Powercomm and Powercomm's retail broadband Internet access service may prevent us from continuing
to lease our network on similar terms from Powercomm, which may require us to make significant
capital expenditures to build our own last-mile connections in those areas.
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Our networks may be vulnerable to security breaches, piracy and hacking
Despite the implementation of security measures, our networks may be vulnerable to computer
viruses, piracy, hacking or similar disruptive problems. Computer viruses or problems caused by
third parties could lead to disruptions of our services to our customers. Fixing such problems
caused by computer viruses or security breaches may require the interruption, delay or temporary
suspension of our services, which could result in lost revenue and penalties payable to affected
customers.
Breaches of our network security, including through piracy or hacking, may have a material
adverse effect on our earnings and financial condition and may require us to incur further
expenditures to put in place more advanced security systems to prevent any unauthorized access to
our networks.
We may not generate sufficient cash flow from operations or obtain adequate financing on
acceptable terms or at all to implement our business plan in the mid- to long-term
As a result of the rapid expansion of our business and the substantial operating losses we
incurred in the past, we have principally relied on equity and debt financings to fund our
operations and have significant debt and debt service and repayment obligations. In order to
maintain our competitive position and continue to meet the increasing demands for service quality,
availability and competitive pricing, we may need to incur additional capital expenditures on
enhancing our networks and expanding our subscriber base. Our actual future financing requirements
will also depend on our future performance, market conditions and other factors, many of which are
beyond our control and cannot be predicted with certainty. In addition, we may need to raise
additional funds through long-term borrowings, the proceeds of equity and corporate bond offerings
and vendor financing to acquire complementary businesses, develop new products or otherwise respond
to changing business conditions or unanticipated competitive pressures or technological or
marketing hurdles. Our ability to obtain additional financing will be dependent on our future
performance and market conditions, among other factors. We cannot assure you that long-term
borrowings, vendor financing, or any alternative financing will be available on favorable terms, or
at all. Moreover, under current Korean law our ability to sell additional voting shares to foreign
investors is limited. As a result, our options to raise equity capital are more limited than other
companies. If we are unable to obtain sufficient new debt or equity financing, we may need to
modify, delay or abandon elements of our business plan, which could have a material adverse effect
on our business, financial condition and results of operations.
We will be exposed to increased risks as we expand the range of our services
As we expand the range of our products and services beyond our traditional business lines and
as the complexity of our services and network systems increases, we will be exposed to new and
increasingly complex risks. We may have only limited experience with the operational risks or new
technologies related to the expanded range of our services. To the extent we expand our service
offerings through acquisitions, we face risks relating to the integration of acquired businesses
with our existing operations. Our operational systems may prove to be inadequate and may not work
in all cases or to the degree required. In addition, our efforts to offer new services may not
succeed if market opportunities develop more slowly than expected or if the profitability of
opportunities is undermined by competitive pressures.
We may be liable for information disseminated over our Internet services network
The liability of Internet service providers, or ISPs, under Korean law for information carried
on or disseminated through their networks is not completely settled. New court decisions, laws,
regulations and other activities regarding content liability may significantly affect the
development and profitability of companies offering online and Internet access services, including
us. The imposition upon ISPs of potential liability relating to information carried on or
disseminated through the ISPs' systems, such as liability for computer viruses, defamatory speech
or copyright infringement, could require us to implement measures to reduce our exposure to such
liability. Such measures may require that we spend substantial
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resources or discontinue some services or content offerings. Any of these actions could have
a material adverse effect on our business, financial condition or results of operations.
We could be adversely affected if we experience a failure of our equipment
We do not carry "business interruption" insurance. A major failure of our equipment or a
natural disaster affecting any part of our network or equipment could have a material adverse
effect on our operations.
We could be subject to liability and regulatory action arising from claims or other actions
relating to our handling of subscriber information.
We maintain various information regarding our subscribers. Various laws and regulations in
Korea and other countries impose restrictions on the use and dissemination of that information by
us. We have put in place comprehensive personal information security management measures across
the company and at any third parties with which we may share subscriber information under
outsourcing arrangements, to comply with the applicable standards. If we are required to implement
further personal information security measures, we may have to incur additional costs and our
financial condition could be negatively affected.
In the event that personal information about subscribers held by us or a third party is leaked
or improperly accessed despite these security measures, we may be subject to liability such as
damage payments or regulatory actions arising out of a failure to protect such information. In
addition, such incidents could create a negative public perception of our operations, systems or
brand, which may in turn decrease customer and market confidence and materially and adversely
affect our business, financial condition and results of operations. For example, there have been
recent press reports about subscriber information collected by certain Internet service providers,
including us, being illegally sold by current or previous employees of the Internet service
providers to third parties, who in turn used the information to distribute spam e-mail and make
unsolicited telephone calls. A Korean law firm is currently soliciting plaintiffs who were
allegedly harmed by the leakage of subscriber information to file a civil lawsuit against those
service providers, including us.
Risks Related to Korea
There are unique economic and political risks associated with investing in Korean companies
We generate substantially all of our revenue from operations in Korea. Our future performance
will depend in large part on Korea's future economic growth. Adverse developments in Korea's
economy or in political or social conditions in Korea may have an adverse effect on our number of
subscribers, call volumes and results of operations, which could have an adverse effect on our
business.
The pace of economic recovery in Korea over the past several years has been volatile.
Economic indicators in the past few years have shown mixed signs of recovery and uncertainty, and
future recovery or growth of the economy is subject to many factors beyond our control. Events
related to terrorist attacks in the United States that took place on September 11, 2001, recent
developments in the Middle East, including the war in Iraq, higher oil prices, the general weakness
of the global economy and the outbreak of severe acute respiratory syndrome, or SARS, in Asia and
other parts of the world have increased the uncertainty of world economic prospects in general and
continue to have an adverse effect on the Korean economy. Any future deterioration of the Korean
economy would adversely affect our financial condition and results of operations.
Developments that could adversely affect Korea's economy in the future include:
•
financial problems relating to chaebols, or their suppliers, and their potential
adverse impact on Korea's financial sector;
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•
adverse changes or volatility in foreign currency reserve levels, commodity prices
(including oil prices), exchange rates (including depreciation of the U.S. dollar or
Japanese yen), interest rates and stock markets;
•
adverse developments in the economies of countries such as the United States, China
and Japan, to which Korea exports, or in emerging market economies in Asia or
elsewhere, which developments could result in a loss of confidence in the Korean
economy;
•
social and labor unrest or declining consumer confidence or spending resulting from
layoffs, increasing unemployment and lower levels of income; and
•
a deterioration in economic or diplomatic relations between Korea and its trading
partners or allies, including such deterioration resulting from trade disputes or
disagreements in foreign policy.
Developments that adversely affect Korea's economic recovery will likely also decrease demand
for our services and adversely affect our results of operations.
Increased international tensions with North Korea could have an adverse effect on us and the
market value of our common shares
Relations between Korea and North Korea have been tense over most of Korea's modern history.
The level of tension between Korea and North Korea has fluctuated and may increase or change
abruptly as a result of current and future events, including ongoing contacts at the highest levels
of the governments of Korea and North Korea and increasing hostility between North Korea and the
United States. In December 2002, North Korea removed the seals and surveillance equipment from its
Yongbyon nuclear power plant and evicted inspectors from the United Nations International Atomic
Energy Agency, and has reportedly resumed activity at its Yongbyon power plant. In January 2003,
North Korea announced its intention to withdraw from the Nuclear Non-Proliferation Treaty,
demanding that the United States sign a non-aggression pact as a condition to North Korea
dismantling its nuclear program. In August 2003, representatives of Korea, the United States,
North Korea, China, Japan and Russia held multilateral talks in an effort to resolve issues
relating to the nuclear weapons program of North Korea. In February 2005, North Korea announced
that it possessed nuclear weapons. In September 2005, North Korea agreed to end its nuclear weapons
program, and the six participating nations signed a draft preliminary accord, pursuant to which
North Korea agreed to dismantle its existing nuclear weapons, abandon efforts to produce new future
weapons and readmit international inspectors to its nuclear facilities. In return, the other five
nations participating in the talks, China, Japan, Korea, Russia and the United States, expressed
willingness to provide North Korea with energy assistance and other economic support. The six
parties agreed to hold further talks in November 2005. However, one day after the joint statement
was released, North Korea announced that it would not dismantle its nuclear weapons program unless
the United States agreed to provide civilian nuclear reactors in return, a demand that the United
States rejected. We cannot assure you that future negotiations will result in a final agreement on
North Korea's nuclear program, including critical details, such as implementation and timing, or
that the level of tensions between Korea and North Korea will not escalate. In addition, in recent
years, there have been heightened security concerns stemming from North Korea's nuclear weapon and
long-range missile programs and increased uncertainty regarding North Korea's actions and possible
responses from the international community. Any further increase in tensions resulting, for
example, from a break-down in contacts or test of long-range nuclear missiles, coupled with
continuing nuclear programs by North Korea or an outbreak in military hostilities, could adversely
affect our business, prospects, financial condition and results of operations and could lead to a
decline in the market value of our ADSs.
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Korea's new legislation allowing class action suits related to securities transactions may
expose us to additional litigation risk
Effective January 1, 2005, a new law became effective that allows class action suits to be
brought by shareholders of companies listed on the KRX Stock Market or the KRX KOSDAQ Market,
including us, for losses incurred in connection with purchases and sales of securities and other
securities transactions arising from (1) false or inaccurate statements provided in registration
statements, prospectuses, business reports and audit reports and omission of material information
in such documents; (2) insider trading; or (3) market manipulation. This new law applies to
companies such as ourselves listed on the KRX Stock Market or the KRX KOSDAQ Market whose total
assets are equal to or greater than Won 2,000 billion at the end of the immediately preceding
fiscal year. However, in the event that certain elements of a financial statement for the fiscal
year ended before January 1, 2005, were not in compliance with the then-effective accounting
standards, this law does not apply, if such non-compliance is cured or addressed in the financial
statement for the fiscal year ending December 31, 2006, and such corrected information is submitted
to the Financial Supervisory Commission, or FSC, the Korea Exchange, Inc., or KRX, or made publicly
available. This law permits, subject to court approval, 50 or more shareholders who collectively
held 0.01% or more of the shares of a company at the time when the cause of action arose to bring a
class action suit against, among others, the company and its directors, officers and auditors. It
is uncertain how the courts will apply this law. Class action suits can be time-consuming and
expensive to resolve, and can divert management time and attention from the operation of a
business. Although we are not aware of any basis for such suit being brought against us, nor of
any such suits that are pending or threatened, any such litigation brought against us could have a
material adverse effect on our business, financial condition and results of operations.
Risks Related to Owning Our Shares or ADSs
Rights of shareholders under Korean law may be different from those under the laws of
jurisdictions within the United States and other countries.
Our Articles of Incorporation, the regulations of our board of directors, the Korean
Commercial Code and the Korean Securities and Exchange Act govern our corporate affairs. Legal
principles relating to such matters as the validity of corporate procedures, directors' and
officers' fiduciary duties and shareholders' rights may be different from those that would apply if
we were a non-Korean corporation. Shareholders' rights under Korean law are different in some
respects from shareholders' rights under the laws of jurisdictions within the United States and
other countries. You may have more difficulty in asserting your rights as a shareholder than you
would as a shareholder of a corporation organized in a jurisdiction outside of Korea. For a detail
discussion of the relevant provisions under the Korean Commercial Code and our Articles of
Incorporation, see "Item 10.B. Memorandum and Articles of Association."
Restrictions on foreign ownership of our voting shares imposed by Korean law may depress the
price of our common shares
The Telecommunications Business Law of Korea restricts foreign ownership in voting shares of a
network service provider, including us. At present, a foreign government, foreigner or any legal
entity owned by a foreigner that has 15% or more of its outstanding voting shares, including
stock-equivalents and investment equity such as depositary receipts, owned by a foreign government,
foreigner or any specially related person as the largest shareholder may not own more than 49% of
the aggregate number of the issued and outstanding voting shares of any network service provider.
In the event that such foreign ownership restrictions are violated, the holders of shares in excess
of the legal limitations cannot exercise voting rights with respect to the shares exceeding such
limit and the MIC may require that corrective measures be taken to comply with the legal
restrictions. In addition, the MIC may impose a mandatory performance fee on the non-compliant
party and the service provider may refuse to enter the violating shareholder's shares in excess of
the legal limitations in its corporate register. As of May 30, 2006,
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foreign ownership in our voting shares was approximately 49%, including the 39.45% share
ownership held by a consortium of investors led by AIG Asian Infrastructure Fund II and AIG Asian
Opportunity Fund, Newbridge Capital, Inc. and TVG Capital Partners, Ltd. The market price of our
common shares may be, and may continue to be, lower because of these limitations on foreign share
ownership in our voting shares. A stricter application of the rules relating to foreign share
ownership may also negatively impact our share price in the future.
Additional restrictions on acquiring a large stake in our common shares imposed by Korean law
may depress the market price of our common shares
Prior to making an investment in 10% or more of the outstanding voting shares of a Korean
company, foreign investors are generally required under the Foreign Investment Promotion Law of
Korea to submit a report to a bank located in Korea (which may include a non-Korean bank's Korean
branch office) that is licensed under the Foreign Exchange Transaction Act to engage in foreign
currency transactions or the Korea Trade Investment Promotion Agency pursuant to a delegation by
the Ministry of Commerce, Industry and Energy of Korea. Failure to comply with this reporting
requirement may result in the imposition of criminal sanctions. Subsequent sales by the investor
of its shares in the company will also require a prior report to the bank. The Telecommunications
Business Law also requires the MIC to undertake a public interest review when a shareholder of a
service provider becomes a controlling shareholder of the service provider. Depending on the
review, which assesses the impact of the transaction on the national security, public good and
order of society, the MIC may order an amendment or suspension of the relevant contract, suspension
of the voting rights, or ultimately, a sale of shares. These restrictions may discourage some
investors from acquiring large positions in our common shares and as a result, may have lowered,
and may continue to lower, the market price of our common shares.
Foreign exchange rate fluctuations may affect the dollar value of our ADSs and dividends
payable to holders of our ADSs
Market prices for our ADSs may fall if the value of the Korean Won declines against the U.S.
dollar. Although we do not expect to pay dividends in the foreseeable future, any dividends that
we do declare and pay will be paid to the depositary for the ADSs in Korean Won and then converted
by the depositary into U.S. dollars. As a result, the U.S. dollar amount of cash dividends and
other cash payments made to holders of our ADSs would be reduced if the value of the Korean Won
declines against the U.S. dollar.
As a holder of ADSs, you have fewer rights than a shareholder has, and you must act through
the depositary to exercise these rights
The rights of our shareholders under Korean law to take actions including voting their shares,
receiving dividends and distributions, bringing derivative actions, examining our accounting books
and records and exercising appraisal rights are available only to shareholders of record. Because
the depositary, through its custodian, is the record holder of the shares underlying the ADSs, a
holder of ADSs may not be entitled to the same rights as a shareholder. In your capacity as an ADS
holder, you are not able to bring a derivative action, examine our accounting books and records or
exercise appraisal rights except through the depositary.
In addition, the Korean Commercial Code and our Articles of Incorporation require us, with
certain exceptions, to offer shareholders the right to subscribe for new shares of our common
shares in proportion to their existing ownership percentage whenever new shares of our common
shares are issued. Under the deposit agreement governing the ADSs, if we offer any rights to
subscribe for additional shares of our common shares, the depositary under the deposit agreement,
after consultation with us, may make such rights available to the holders of ADSs or dispose of
such rights on behalf of the holders and make the net proceeds available to them or, if the
depositary is unable to take such actions, it may allow the rights to lapse with no consideration
to be received by the holders of the ADSs. The depositary is required to make available any rights
to subscribe for any securities only when a registration statement under the U.S.
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Securities Act of 1933 is in effect with respect to the securities or if the offering of the
securities is exempt from the registration requirements under the U.S. Securities Act. We are
under no obligation to file a registration statement under the U.S. Securities Act to enable
holders of the ADSs to exercise preemptive rights for our common shares underlying the ADSs, and we
cannot assure you that any registration statement would be filed or that an exemption from the
registration requirement under the U.S. Securities Act would be available. Holders of ADSs that
are not entitled to exercise preemptive rights may thereby suffer dilution of their interests.
Future sales of ADSs and common shares could lower our share price
If existing shareholders decide to sell large amounts of our shares, the trading price for the
ADSs and our shares could fall. We believe that some of our five major shareholders are currently
contemplating selling their shares of our common shares. Any announcement of a sale by any major
shareholders of our shares or any such sale may have a material adverse effect on the price of our
common shares or the ADSs.
It may not be possible for investors to effect service of process within the United States
upon us or our directors or senior management, or to enforce against us or those persons judgments
obtained in U.S. courts predicated upon the civil liability provisions of the federal securities
laws of the United States
We are a stock corporation organized under the laws of the Republic of Korea. Almost all of
our directors and senior management reside outside of the United States. Most of our assets and
those persons are located in Korea and elsewhere outside of the United States. It may not be
possible, therefore, for U.S. investors to effect service of process within the United States upon
us or those persons or to enforce against us or those persons judgments obtained in U.S. courts
predicated upon the civil liability provisions of the federal securities laws of the United States.
We believe that there is doubt as to the enforceability in Korea, in original actions or in
actions to enforce judgments of U.S. courts, of claims predicated solely upon the federal
securities laws of the United States.
Item 4. Information on the Company.
A. History and Development of the Company.
We are a stock corporation organized under the laws of the Republic of Korea. We were
incorporated on September 26, 1997. Our legal and commercial name is "hanarotelecomChushikHoesa"
in Korean, and "hanarotelecom incorporated" in English. Our registered office is located at 17-7
Yeouido-dong, Yeongdeungpo-gu, Seoul, Korea, 150-874, telephone number (82-2) 6266-5500. Our agent
for U.S. federal securities law purposes is CT Corporation System, 111 Eighth Avenue, New York, NY
10011.
We were established as Korea's second local call carrier. Since our inception, we have been
striving to become the leading provider of high-speed Internet access, data and multimedia services
in Korea. Some of the important events in the development of our business are set forth below:
•
In October 1997, we received our perpetual license to provide fixed-link local
telephone service on a nationwide basis in Korea.
•
In June 1998, we registered as a specific service provider to resell or provide the
same type of telecommunications services as those of domestic or foreign network
service providers.
•
In April 1999, we launched our local call and high-speed Internet access services
in Seoul, Busan, Inchon and Ulsan.
•
In March 2000, we successfully completed a global offering of our ADSs on the
NASDAQ National Market.
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•
In January 2003, we received a perpetual license to provide long distance telephony
services, including inter-city and international services.
•
In June 2003, we commenced providing fixed line number portability service.
•
In November 2003, we issued new shares to a consortium of investors led by AIG,
Newbridge and TVG having an aggregate value of Won 585 billion, as a result of which
they acquired an aggregate of 39.6% equity interest in us. AIF II NT, Ltd. and its
affiliate became our largest shareholder holding a 13.67% equity interest in us.
Following such new share issuance, there was a change in certain members of our
management. See "Item 6. Directors, Senior Management and Employees."
•
In July 2004, we launched "hanarotelecom" as our new corporate identity.
•
On January 1, 2006, we completed an acquisition of Thrunet common shares
representing 96.22% of Thrunet's outstanding common shares.
•
On May 3, 2006, as a result of a reverse stock split (2:1) without payment to
shareholders, the number of our outstanding shares decreased to 231,767,506 shares.
See "Item 5.B. Liquidity and Capital Resources" for a description of our principal capital
expenditures for the last three fiscal years and currently in progress.
We have not received any public takeover offers by third parties.
B. Business Overview.
General
We have been providing telecommunications services since 1999 and currently offer high-speed
broadband Internet access, voice, leased line and IDC services in Korea. We are the second largest
provider of broadband Internet access services in Korea in terms of both revenue and subscribers
and our network currently covers 80% of households in Korea. Our voice service comprises local,
domestic long distance, international long distance and VoIP services. For the year ended December
31, 2005, we had revenues of Won 1,444.4 billion and net income of Won 208.8 billion. As of
January 1, 2006, we completed our merger transaction with Thrunet. The following data reflects the
operating statistics of the combined entity.
As of April 30, 2006, we had 3.58 million broadband Internet access subscribers. Our market
share of Korean broadband Internet access subscribers was 28.5%. Of our broadband Internet access
subscribers, 40.5% are using DSL technology, 59.2% are using cable modem technology and 0.3% are
using either broadband WLL, often referred to as "B-WILL," or wireless LAN, often referred to as
"WLAN." We are the only major provider of broadband Internet access services in Korea with a
significant presence in both DSL and cable modem technology, with our major competitors
predominantly providing one or the other. Broadband Internet access services accounted for 68.2%
of our revenues for the year ended December 31, 2005.
As of April 30, 2006, we had 1.58 million voice lines. Since the nationwide implementation of
fixed line number portability on August 1, 2004, we have been expanding our coverage and subscriber
base with our integrated services of long distance and international telephony as well as voice
over Internet Protocol, or VoIP, services based on IP networks. We added 436,840 net voice lines in
the period from August 2004 through April 2006, which represents a 27.6% growth in our voice lines
and an increase in our market share of total voice lines in Korea from 5.0% to 6.9%. In particular,
after the acquisition of Thrunet, we are strengthening marketing activities targeting Thrunet's
broadband subscribers. Voice services
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accounted for 25.9% of our revenues for the year ended December 31, 2005. As of April 30,
2006, 29.6% of our broadband Internet access customers use our voice lines on a bundled basis.
We also provide leased line services and operate an Internet data center for corporate
customers. These and other activities accounted for 9.07% of our revenues for the year ended
December 31, 2005.
We have a technologically advanced transmission and access network, which comprises 20,258
route kilometers of owned and 9,487 route kilometers of leased fiber optic cables as of April 30,
2006. As of Dec 31, 2005, we had connected 9,028 apartment complexes and 3,466 office buildings
with fiber optic lines. We estimate that our network has access to approximately 12.8 million
Korean households.
We provide our broadband Internet access and voice services under the "hanafos" and "hanafone"
brands, respectively. We have been voted the best Internet service provider for the last three
years by the Korean Standard Service Quality Index (KS-SQI), which is sponsored by the Korean
Standards Association, and the best Internet service provider for the last two years by the Global
Customer Satisfaction Competency Index (GCSI), which is sponsored by the Japan Management
Association Consulting.
Recent Acquisitions and New Services
Thrunet Acquisition
We completed the merger transaction with Thrunet as of January 1, 2006, in order to strengthen
our competitiveness in the broadband Internet market and maximize our corporate value.
To date, we have completed the integration of computer systems of both companies. We plan to
finalize the integration of call centers and the transfer of some Thrunet subscribers who had used
a leased network to our own network by the end of the first quarter of 2006. However, if the
remaining integration work is delayed or if an unexpected change in the regulatory environment
occurs, benefits from the merger with Thrunet may be smaller than previously expected.
For a discussion of the risks involved in our acquisition of Thrunet, see "Item 3.D. Risk
Factors—Risks Related to the Telecommunications Industry and Our Business—Targeted benefits from
our merger with Thrunet may not be achieved if the remaining integration work does not proceed as
planned or if an unexpected change in the regulatory environment occurs
TV-Portal Service
In order to grow into a comprehensive media company, we acquired 65% of the common shares
(780,000 shares at Won 5.5 billion) of CelrunTV, a provider of TV portal/IP TV service platform and
IP STB technology on March 13, 2006. We plan to launch TV-Portal, a TV-based content-on-demand
service, in the second half of 2006. CelrunTV changed its corporate name to hanaromedia Inc. and
became our affiliated company on May 2, 2006, when we invested an additional Won 6.5 billion to
acquire new shares issued by hanaromedia. We plan to acquire additional new shares for Won 6.5
billion in the second half of 2006.
In addition, to strengthen our convergence services including TV-Portal, we established a
Convergence Headquarters in April 2006. We plan to offer various value-added services based on our
own network and improve subscriber retention. For our TV-Portal business we are aiming to gain
250,000 subscribers by the end of 2006, and 1.5 million subscribers by the end of 2008 when
government regulations on IV-TV business are expected to be eased and full-blown service will be
permitted. However, we may not be able to achieve our targeted subscriber growth for TV-Portal if
we are unsuccessful in marketing this service to our existing broadband subscribers. Actual
subscriber growth and revenue from such subscribers may differ significantly from our targets.
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Our Services
We currently provide broadband Internet access services, telephony services and leased line
services in Korea pursuant to several wire-line based options and wireless technologies. The
following table shows the numbers of subscribers or lines by business segment and technology:
As of December 31,
As of
2002
2003
2004
2005
May 31, 2006
Broadband:
VDSL
—
165,134
272,900
344,988
374,354
ADSL
1,294,368
1,051,891
823,539
569,604
508,578
Cable Modem
1,539,690
1,459,319
1,439,792
1,416,744
2,109,756
Fiber optic LAN
(1)
—
—
157,808
396,088
589,862
B-WLL
43,468
49,419
54,895
45,735
9,432
Subtotal
2,877,526
2,725,763
2,748,934
2,773,159
3,591,982
Voice lines
939,852
1,001,381
1,413,273
1521,117
1,599,467
Leased lines
6,709
6,480
6,057
7,958
8,200
Total
3,824,087
3,733,624
4,168,264
4,302,234
5,199,649
(1)
Fiber optic LAN subscribers were counted as ADSL subscribers until 2005, since which they
have been counted separately.
(2)
Since 2006, we have counted broadband subscribers without classifying them into residential
and corporate subscribers. Subscriber numbers for previous years reflect this new counting
method.
(3)
The number of subscribers for 2005 (residential and corporate subscribers are counted
separately);
As of December 31, 2005
Broadband:
Residential:
VDSL
344,871
ADSL
551,128
Cable Modem
1,415,900
Fiber optic LAN
396,088
Corporate:
VDSL
117
ADSL
18,476
Cable Modem
844
B-WLL
11,482
WLAN
34,253
Subtotal
2,773,159
Voice lines
1521,117
Leased lines
7,958
Total
4,302,234
For the years ended December 31, 2002, 2003, 2004 and 2005, we had the following revenues
generated by our business segments:
Year ended December 31,
2002
2003
2004
2005
(billions of Won)
Broadband
Won
969.6
Won
982.7
Won
985.4
Won
1074.4
Voice
210.7
249.0
291.2
375.2
Leased line
111.8
38.0
39.8
44.2
Others
125.8
113.8
133.2
95.5
Total
Won
1,417.9
Won
1,383.5
Won
1,449.6
Won
1589.3
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Broadband
We currently provide high-speed broadband Internet access services through several service
offering options marketed under the brand name "hanafos." Our broadband network coverage extends
to 80% of households in Korea. We offer broadband Internet services to subscribers in large
apartment complexes and commercial buildings through fiber optic networks and to subscribers in
less densely populated residential areas through HFC cable networks. We also provide wireless
broadband Internet access to medium and low density housing complexes using B-WLL technology and in
high traffic areas (such as hotels and commercial centers) using WLAN technology. Residential
subscribers in areas covered by fiber optic networks have the choice of two types of DSL services,
namely ADSL and VDSL services. With the broadband Internet market reaching saturation, 100Mbps
products such as optical LAN are driving market growth. In this environment, we provide fast and
reliable access to the Internet for subscribers in apartment complexes and residential/commercial
complexes. Corporate subscribers generally have the choice of ADSL, VDSL or our dedicated leased
line services. Subscribers in service areas covered by HFC cable networks are provided with cable
modem based services.
The principal features of our main broadband Internet access service packages and tariff
structure are set out in the table below:
Monthly Service
Service Package
Technology
Max Speed
Charge
(1)
hanafos V Dream II
VDSL
50 Mbps
Won
43,000
hanafos V Dream I
VDSL
20 Mbps
40,000
hanafos V Pro xDSL
ADSL
13 Mbps
38,000
hanafos Fiber LAN
LAN
100 Mbps
33,000
hanafos V Pro CATV
Cable Modem
10 Mbps
34,000
hanafos V Lite
ADSL, Cable Modem
4 Mbps
28,000
(1)
There is a one-time installation fee of Won 30,000. Cable or DSL modems are rented for a
monthly fee of Won 8,000. Discounts on the monthly service charge are given to long-term
subscribers and range from 3.0% to 11.0%. Modem rental fees have in some circumstances been
waived or discounted by up to 40.0%.
DSL (ADSL and VDSL) Services
DSL services are provided primarily over existing copper lines in the subscriber's premises,
which are connected to our backbone network through fiber optic last-mile connections. Our DSL
services are targeted at subscribers in large apartment complexes. ADSL services offer Internet
access transmission speeds of up to 13 Mbps and VDSL services offer data transmission speeds of up
to 50 Mbps. DSL subscribers pay a monthly flat fee.
Fiber Optic LAN
We provide fiber optic LAN service to apartments and residential complexes hooked up to our
Fiber LAN service and equipped with hanarotelecom LAN facilities. It is useful for professional
users and others desiring access to the broadband Internet at a lower flat price as well as for
customers that frequently access services requiring symmetrical throughput (equal upload and
download), such as e-Learning and e-mail Healthcare services, video chat and peer-to-peer networks.
We are able to offer Internet access transmission speeds of up to 100 Mbps.
Cable Modem Services
Our cable modem based services are currently available in 162 service areas and are delivered
via HFC cable infrastructure. HFC connections to our data network allow for maximum speeds of 10
Mbps downstream and 700—800 Kbps upstream through the use of cable modems installed at our
subscribers' premises. Compared to the construction of our fiber optic network, our use of
existing HFC cable lines to offer broadband Internet access allows us to expand our broadband
service coverage area with lower capital
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expenditures. We have not invested in building out our own network in areas where we have
established non-exclusive network lease agreements with cable television network system operators
and Powercomm to use their HFC cable lines. As of April 30, 2006, approximately 31% of our cable
modem subscribers used cable lines that we lease from cable television network system operators and
Powercomm. Powercomm, a subsidiary of Dacom, began to provide retail broadband Internet access
service from September 2005 and launched aggressive marketing campaigns to acquire subscribers. In
part to respond to such marketing, we have increased our marketing efforts and competition in the
broadband Internet market has intensified significantly. We may be prevented from continuing to
lease our network on similar terms from Powercomm in the future, which may require us to make
significant capital expenditures to build our own network in those areas. See "Item 3.D. Risk
Factors—Risks Related to the Telecommunications Industry and Our Business—The inability to lease
networks from third parties could materially affect our ability to provide services."
Wireless Services
We also provide wireless last-mile connections to our backbone using B-WLL and WLAN
technologies. We commenced our commercial high-speed Internet access services using B-WLL
communications technology in July 2000. B-WLL services are marketed primarily to medium-sized
businesses and apartment complexes which are not covered by our fiber optic or HFC networks. Our
B-WLL services are currently provided in 11 cities, including Seoul and Busan. We commenced
providing "hanafos wing" WLAN services in April 2002, which allow Internet access through mobile
devices such as notebook computers or personal digital assistants, or PDAs, equipped with a LAN
card for users within the coverage of our access points. As of April 30, 2006, we provide WLAN
services in approximately 189 access point areas across Korea, including high traffic areas such as
hotels, subway stations, shopping malls, colleges and fast food stores.
Voice
We offer corporate and residential customers in Korea, local telephony, VoIP and domestic and
international long distance telephony services.
Local Telephony
We are one of two competitors to KT, the dominant operator, in the local telephony market, the
other being Dacom. Although KT has a dominant position in this market, we have increased our
market share to 6.9% as of April 30, 2006. In addition to local dial tone service and other basic
features such as call forwarding, call waiting, dial back and voicemail services, we offer
value-added services such as wake-up call and teleconferencing services in order to distinguish our
services from those available from KT.
Most of our residential subscribers receive local telephony services bundled with our DSL
services. If customers subscribe to our bundled DSL and local telephony services, the monthly base
fee for our local telephony service is discounted from Won 4,500 to Won 2,500 per line. We believe
the ability to offer local telephony distinguishes our service offerings from that of other
communication service providers, except for KT and Dacom, because it allows our subscribers to
receive both data and local telephony services through a single provider and thus receive one bill
for both service offerings.
Voice over Internet Protocol (VoIP) Services
In April 2002, we commenced providing VoIP services bundled with cable modem-based broadband
Internet services to residential subscribers under the name "hanafos cable + voice," which allow
simultaneous use of high-speed Internet and local telephony services. We also provide VoIP
services on an unbundled basis to corporate customers. We currently provide VoIP services in Seoul
and other major municipal areas. As a result of improvements in VoIP technology and our increased
marketing efforts, the number of VoIP lines increased by 34.5% to 325,523 lines as of December 31,
2005 from 241,997 lines as
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of December 31, 2004. As of April 30, 2006, we provided "hanafos cable + voice" services to
346,167 residential subscribers. In December 2004, the MIC decided to allow us to provide local
telephony service by way of VoIP, thereby making our VoIP services eligible for fixed-line number
portability provided certain conditions are met. Pursuant to these new regulations since December
22, 2004, we have been providing VoIP services as part of our local telephony service offering. In
July 2005, we obtained a license to provide 070 Internet telephony services. For a further
discussion of these regulations, see "—Competition—Voice."
Long Distance Telephony
In July 2004, we launched our domestic long distance telephony service and international long
distance telephony services. In April 2005, we rolled out "hanafone 3050," a voice service offering
a discount of up to 50% on usage fees at the same basic monthly fees as competitors, to attract
subscribers who mainly use domestic and international long distance telephony services.
Leased Line Services
We hold a license to operate leased line services on a nationwide basis in Korea. Our leased
line fees vary depending on the distance and bandwidth requirements of our subscribers. Our leased
line services enable high volumes of data to be transmitted quickly and reliably. We also provide
back-up storage for transmitted data. We use international transmission lines with transmission
speeds of over 10 Gbps to provide leased line services to countries such as the United States,
Japan and China and have points of presence, commonly referred to as "POP," facilities in the
United States. Our Internet leased line services are provided to companies with LAN facilities
through fiber optic cable lines. With the aim of expanding the scope of our Internet leased line
services, we have entered into transit or peering agreements with 89 domestic and 327 international
Internet leased line service providers.
Other
Internet Data Center
We opened "N-GENE," our IDC, in May 2000. Through N-GENE, we provide our corporate
subscribers with server-based support in the form of co-location and dedicated server hosting.
Co-location allows our customers to connect their servers directly to our backbone network at
speeds in excess of those available through leased Internet lines. This service is targeted at
corporate customers with multiple servers and for those who need broadband circuit capacity.
Dedicated server hosting provides our customers with servers customized to their desired
specifications. These services are connected to our backbone network at Gbps rates and allow our
customers access to dedicated servers without the burden of purchasing or maintaining such servers.
As of April 30, 2006, N-GENE hosted approximately 16,500 servers, mostly for corporate customers.
Internet and Related Support Services
Through our "hanafos.com" portal site, which is operated by our subsidiary, Hanaro Dream
Corp., we offer to our subscribers a variety of basic on-line services, including personal
homepages, free e-mail services, chat services, bulletin board and social communities, and
multimedia contents including movies, music, comics, animation, popular on-line games, on-line
education, sports, news and television dramas. We intend to continue developing our Internet
content business and maintaining a competitive position in this business through Hanaro Dream.
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Sales, Marketing and Customer Service
Sales
We are focused on bringing our high-speed broadband Internet access and voice services to
residential users, and Internet dedicated lines and data, leased line services and IDC to corporate
users.
Residential
We currently outsource a significant portion of our retail sales force needs. Our outside
sales force receives several weeks of training on how to sell our services. The training includes
basic instruction on selling techniques, as well as classes regarding our corporate image and our
services. Follow-up sessions are held to introduce new services to the sales force. Our outside
sales force sells our services through the following channels:
•
Customer Centers
. We have agreements with 92 customer centers and 9 service
centers, most of which are located in Seoul. Service centers serve areas with
population densities that are lower than the areas served by the customer centers.
These customer and service centers sell our services exclusively and contributed to
approximately 30% of our total sales in 2005. These centers receive a commission for
each service contract and installation contract secured. In addition, we pay these
centers for the maintenance and repair work that they perform for our subscribers.
Customer and service centers often enter into sub-contracts with smaller distribution
outlets within their area to increase their sales coverage and sell through
telemarketing.
•
Cable Television Network System Operators and Relay Operators
. As of April 30,
2005, we have arrangements to sell our services with 50 cable television network
system operators and 30 relay operators. These arrangements form part of the
strategic alliances we have formed with these cable television network system
operators and relay operators (see "—Competition—Broadband"). The cable television
network system operators and relay operators in each of the areas covered by our cable
network leasing arrangements have the right to sell our services within their
respective areas. In the event a potential subscriber elects a non-cable service
(such as ADSL) that is available in that service area, the subscriber is referred to
one of our customer centers.
•
Strategic Sales Distribution Channels.
As of April 30, 2006, we have agreements
with 67 strategic sales distribution channels that own nationwide sales channels.
Sales through these channels accounted for 28% of our total sales in 2005. Strategic
sales distribution channels engage in sales activities for hanarotelecom using various
channels such as telemarketers and street vendors, and receive sales commissions based
on their sales performance. Currently, we are running a task force to improve the
sales channel management and the commission system, which is aimed at enhancing the
credibility and loyalty of sales distribution channels.
•
Other Agents
. We use individual sales agents and small sales agencies to sell our
services in our coverage areas. Our agents receive a sales commission for each new
subscriber.
Corporate
Sales to corporate subscribers are handled through our in-house sales group. Our sales people
focus on securing contracts with large commercial complexes, allowing us to install our remote
terminals at their premises. After installation, sales people direct their attention to individual
corporate clients within these premises. Sales people who have secured contracts with corporate
clients remain the primary contacts for all aspects of the client's needs, including further
installation and customer and follow-up service. Our sales force is compensated using an
incentive-based performance scheme.
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Others
We also have agreements with providers of other services in order to further expand our sales
coverage. We are a party to agreements with certain construction companies pursuant to which we
install our network equipment in newly built commercial and residential buildings, which in turn
allows builders to advertise their new buildings as "cyber buildings." In order to add more
Internet network game players to our subscriber base, we offer "Game Plus," popular network games
bundled with our high-speed Internet access service.
Marketing
We use a variety of marketing strategies and media to raise awareness of our services. Our
marketing strategies include the following:
Broadband
•
Strengthening service competitiveness by offering bundled services incorporating
broadband, voice and value-added services, as well as providing media content through
the TV-Portal service
•
Occupying the 100Mbps market by accelerating network upgrades
•
Overhauling our distribution channels by building up distribution channel capacity,
expanding direct acquisition channels and securing new distribution channels, which
will lead to a decrease in subscriber acquisition cost
Voice
•
Focusing on target marketing for about 2 million HFC subscribers of Hanaro and
Thrunet by utilizing fixed line number portability
•
Planning to launch digital wired/wireless integrated voice services which support a
variety of value-added services including SMS in the third quarter of 2006
General
•
Achieving customer stabilization and business performance by raising brand
awareness and credibility through an integrated brand of Hanaro and Thrunet
•
Improving service quality by increasing our call center response rate, improving
the customer complaint handling process and expanding operating hours
We also organize special events, such as Internet seminars, to promote our services. We spent
a total of Won 44.8 billion in 2004 and Won 34.9 billion in 2005 on advertising.
Customer Service
We believe our emphasis on customer care differentiates us from our competitors. We have been
voted the best Internet service provider in Korea for the last two years by the Global Customer
Satisfaction Competency Index. We provide 24-hours-a-day, 365-days-a-year customer support through
four call centers operated by our subsidiary, Hanaro Telephone & Internet Information, Inc., or
Hanaro T&I. We also have a customer claims center located within the call centers to handle
subscriber claims regarding our service quality and billing. All service representatives receive
two months of orientation training and on-site supervisors provide additional support. All calls
to the call centers are recorded and service
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representatives are graded periodically based on performance. We strive to answer all calls
within 73 seconds. The call centers currently receive approximately 72,092 calls per day. We use
automated answering services to respond to routine inquiries, such as account balances.
Subscribers can also voice their complaints through e-mail. Common questions or complaints are
posted, together with our response, on a bulletin board on our home page. As of May 31, 2006 we
employed 1,642 workers in our call centers, each working eight hour shifts. We anticipate that we
will continue to hire additional customer support personnel as the size of our subscriber base
increases.
Subscribers also have face-to-face access to our representatives at our customer and service
centers and to representatives at customer centers operated by cable television network system
operators and relay operators with whom we have non-exclusive sales arrangements. Our sales staff
at our customer and service centers receive customer service training in addition to their sales
training. Our in-house sales people monitor the performance of our customer and service center
employees during their visits to these centers.
Relationship with Dreamline
In December 2001, we acquired a 32.2% equity interest in Dreamline, a broadband and leased
line services provider. As a result of a third party's investment in Dreamline in early 2004, our
equity interest in Dreamline has been diluted and was 14.18% as of April 30, 2005. Accordingly,
Dreamline is no longer considered our affiliate for accounting purposes. Under a stock purchase
agreement with CJ Corporation, the previous controlling shareholder of Dreamline, CJ Corporation,
has an obligation not to compete, directly or indirectly, with us in the leased line and broadband
services or other related or similar services for five years from the closing of the stock purchase
agreement. However, affiliates of CJ Corporation have been engaged in business in those service
areas, and we filed certain lawsuits against CJ Corporation to enjoin its affiliates from providing
such services and to seek monetary compensation caused by said violation and CJ Corporation's
failure to disclose certain contingent tax liabilities. See "Item 8.A. Consolidated Statements and
Other Financial Information—Legal Proceedings."
Information Systems and Billing
Information Systems
We currently use an information system which consists of three separate systems: the customer
support system, the operational support system and the business support system. The customer
support system handles all information related to an individual subscriber, including customer care
and billing information, and marketing and sales data. The operational support system handles all
data related to the management of our operations and acts as the interface to the network
management system, which monitors the performance of our network and delivery of services on a
24-hour basis every day. This interface allows for quick identification of network faults and
relays the information to our customer support system. The business support system handles data
regarding internal business operations, including accounting, personnel and our assets. Our
operational information system is designed to integrate all of our internal support services. The
integration of our internal support services has been substantially completed.
The integration of our operational information system allows management personnel from our
customer care, sales engineering, service management, service delivery, accounting and inventory
sales departments to access a single subscriber record. Accordingly, a subscriber is able to
request support for any of our services with one phone call. By providing comprehensive, real-time
customer information, this system is designed to enable our customer service representatives to
respond faster to inquiries and to identify more cross-selling opportunities. In addition, credit
history information regarding potential and existing subscribers obtained from credit analysis
organizations is available through our integrated information system. This allows our sales and
operational staff to suspend services to non-paying subscribers with poor credit ratings at an
early stage.
In March 2004, we implemented our "Information Strategy Planning" which aims to identify new
business opportunities by analyzing the customer information contained in our operational
information
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system to create a transparent strategy formulation process and to promote a stable service
environment. We also intend to establish CRM and knowledge management systems, an enterprise data
warehouse, an enterprise information portal and a disaster recovery center by the end of 2007. On
October 1, 2005, we launched the CRM system as part of our Information Strategy Planning in order
to provide customized services, enhance customer loyalty and strengthen sales and marketing
activities including retention activities. With the CRM system, we are able to support quick,
reasonable and systematic decision making based on an understanding of our customers.
Billing
Our billing system is designed to allow our sales and marketing staff some flexibility in
designing new pricing plans and service offerings. The subscription terms, deposit requirements
and service period for each subscriber are determined in accordance with the subscriber's credit
rating. We currently provide joint billing services for subscribers who also subscribe to the long
distance and international telephony services of Dacom and Onse Telecom.
The billing system is able to process discounted billing rates for different types of calls
and allows subscribers to pay for our services in several ways, including online payment or by
direct debit from their bank accounts. Each subscriber may also access a detailed breakdown of
services rendered on the Internet. Any bill which has not been paid for one month is actively
managed. Services are suspended if a bill remains unpaid for two months and the relevant service
agreement is terminated after four months of non-payment. After five months, the collection of any
unpaid bill is turned over to debt collection agencies.
Competition
Broadband
In the high-speed broadband Internet access market, our main competition comes from KT. As of
April 30, 2006, KT had a 49.9% market share of total broadband subscribers in Korea. In June 2005,
the MIC designated KT as a dominant operator for this market, taking into account KT's market share
exceeding 50%. See "—Korean Telecommunications Laws and Regulations—Designation of a Dominant
Operator."
We have also faced competition from cable television network system operators and relay
operators which have been offering broadband Internet access at steep discounts in an effort to
diversify their revenue sources. However, the recent classification of broadband as a
facilities-based service means that the cable television network system operators and the relay
operators will be required to obtain a license from the MIC to provide broadband services and will
become subject to more stringent regulations by the MIC. The MIC has granted the cable television
network system operators and relay operators a two-year period to comply with these requirements.
The two-year period ends July this year, and the cable television network system operators and
relay operators will have to finish reviews to obtain the license by July 20, 2006. If these
operators are granted licenses, they will be required to establish an interconnection network and
backup networks. This will require additional CAPEX, which in turn will lead to an increase in
service costs. Furthermore, due to requirements to notify the MIC of the terms of service and adopt
accounting separation as well as stricter regulations imposed by the Fair Trade Commission and the
Korea Communications Commission, the cable television network system operators and relay operators
will find it difficult to continue low-price marketing. They have been engaged in aggressive
marketing to acquire as many broadband subscribers as possible before July 2006. In addition, we
have entered into over 80 strategic alliances with cable television network system operators and
relay operators for the purposes of establishing mutually beneficial arrangements with respect to
the provision of broadband Internet access, marketing, sales and customer services. In general, we
have agreed to outsource to the cable television network system operators and relay operators our
sales, marketing and customer service functions in return for our use of their last-mile connection
networks and our acquisition of their broadband Internet subscriber base. For further detail on
our relationship with cable television network system operators, see "Item 7.B. Related Party
Transactions—Relationships with Cable Television Network System Operators."
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Since late 2004, Dacom has been strengthening its retail broadband Internet access business by
using the network facilities of Powercomm, and launching LAN-based Internet services. In August
2005, the MIC granted Powercomm an NSP license to provide broadband services telecommunications.
Powercomm, which had been leasing network facilities to retail telecommunications business
operators, entered the retail broadband Internet access market in September 2005. After Dacom, the
parent company of Powercomm, transferred its retail broadband Internet access business to
Powercomm, the two companies accounted for 5.8% of the broadband Internet market as of April 30,
2006. In just one month after entering the retail broadband Internet access market, Powercomm was
subject to an order of suspension of business for 19 days from October 10, 2005 issued by the Korea
Communications Commission for violating an Internet interconnection agreement with Dacom.
DSL (ADSL & VDSL)
KT is our only competitor that is not limited in the coverage of its services by the coverage
of its network. KT, as the dominant telecommunications carrier, has a nationwide copper wire
last-mile network and an extensive fiber optic backbone network throughout Korea and has
significantly greater capital resources than we do. KT currently provides ADSL services and is
upgrading its last-mile connections and related transmission facilities to provide DSL services to
its subscribers at speeds comparable to ours. KT is focusing its upgrading process and marketing
efforts in our targeted high density, high demand areas and is continuing to increase the marketing
of its long-reach VDSL services to single resident houses located among apartment complexes. As of
April 30, 2006, KT and hanarotelecom had market shares of approximately 84.4% (based on MIC data)
and 14.2% (based on MIC data), respectively, in the DSL services market in Korea. With the
broadband Internet market reaching saturation, 100Mbps services including optical LAN are driving
market growth. In these circumstances, Powercomm entered the market in September 2005 and has been
expanding its market share by strengthening its marketing activities with its 100Mbps fiber optic
LAN service. As of April 30, 2006, KT had 43.3% of the fiber optic LAN market while hanarotelecom
and Powercomm had 29.0% and 9.0%, respectively (based on MIC data).
Cable Modem
Thrunet has been our main competitor in the cable modem market. We, together with Thrunet and
Onse Telecom, utilize almost all of Powercomm's cable networks for the provision of our cable modem
services. Our cable lease agreements with Powercomm are not exclusive and, accordingly, Powercomm
may lease the cable networks we are currently leasing to additional service providers. In
addition, we may be prevented from continuing our lease agreements with Powercomm on similar terms
if Dacom, together with its subsidiary Powercomm which began to provide retail broadband Internet
access service from the second half of 2005, expands its business in the retail broadband Internet
access market by using Powercomm's network. See "Item 3.D. Risk Factors—Risks Related to the
Telecommunications Industry and Our Business—The inability to lease networks from third parties
could materially affect our ability to provide services." Dreamline provides services through
smaller, localized cable networks owned by cable television network system operators.
Voice
In the local telephony market, we and Dacom are the only competitors to the dominant operator,
KT. As of April 30, 2006, we and KT had a 6.9% and 92.9% market share, respectively, in the local
telephony market. Dacom was granted a local telephony license in July 2004 and commenced its
commercial local telephony services in January 2005. Dacom has a mere 0.2% of the local telephony
market share. Fees charged by KT for local telephony services are currently regulated by the MIC
while we are only required to report our fees charged for local telephony services to the MIC. The
MIC will not allow KT to charge fees which it deems to be unreasonable and against public interest.
See "—Korean Telecommunications Laws and Regulations—Designation of a Dominant Operator." In
addition, as the local common carrier, KT is under a "universal service" obligation to provide its
local telephony services to all subscribers requesting service. We do not have a universal service
obligation and are able to focus the
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roll-out of our services to areas with high density populations and households with greater
than average disposable income.
Our main competitors in the domestic and international long distance telephony markets are KT,
Onse Telecom, Dacom and SK Telink. According to the MIC, as of April 30, 2006, our share of the
domestic long distance telephony market was 5.1% and KT had the largest share with 85.6%, based on
the number of lines for which subscribers have designated certain operators as their preferred long
distance operators.
There are currently two types of VoIP services on offer in Korea. SSPs, which are mostly
cable television network system operators and Internet portal operators, provide VoIP services
which allow calls to be made but not received. VoIP services which allow calls to be made and
received (often referred to as "two-way VoIP") could only be provided, until recently, by service
operators with a local telephony license. To date, we are the only significant provider of two-way
VoIP using a standard eight-digit telephone number. While KT has not been pursuing this market
actively, Dacom has announced its intention to provide two-way VoIP by November 2005. On October
1, 2004, the MIC announced a decree authorizing the provision of two-way VoIP service using an
eleven-digit number with a dialing prefix of "070." Currently, facilities-based telecommunications
business operators and specific telecommunications business operators are offering the two-way VoIP
service. Two specific telecommunications business operators, Samsung Networks and Anyuser.Net,
launched the "070" service for the first time in August 2005, followed by facilities-based
telecommunications business operators, such as KT in November 2005 and hanarotelecom and SK Telink
in December 2005. Furthermore, Korea Cable Telecom, a nationwide consortium of cable television
operators, plans to gain a license to provide the VoIP service and launch its service in 2006.
Separately, the MIC adopted a set of new regulations on December 13, 2004, which allows licensed
local telephony carriers, including us, to provide local telephony service by way of VoIP provided
that certain technical and regulatory requirements are met. These requirements include improving
the voice quality to a certain level, charging VoIP subscribers different usage rates between local
telephony and domestic long distance services, and providing free emergency call services. We have
met these requirements, and have been providing VoIP-based local telephony service in our HFC areas
since December 22, 2004. In addition, because this type of VoIP service is considered a local
telephony service under the new regulations, our VoIP-based local telephony service is currently
eligible for fixed-line number portability.
Leased Line Services
In the leased line services market there are currently seven major service providers in Korea.
As of April 30, 2006, we believe our market share in terms of revenue was 2.9% while KT, with
53.1% in terms of revenue, had the largest share of the leased line market, followed by Powercomm
with 15.7% and SK networks with 13.5%. Competition in this market is primarily based on price,
network coverage and quality. In order to provide leased line services, a service provider must
have a license to provide network services.
Other
In the IDC services market, there are currently three major IDC service providers in Korea:
KT, Dacom and Hanaro (N-GENE). Competition in this market is primarily based on price and service
quality. Some of these major providers are expanding their service capacities. In addition,
approximately 10 small and medium-sized data centers provide IDC services similar to ours.
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Licenses
NSP License
Under the Korean Telecommunications Business Law (Law No. 4394 of August 10, 1991, as
amended), the telecommunications services that Network Service Providers, or NSPs, which are
facilities-based telecommunications service providers, may provide are restricted to those for
which it has received a license from the MIC. To date, we have received the following types of NSP
licenses from the MIC. In October 1997, we received our perpetual license to provide fixed-link
local telephone service on a nationwide basis in Korea. The founding shareholders of our company
paid a one-time fee of Won 45.0 billion for such license. In August 1999, we obtained a perpetual
license to provide domestic leased line services, for which we paid a one-time fee of Won 1.9
billion. In February 2000, we obtained a perpetual license to provide value-added telephone
services relating to long distance telephone services and international telephone services, for
which we paid one-time fees of Won 0.3 billion and Won 0.1 billion, respectively. In August 2000,
we obtained a perpetual license to provide international leased line services for which we paid a
one-time fee of Won 0.2 billion. In January 2003, we obtained a perpetual license to provide long
distance telephony services, including inter-city and international services. Additionally, in
October 2004, we obtained a perpetual license to provide broadband services as a result of recent
amendments to the enforcement regulations of the Telecommunications Business Law. In July 2005, we
obtained a perpetual license to provide 070 Internet telephony services. Our licenses to provide
such NSP services are subject to satisfaction of certain terms and conditions, including the
following:
•
The licenses require us to make annual contributions to the Information Promotion
Fund for the purpose of research and development pursuant to the Telecommunications
Business Law. Only the NSPs whose total broadband, voice and leased line services
revenue amount for the preceding year was more than Won 30.0 billion (provided that
broadband revenue will only be counted towards this threshold from 2005 onwards), and
that realized a net profit in the preceding year, are required to make annual payments
for the purpose of research and development in the amount of 0.5% of the total
broadband, voice and leased line services revenue, to the extent that the amount of
such payment does not exceed the amount of the net profit for the preceding year. In
the case of a dominant operator, the amount is 0.75% of such revenue. The "net
profit" which the MIC will use in its determination of the amount of our contribution
is calculated using MIC accounting standards which differ in certain respects from
Korean GAAP.
•
We must comply with the business plan submitted to the MIC in all material
respects. If necessary, the business plan may be revised in accordance with the
procedures set out in the "Guidelines for Handling of Change of Business Plan of
Network Service Provider." The initial service fee must be in compliance with the
business plan. We must report to the MIC the general terms (including the service fee
of each service) together with supporting documentation.
We are not required to pay any fees to the Government in connection with its approval of us as
an NSP.
SSP License
In June 1998, we also registered as a Specific Service Provider, or SSP. This registration is
for an indefinite term. As an SSP, we are permitted to provide the following services:
•
By utilizing our own switching facilities and other telecommunications facilities
owned by NSPs, resell or provide the same types of telecommunications services as
those of domestic NSPs.
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•
By leasing telecommunications facilities owned by other NSPs without its own
switching facilities, resell the same types of telecommunications services as those of
domestic NSPs.
•
By utilizing our own facilities, provide telecommunications services within a
specific building.
Our registration as an SSP requires that, prior to the commencement of commercial operations,
we submit to the MIC detailed information on the location of our principal facilities and the
structure of our network.
We are not required to pay any fees to the Government in connection with our registration as
an SSP.
Cable TV Network Operator License
Pursuant to the Integrated Cable Broadcasting Law (which was subsequently replaced by the
Broadcasting Law), we were designated by the MIC in June 1999 as a network operator in the cable
television industry. As a network operator, we are permitted to install, operate and lease network
facilities to cable television network system operators and relay operators in 57 regions
throughout Korea. No fees are required to be paid to the Government in connection with such
designation.
Our designation as a network operator requires that we establish the transmission network in
compliance with the technical standard set forth in Article 25 of the Telecommunications Basic Law
(Law No. 4393 of August 10, 1991, as amended) and obtain "fitness confirmation" from the MIC prior
to providing network facilities to cable television network system operators under Article 80 of
the Broadcasting Law. We have obtained fitness confirmations from the MIC prior to each provision
of these network facilities.
Wireless Frequency Allocation
. In February 1998, we obtained the right to the WLL frequency
of 2.3 GHz bandwidth for 20MHz down- and up-stream transmission. In August 1999, we obtained the
B-WLL frequency of 26 GHz for 360 MHz down- and 150 MHz up-stream transmission. These rights are
for an indefinite term and no fees are required to be paid to the Government in connection with
such rights. In February 2002, the MIC announced its plans to allocate 100 MHz of the WLL
frequency to WiBro services after June 2005.
International Common Carrier Authorization in the United States
. In July 2000, hanarotelecom
America, our U.S. subsidiary, obtained a Section 214 authorization from the U.S. Federal
Communications Commission. This authorization authorizes hanarotelecom America to operate as a
facilities-based international common carrier and to resell the international services of
authorized U.S. common carriers. On December 15, 2004, we filed an application for the liquidation
of hanarotelecom America with the U.S. state and federal authorities. Upon liquidation, we will
cease to have this authorization and our international common carrier services will be provided
through DVS, with which we have entered into an alliance agreement.
Interconnection
We have entered into interconnection agreements that allow for interconnection of our
telecommunications facilities and those of other telecommunications operators. These
interconnection agreements allow our customers to connect to the networks of other
telecommunications operators and receive telecommunications services, such as local, long distance
and international call, Internet telephony, cellular phone call, personal communication and
Internet access services, through our network. Pursuant to the Telecommunications Business Law, a
telecommunications service provider is required to enter into interconnection arrangements with any
other telecommunications service provider that requests interconnection. In the event a dispute
arises between interconnecting parties, the Communications Commission is to act as the arbitrator.
In addition, the MIC issues guidelines regarding interconnection. The guidelines generally require
that interconnection charges be based on the rates set by the MIC after examining the costs to
regulated operators, such as KT and mobile service operators (such as SK Telecom,
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KT Freetel Co., Ltd. and LG Telecom Co., Ltd.), of carrying a call. The regulated operators
are required to calculate such costs every other year. The MIC determines the interconnection rate
after the MIC reviews the cost of KT and mobile phone service providers every other year. In July
2004, the MIC determined, for the 2004 to 2005 period, that the fixed line interconnection rate be
increased from Won 11.3 to Won 16.2 per 60 seconds and no interconnection fee be charged for a
certain portion of the land-to-land telephone calls switched between the networks of hanarotelecom
and KT.
We have entered into interconnection agreements with all major telecommunications service
providers in Korea. The chart below sets forth the type and name of service providers with which
we have such agreements:
Type
Name of Providers
Local
KT; Dacom
Domestic long distance
KT; Dacom; Onse Telecom; SK Telink
International
KT; Dacom; Onse Telecom; SK Telink
Internet telephony
KT; Dacom; SK Telink; SK Networks; Dreamline
Cellular
SK Telecom
Internet access
(1)
KT; Dacom; Onse Telecom; SK Networks; Dreamline; EPN
Personal communication service providers
KT Freetel Co., Ltd.; LG Telecom Co., Ltd.
(1) We will enter into an interconnection agreement for Internet access with Powercomm in the near
future.
Korean Telecommunications Laws and Regulations
Overview
Korea's telecommunications industry is subject to comprehensive regulation by the MIC pursuant
to, among others, provisions of the Telecommunications Basic Law, the Telecommunications Business
Law and the Radiowave Act (Law No. 6197 of January 21 2000, as amended) (collectively, and
including subordinate regulations promulgated thereunder, the "Telecommunications Laws"). In
addition to the Telecommunications Laws, industry participants are subject to other
telecommunications regulations and regulations under various laws of general application. The
Telecommunications Laws empower the MIC to regulate and supervise, among other things, entry into
the telecommunications industry, allocation of radio spectrum, the scope of permissible business of
telecommunications service providers, technologies used by telecommunications service providers,
rate-setting, deposit requirements, the focus and budget of research and development, user
protection and interconnection and facilities sharing between telecommunications service providers.
In addition, the MIC is in charge of and responsible for informatization, information and
communications industry, telecommunications services, radio and broadcasting, postal service and
postal finance.
Telecommunications Laws
Under the Telecommunications Basic Law and the Telecommunications Business Law,
telecommunications service providers are currently classified into three categories: NSPs, SSPs
and Value-added Service Providers, or VSPs. We are classified as an NSP and also registered as an
SSP. An NSP provides specified types of telecommunications services as stipulated under the
Telecommunications Business Law ("Network Services") and as licensed by the MIC, in most cases with
its own telecommunications networks and related facilities. As an NSP, we have licenses to provide
local telephony services, 070 Internet telephony services, long distance and international
telephony services, leased line services (domestic and international) and Internet access services.
These licenses are for indefinite terms.
Network services to be provided by an NSP include local, long distance and international
telephone services, subscribed telegraph services, leased line services, services through allocated
radio frequencies (including cellular communications services, paging services, PCS services,
IMT-2000 services
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and trunked radio system services), Internet access services and such other services as
designated by the MIC (including certain VoIP services). VSPs provide telecommunications services
other than those services specified for NSPs, such as data communications using facilities leased
from an NSP following notification to the MIC. The newest category of service providers, the SSPs,
is intended to occupy a middle ground between NSPs and VSPs. The Telecommunications Business Law
provides that there are three types of SSP licenses as follows:
•
type 1 reseller licenses for entities that have their own switching facilities and
resell or provide the Network Services;
•
type 2 reseller licenses for entities that do not have their own switching
facilities and resell the Network Services; and
•
intra-building telecommunications service provider licenses for entities that
provide telecommunications services within a specific building area through their own
facilities.
Ownership Restrictions
Under the current Telecommunications Basic Law and the Telecommunications Business Law, an
NSP, such as hanarotelecom, must be an entity incorporated in Korea (other than the Government and
any municipal government) in order to qualify for a license from the MIC. In addition, the
Telecommunications Laws restrict the ownership of NSPs by certain shareholders. Ownership
interests in NSPs are subject to the following ownership restrictions:
•
a foreign government or a foreigner may not own more than 49.0% of the aggregate
number of the entity's issued and outstanding voting shares, including
stock-equivalents and investment securities having voting powers such as depositary
receipts. For this purpose, an entity whose voting shares are held by a foreigner or
a foreign government that, together with specially-related parties, is the largest
shareholder and holds 15.0% or more of the total number of voting shares issued and
outstanding, is also deemed a "foreigner"; provided, that if such entity owned by a
foreigner or a foreign government holds less than 1.0% shares in the relevant NSP, it
is not regarded as a "foreigner." In the event a foreign government or a foreigner
owns shares in excess of the shareholding restriction, the holders of shares in excess
of such limitations cannot exercise the voting rights with respect to the shares
exceeding such limitations, and the MIC may require the
"foreigner" who has acquired shares in violation of such restriction, the violating NSP or the shareholder of the
violating foreign entity to take corrective measures to comply with such restriction
within a grace period of six months. The MIC may also impose on a non-compliant
violator a mandatory performance fee within 3/1000th of the purchase price of the
share per day (or up to Won 0.1 billion for cases that do not relate to shareholding);
and
•
under the Telecommunications Business Law, if an NSP that is subject to mandatory
interconnection requirement (currently, KT and SK Telecom), together with specially
related person(s), acquire shares in another NSP, which is subject to a mandatory
interconnection requirement, in excess of 5%, the acquiring NSP cannot exercise the
voting rights with respect to the shares exceeding such limitation, subject to certain
exceptions.
Under the Telecommunications Business Law, the MIC may review whether any investment in, or
change in the control or business management of, an NSP by means of any of the following
transactions impairs national security, public interest, or social order:
•
owning 15% or more of total outstanding shares of the NSP in concert with
specially-related person(s);
•
a change in the largest shareholder of the NSP;
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•
the NSP or its shareholder entering into an agreement with a foreign government or
a foreigner on important business management matters, such as the appointment of
representative directors or officers of the NSP, the transfer of the NSP's business or
engaging in a new Network Service by the NSP; or
•
an agreement by shareholders of the NSP (none of which is the largest shareholder)
to exercise their voting rights in concert so that there is a de facto change in the
management of the NSP.
If any of the above events occur with respect to the NSP, the NSP or the shareholder of the NSP is
required to report to the MIC within seven days of the occurrence of such event.
In its implementing regulations, the MIC designated KT and SK Telecom (both currently
designated as dominant operators) as the carriers subject to the foregoing rules and the MIC will
set up a Public Interest Review Committee to implement the foregoing. If the MIC finds a
violation, it may order an amendment or suspension of the relevant contract, suspension of the
voting rights or the sale of shares. The MIC may also impose on a non-compliant violator a
mandatory performance fee of up to 3/1000th of the purchase price of the share per day (or up to
Won 0.1 billion for cases that do not relate to shareholding).
Authority of the MIC and the Communications Commission
The MIC has the authority to require NSPs, as a condition to granting the license, to
contribute towards the Informatization Promotion Fund, a government-managed fund for national
research and development of telecommunications technology and related projects, pursuant to the
License Application Guidelines, a notification issued by the MIC. Currently, we are required to
contribute 0.5% of the total annual service revenues derived from our voice and leased line and
broadband services which are classified as facility-based telecom services in the event that we
have net income for the preceding year. The "net profit" which the MIC will use in its
determination of the amount of our contribution is calculated using MIC accounting standards which
differ in certain respects from Korean GAAP.
The MIC may revoke an NSP's license. The grounds for revocation include fraud in obtaining
the license, failure to perform the conditions imposed by the MIC upon issuance of the NSP license,
failure to comply with any corrective order issued by the MIC in connection with non-compliance
with foreign shareholding restrictions, failure to commence business within the time period
designated by the MIC, failure to abide by the standard terms and conditions for the services
either reported to or approved by the MIC and failure to comply with the Telecommunications Laws,
the Act on Information Communication Network Promotion and Information Protection, the
Informatization Promotion Law or any order issued under such laws. If an NSP wants to cease its
business (or any part of it) or dissolve, such NSP must obtain MIC approval. In addition, instead
of suspending its license, the MIC may impose fines against such telecommunications service
provider, subject to certain exceptions, of up to 3.0% of the entity's average sales revenues
generated from the service in violation of such regulation during the three years preceding such
violation.
The Communications Commission also has the authority to monitor unfair business practices as
specified in the Telecommunications Business Law by telecommunications service providers in
accordance with the Telecommunications Business Law. If an NSP or any telecommunications service
provider engages in such activities, the Communications Commission may order such
telecommunications service provider to take certain actions, including (1) separating the internal
organization of telecommunications service provider, (2) changing its internal accounting
regulations, (3) disclosing certain information regarding the services, (4) executing, performing
or amending an agreement between telecommunications service providers, (5) changing its articles of
incorporation, or the standard terms and conditions of services, (6) discontinuing violation of the
law, (7) making a public announcement of the fact that a corrective order was issued, (8) taking
measures necessary for the rectification of any violation, such as the removal of
telecommunications facilities which gave rise to the violation, and (9) other actions specified in
the Presidential Enforcement Decree. In addition, if the Communications Commission finds that a
service
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provider has conducted unfair business activities, including the implementation of a pricing
structure that restricts fair competition or that is against the interests of service users, it may
order the service provider to take corrective measures or impose an administrative fine of up to
3.0% of the service provider's average annual revenues for the three years preceding the violation.
Under the Telecommunications Business Law, telecommunications service providers may request
other service providers to interconnect to their networks for the purpose of offering other
services. Telecommunications service providers may not, without any justifiable reason, refuse to
enter into such interconnection agreements with other telecommunications service providers
requesting such interconnection. In the event an agreement between the service providers is not
reached within 90 days, either service provider becomes entitled to file an application for
mediation before the Communications Commission. We have entered into interconnection arrangements
with most major service providers in Korea, including KT, Dacom, Onse Telecom and other NSPs, and
expect that we will enter into more interconnection agreements as additional licenses for
telecommunications services are issued.
Designation of a Dominant Operator
As an NSP, we must report to the MIC our standard terms and conditions of service containing,
among others, rates and the contractual terms for each type of service we provide. In addition, an
NSP that has a dominant market share for a specified type of service must obtain prior approval
from the MIC with respect to its proposed standard terms and conditions of service, including the
rate, if its revenues from such service for the previous year exceed a specific revenue amount set
by the MIC.
Each year, the MIC may designate, pursuant to regulations, the NSPs that require MIC approval.
Other than the market share and the market influence of the relevant NSP, the MIC may consider
such other factors as it may deem appropriate in making these designations. On June 8, 2004, the
MIC designated the local telephone service of KT and the mobile service of SK Telecom as requiring
prior MIC approval. The MIC requires fees and charges, in terms of the methods of their
calculation, to be adequate, fair and objective. The MIC may order changes in the standard terms
and conditions, including rates, if it deems the terms to be unreasonable and against public
interest.
In June 2005, the MIC designated KT as a dominant market operator for the market, taking into
account KT's market share exceeding 50%.
Licensing
Under the Telecommunications Business Law, the MIC promulgated a regulation specifying a
detailed standard of review, application method and application period for each new NSP license.
Upon receipt of the application, the MIC considers various factors in its approval process,
including reasonableness of the service provision plan, size of facilities for the services,
financial and technical soundness of the applicant, results of development of technology and plans
for new technological developments.
Frequency Allocation
The MIC has the discretion to allocate and adjust the frequency band for each type of service.
Upon allocation of new frequency bands or adjustment of frequency bands, the MIC is required to
give a public notice. The MIC also regulates the frequency to be used by each radio station. We
have been allocated the frequency of 2.3 GHz band for 20 MHz downstream and upstream transmission
and the frequency of 26 GHz band for 360 MHz downstream and 150 MHz upstream transmission.
Bundling of Services
The Presidential Enforcement Decree of the Telecommunications Business Law currently prohibits
any telecommunications service provider from offering bundled sales of telecommunications services
or products that the MIC determines to be adverse to consumer interests. In making this
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determination, the MIC may weigh the advantages of cost-savings or increased convenience for
the consumers as a result of bundling against the disadvantages of any anti-competitive effects of
bundling. According to the Decree, commencing in March 2007, only NSPs (including us), but not
non-NSP service providers, will be subject to such review by the MIC and potential bundling
prohibitions pursuant to this Decree.
Other Laws
Companies that operate network facilities for cable TV transmission are required to register
with the MIC under the Broadcasting Act (Law No. 6139 of January 12, 2000, as amended). We are
registered as a service provider under this statute. However, as an NSP, we are not currently
permitted to provide broadcasting services under certain other laws and regulations, including the
Broadcasting Act.
The Foreign Exchange Transaction Law, the Foreign Investment Promotion Law and their
regulations require companies, such as hanarotelecom, to obtain approval from, or file a report
with, a foreign exchange authority in connection with any foreign direct investment. The relevant
governmental authority may be the Ministry of Finance and Economy, or MOFE, The Bank of Korea or
the designated foreign exchange bank. The type of approval or report required depends on the type
of business engaged in by the investor and/or the amount of the investment being made.
Monopoly Regulation and Fair Trade
If we are deemed a market-dominating business entity, we may be subject to certain regulations
under the Monopoly Regulation and Fair Trade Act. In determining whether an entity is a
market-dominating business, the FTC reviews the entity's market share, the existence and severity
of barriers to entry to the market concerned, the relative size of the entity's competitors and
other factors.
In the case of abusive business practices by a market-dominating business entity, the FTC may
order such entity to cease and desist from such business practices, publicly announce that it has
engaged in abusive business practices and/or take other corrective measures it deems fit. The FTC
may also impose fines of up to 3% of the entity's average sales revenues during the three years
preceding the violation. In addition, a violation of the Monopoly Regulation and Fair Trade Act
can bring about criminal sanctions. The violating entity may be fined up to Won 0.2 billion or its
representative(s) may receive sentences of imprisonment of up to three years, although imprisonment
is rarely, if ever, imposed.
Under the Monopoly Regulation and Fair Trade Law, a service provider that is found guilty of
horizontal collusion with other providers may be subject to fines of up to 10% of the total
revenues derived from the collusion.
Intellectual Property
As of May 31, 2006, we held 146 registered trademarks, 89 program copyrights, 40 registered
patents and two registered industrial design rights in Korea. As of May 31, 2006, we also had 5
trademark applications and 467 patent applications (which includes 143 international applications
under the Patent Co-operation Treaty) pending at the Korea Industrial Property Office. While we
consider all of our intellectual property to be important, we do not consider any one or group of
patents, trademarks or industrial design rights to be so important that their expiration or
termination would materially affect our business.
C. Organizational Structure
As of April 1, 2001, we and our Korean affiliates have been designated as member companies of
a "business group subject to restrictions on debt guarantees" as well as a "business group subject
to restrictions on mutual shareholding" by the FTC based on the new criteria prescribed by the
amended Monopoly Regulation and Fair Trade Act. Under the amended Monopoly Regulation and Fair
Trade Act, a member company of both the "business group subject to restrictions on debt guarantees"
and the
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"business group subject to restrictions on mutual shareholding" is subject to, among others,
the following restrictions: subject to certain exceptions, such company (1) shall not acquire or
own shares of an affiliate company which acquires or owns its shares; nevertheless, for newly
designated companies, the application of this restriction is waived for one year from the date of
such designation; and (2) shall not provide payment guarantees with respect to loans extended by
certain Korean financial institutions for its domestic affiliates.
The following table lists information concerning the significant subsidiaries and affiliates
of hanarotelecom:
Percentage of
Ownership and
Voting Interest
held by
Jurisdiction of
hanarotelecom as of
Name
Incorporation
May 31, 2006
Hanaro Realty Development & Management Co., Ltd
Korea
99.99
%
Hanaro T&I
Korea
99.99
Hanaro Dream
(1)
Korea
57.02
Hanaromedia
(2)
Korea
65.00
(1)
In July 2004, we purchased 57.02% of Hanaro Dream's total issued and outstanding shares from
Dreamline and other major shareholders of Hanaro Dream.
(2)
On March 13, 2006, we purchased shares of CelrunTV for Won 5.5 billion , and on May 2, 2006,
acquired additional shares of CelrunTV for Won 6.5 billion. CelrunTV changed its name to
hanaromedia, Inc.
We sold all of our shareholdings in two of our previous affiliates, Hanaro WEB(n)TV Co.,
Ltd. and Mediaholdings Co., Ltd. to the Joong-Ang MSO in March 2005. In addition, in December
2004, we completed the liquidation of our previous affiliate, hanarotelecom America.
Also, we completed integration of Thrunet on January 1, 2006 and acquisition of CelrunTV on
March 13, 2006. CelrunTV changed its name to hanaromedia, Inc. and became an affiliated company of
hanarotelecom as of May 3, 2006.
D. Property, Plants and Equipment
Facilities
Our principal fixed assets consist of transmission facilities and telecommunications equipment
and information centers located throughout Korea. We own two central telecommunications centers in
Seoul, for the purposes of managing our nationwide network. The area of each such center is
approximately 15,000 square meters. We also own four regional telecommunications centers in Busan,
Taegu, Kwang-ju and Taejeon, to manage the networks in those regions. The area in square meters of
such centers is approximately 5,900, 6,900, 8,400 and 4,300, respectively. Those centers are
equipped with exchange and transmission equipments.
We also have 34 exchange offices equipped with exchange equipments in 20 cities including
Seoul, Busan, Taegu, Taejeon and Kwang-ju. We own 31 of those offices and lease the remaining
three offices. We also have 38 transmission offices equipped with transmission equipments in 23
cities including Seoul, Busan, Taegu, Taejeon and Kwang-ju. We own 33 of those offices and lease
the remaining 5 offices.
We lease our head office located in the Asia One Building in Yeongdeungpo-gu, Seoul.
Of the net book value of our total plant, property and equipment as of March 31, 2006
(excluding construction in progress), transmission facilities and telecommunications equipment
represented 87.7%, buildings and real property represented 11.3% and other assets represented 0.9%.
As of March 31, 2006, our fiber optic network consisted of 33,412 kilometers of owned and leased
lines.
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We believe that our existing facilities are adequate for current requirements and that
additional space can be obtained on commercially reasonable terms to meet future requirements.
Network
Our subscribers are connected to our network either through fiber optic lines to the
subscribers' premises or through the use of HFC lines in areas in which we have built or leased
cable networks. We began delivery of commercial services through wireless last-mile connections in
Seoul in July 2000.
Backbone Network
Our high-speed broadband Internet access services and our telephony services are currently
provided over our fiber optic backbone network and last-mile connections consisting of 20,258
kilometers of owned and 9,487 kilometers of leased fiber optic cable. Through the merger with
Thrunet, we have been able to significantly increase our owned or leased fiber optic cables. Our
backbone network is a WDM-based ring type backbone with duplicate routers to ensure high system
reliability. We utilize advanced switches and other technologies in our backbone network to ensure
high quality and fast transmission. Our system utilizes technologies that offer the following
advantages over traditional networks:
Deployment of Gigabit IP Network over WDM Backbone Systems
. Our data network utilizes Gigabit
IP routers over 800 Gbps and 40 Gbps wavelength division multiplex, or WDM, systems, which offer
greater transmission speed capability than traditional backbone network. The maximum transmission
speed currently is 10 Gbps. We also deploy ATM switches which aggregate ADSL and dedicated access
lines.
CCS7 Signaling Method
. Our voice network utilizes the CCS7 signaling method, which allows us
to offer advanced value-added services, such as fixed-line number portability, and to process our
calls more efficiently.
V5.2 Protocol to Increase Voice Network Efficiency
. We were the first in Korea to provide
services using the V5.2 protocol. KT is using this protocol in a small number of apartment
complexes. This protocol allows us to efficiently connect multiple subscribers to our fiber optic
network through a single fiber optic connection by using remote terminals that are installed at the
subscriber's premises. Our network lines have been installed using existing infrastructure,
including subway routes and electrical poles, in order to minimize the cost of our roll-out. Our
backbone network has been built using equipment based on a number of technologies developed by
third party vendors, including Lucent Technologies, Cisco Systems, Alcatel and NEC Corporation. We
believe that telecommunications network technologies have been standardized and are generally
compatible with each other, so that equipment and hardware provided by different vendors can be
used within an integrated network and we are not dependent on any one particular vendor for the
procurement of important network equipment.
We have our own POP facilities in Palo Alto and Los Angeles in the United States and in
London, United Kingdom. Our backbone network has direct links of 10 Gbps to these POP facilities
in the United States and the United Kingdom via our own cable capacity and leased circuit. In
addition, we are working with all Korean Internet exchanges and major ISPs for domestic Internet
interconnection, including DACOM IX, Korea-Internet Neutral Exchange and KT-IX.
We have the right to use the following international leased lines on various submarine cables
connecting the United States, Asia and certain parts of Europe until the end of the economically
useful life of such cables.
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Bandwidth Capacity
Connecting Points
Providers
Quantity
Acquisition Cost
(billions of Won or
millions of U.S. dollars)
Korea — US
Iljin C2C Ltd.; Onse Telecom; Asia
30 x STM-1
$49
Global Crossing; Dacom Crossing;
6 x STM-4
Flag Telecom; Dacom
Korea — Japan
Iljin C2C; Teleglobe Dacom;
14 x STM-1
$19.8
Teleglobe Onse Telecom
1 x E-1
Korea — Hong Kong
Onse Telecom
19,158km
$1.2
HGC
$2.5
Japan — US
Teleglobe; Metromedia Fiber Network
3 x STM-1
$1.3
Japan — US
Cable Network
2 x STM-1
$5.8
Korea — Vietnam
Dacom
2 x Half E-1
Won0.2
Korea — Belgium
Dacom
2 x Half E-1
Won0.2
Korea — Singapore
Iljin C2C
1 x Half STM-1
$0.4
Korea — China
Enterprise Networks
1 x Half STM-1
$1.0
US — UK
France Telecom; British Telecom;
4 x STM-1
$0.9
Onse Telecom; FLAG Telecom
1 x DS-3
1 x STM-4
(1)
Each STM-1 represents a bandwidth capacity of 155 Mbps.
(2)
Each E-1 represents a bandwidth capacity of 2 Mbps.
(3)
Each STM-4 represents a bandwidth capacity of 622 Mbps.
In addition, we have agreements with foreign ISPs, such as Level3, Verio, AboveNet
Communications, Inc., AT&T and Teleglobe, for global Internet Protocol transit services.
Our backbone network has been deployed in 83 cities and 58 districts, including Seoul, Busan,
Inchon, Taegu and Ulsan. Each of the ten local loops is interconnected by 800 Gbps and 40 Gbps WDM
backbone networks.
We have expanded our voice network to 52 cities for PSTN and VoIP services. PSTN is in
service in 32 cities and districts, and VoIP in 52 cities and 4 districts. After taking into
account the overlapping coverage areas between the two services, our voice services are available
in 52 cities and 4 districts in total.
Fiber to the Office and the Curb
We connect subscribers in large commercial buildings and apartment complexes with over 150
units to our backbone network through fiber optic connections directly to the premises. These
subscribers have three basic options in the mode of service to be used to secure access to our data
network.
DSL
. Subscribers in large apartment complexes and buildings can receive our services by
installing ADSL or VDSL modems in their offices or homes that allow our services to be provided
through existing copper lines within the building. Our subscribers' premises are then connected to
our backbone network through fiber optic last-mile connections. Single residential households and
small apartment buildings located within a one kilometer radius of certain of these large buildings
can also receive DSL services through copper connections we install from the remote terminals
located in the large buildings. These additional services are provided in order to maximize the
return on expensive remote terminals and other equipment installed in connection with our fiber
optic connection services.
Ethernet (LAN)
. In August 2001, we introduced the "e-Valley" service, which connect
subscribers to a remote router in each apartment complex via a LAN cable instead of copper wire.
The remote router is, in turn, connected to our backbone network through fiber optic cable. Our
fiber optic LAN service operates at a maximum speed of 100 Mbps. As of March 31, 2006, we were
providing e-Valley service to 2,612 apartment complexes.
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Internet Direct service
. Large corporate subscribers often find dedicated line service to be
the most cost effective means of securing high-speed data transmission capability. Our dedicated
line service, which we call "Internet Direct" service, is provided through our ATM-based network
and Gigabit routers at maximum speeds of up to 10 Gbps.
Hybrid Fiber Coaxial
We currently provide our cable modem high-speed Internet access through hybrid fiber coaxial
connections in 118 service areas. These HFC connection services are provided over our own cable
network in 50 service areas, Powercomm's cable network in 62 service areas and other cable
television network system operators' cable networks in 55 areas. The approximate number of homes
within these areas is 9.6 million.
We have agreements with 80 (including 50 Ros and 30 SOs) cable television network system
operators in 55 service areas as of March 31, 2006. Each of these cable television network system
operators is responsible for maintaining subscriber lines and subscriber relationships within its
service area. The cable television network system operators in the service areas in which we own a
network also provide cable television services to subscribers. Most of the agreements are for
three to five year terms that are automatically renewed absent termination by either party.
The head-end of each system operator is connected to our regional data center at a maximum
speed of 1 Gbps, either through self-constructed fiber optic lines or through lines leased from
other telecommunications companies. We currently provide services using HFC lines at a maximum
speed of ten Mbps downstream and 600—700 Kbps upstream. As of March 31, 2006, our HFC cable
network covered 9,566,946 households and 2,136,077 subscribers were provided with our services
through HFC connections. As of March 31, 2006, our network was connected to 3,509 (including
Thrunet's network) cells through HFC connections.
Wireless Connections
We also provide the use of wireless last-mile connections to our fiber optic network using
BWLL and WLAN technologies. WLAN connection equipment and infrastructure are easier and quicker to
install than wire-line connections to our backbone network.
Services using B-WLL are transmitted at a maximum speed of 8 Mbps. As of December 31,2005,
our network was connected to 630 buildings through B-WLL connections. The number of buildings
connected to our B-WLL decreased because of a subscriber decrease. Our WLAN services allow
Internet access through mobile devices equipped with a LAN card for users within the coverage of
our access points. Internet access services using WLAN are transmitted at a maximum speed of 11
Mbps. We currently provide WLAN services in approximately 189 access point areas across Korea,
including high traffic areas such as hotels, subway stations, shopping malls, colleges and fast
food stores.
Item 4A. Unresolved Staff Comments.
Not applicable.
Item 5. Operating and Financial Review and Prospects.
The following discussion is based on information derived from our consolidated financial
statements. Our consolidated financial statements have been prepared in accordance with Korean
GAAP, which differ in significant respects from U.S. GAAP. Our consolidated financial statements
for the years ended December 31, 2003, 2004 and 2005 have been reconciled to U.S. GAAP (see note 28
to our
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consolidated financial statements included in this Annual Report). The following discussion
also contains forward-looking statements that involve risks and uncertainties. Our actual results
could differ materially from those anticipated in these forward looking statements as a result of
certain factors, including those set forth under "Item 3.D. Risk Factors" and elsewhere in this
document. You should read the following discussion together with our audited consolidated
financial statements and the related notes for the years ended December 31, 2003, 2004 and 2005,
included in this Annual Report.
A. Operating Results
Overview
We offer high-speed broadband Internet access, voice, leased line and IDC services in Korea.
We are the second largest provider of broadband Internet access in Korea and our network covers
approximately 80.6% of households in Korea as of April 30, 2006. We offer broadband Internet
access service utilizing DSL technology, cable modem technology, B-WLL and WLAN. Our voice service
comprises local, domestic long distance, international long distance and VoIP services. We also
provide leased line services and operate an Internet data center for corporate customers.
The following table indicates the percentage of revenue for the several segments of our
operations:
Year Ended December 31,
2004
2005
Revenue:
Broadband
68.0
%
67.6
%
Voice
20.1
23.6
Leased Line
2.7
2.8
Others
9.2
6.0
Total
100.0
%
100.0
%
Our broadband Internet access business has been our largest business segment and has
contributed the vast majority of our operating income to date. Our market share of Korean
broadband Internet access subscribers was 22.7% as of December 31, 2005, but as a result of our
merger with Thrunet on January 1, 2006, our market share increased to 28.5% as of April 30, 2006.
We provide broadband Internet access through DSL services utilizing our fiber optic network,
through cable modem access technology, and through wireless access via B-WLL and WLAN. As of April
30, 2006, we had a 6.9% share of the local telephony market in Korea, KT, the dominant operator in
the local telephony market, had a 92.9% market share and Dacom, which commenced its commercial
local telephony services in January 2005, had a 0.2% market share.
Our broadband Internet access services are provided over our fiber optic backbone network and
last-mile connections, consisting of 20,258 kilometers of owned and 9,487 kilometers of leased
fiber optic cable as of April 30, 2006. In order to maintain the customer base and achieve the
targeted synergies following the merger with Thrunet, we have focused on increasing the portion of
our owned access network and, as of April 30, 2006, have shifted approximately 460,000 subscribers,
who were previously connected through leased last-mile connections, to our owned network.
In December 2004, we commenced providing VoIP services as part of our local telephony service
offerings. We have recently focused on marketing our VoIP services to the new customer base
acquired through our merger with Thrunet. As a result of such efforts, the number of local
telephony service lines as of December 31, 2005 increased by 107,844 compared to December 31, 2004,
including an increase of 83,526 in VoIP lines. At the end of 2005, however, we elected to modify
the method in accounting for the number of local telephony service lines from the number of
telephone numbers to the number of billing accounts, which reduced the number of service lines by
approximately 40,000.
The competitive environment in the industry in which we operate has intensified as Powercomm
began to provide retail broadband Internet access service from September 2005 and launched
aggressive marketing campaigns to acquire subscribers. We expect competition may continue to
intensify in the
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future, and may need to increase our marketing expenses to retain our customer base. In that
case, our operating income may be adversely affected.
Significant Factors Affecting Our Results of Operations
Factors Directly Affecting Revenues
Our service revenues are driven primarily by subscriber growth and retention, usage and prices
charged for the services we offer.
Subscriber Growth
Broadband
. During our first several years of operation from 1999 to 2002, our results in the
broadband Internet access area were driven by rapid growth in number of subscribers for these
services. The compound average growth rate in broadband subscribers during this period was 204%.
Since that time, our rate of broadband subscriber growth has slowed. The broadband penetration
rate in Korea is among the highest in the world; according to data derived from the MIC, the
broadband penetration rate (as a percentage of Korean households with broadband Internet access)
was 77% as of December 31, 2005. The relatively high level of penetration suggests a more moderate
growth trend going forward. Our revenue growth in this area in the future will depend on retaining
our existing customers as well as the customers acquired through our merger with Thrunet, and on
increasing the usage of our services through adding or improving value-added services.
Voice
. Voice subscriber growth has increased significantly in 2004 due to the regulatory
change permitting fixed-line number portability and our consequent marketing efforts. Although the
growth rate has decreased, the overall increase in the number of voice subscribers continued in
2005. We believe the new customer base acquired through our merger with Thrunet will offer us
additional opportunities to market our bundled broadband Internet access and voice services and
increase our voice subscribers.
Revenue per Subscriber
Our revenue per subscriber of broadband services has declined over the past several years.
The primary factors contributing to this trend are (1) revenue levels among long-term subscribers
declining slightly due to the impact of discounts provided in connection with such customers
shifting into longer term (one year or longer) contracts, (2) slower increases in numbers of
subscribers yielding fewer installation and connection charges than in years of rapidly increasing
subscriber bases and (3) the increasing proportion of subscribers who are exempt from modem rental
fees after using our services over three years. Our average revenue per subscriber in voice
services decreased though 2004 due to rapid growth in the total number of subscribers and the
larger proportion of lower usage subscribers. In 2005, however, average revenue per subscriber
began to recover mainly due to an increase in the number of subscribers using our voice services as
their primary phone service.
Competition and Pricing
Since our inception, we have been operating in a competitive environment featuring a dominant
operator, KT, with a majority or significantly greater market share in both the broadband Internet
access market (49.9% versus our 28.5% share as of April 30, 2006, according to the MIC) and the
local telephony market (92.9% versus our 6.9% share as of April 30, 2006, according to the MIC).
KT has significantly greater financial resources than we do, and has been aggressively upgrading
its broadband offerings in the past year. In the broadband Internet access market, in addition to
KT, we face competition from Powercomm, which began to provide retail broadband Internet access
service from September 2005, Onse Telecom Co., Ltd. and a variety of cable service operators. As a
result, pricing competition in our market is likely to continue to be intense and our ability to
implement price increases or to avoid price decreases may be limited. In the local telephony
market, although KT is constrained in its pricing flexibility by its "dominant operator" status
(see "—Significant Factors Affecting Our Results of Operations—Extensive
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Governmental Regulation"), we are effectively constrained in our ability to increase prices by
KT's dominant position.
Customer Churn
Managing our customer churn is a significant business objective. Customer churn is a measure
of the number of customers who stop using our services. We continue to focus on improving our
customer services and enhancing and expanding our service offerings to existing customers in an
effort to manage our customer churn rate. We have implemented quality improvements such as
increasing broadband Internet access speed and expanding the coverage of fiber optic LAN service,
which offers Internet access transmission speeds of up to 100 Mbps, in apartment complexes. In
addition, we have promoted conversion of non-contract subscribers to contract subscribers and are
developing differential customer management programs such as customer relationship management,
commonly referred to as "CRM," a data analysis program designed to capture more customer usage data
and enable us to tailor packages, features and promotions to customers' preferences. Our average
monthly churn rate increased slightly to 1.8% for 2005 from 1.7% for 2004 as a result of increased
competition following our merger with Thrunet and the launch of retail broadband Internet access
service by Powercomm in September 2005. Our average monthly churn rate for the first quarter of
2006 stabilized at around 2.55% compared to the average monthly churn rate of 2.8% on a simple
combined basis for us and Thrunet.
Extensive Governmental Regulation
The Government has played a very active role in the development of the telecommunications
industry in Korea, primarily through regulation by the MIC. The MIC is responsible for licensing
(including granting licenses to utilize new technologies), competitive practices, interconnection
rates, tariff regulation, technological choices and levels of foreign investment, among others.
Among the centerpieces of the MIC's regulatory regime is its monitoring and control of pricing
policies. KT has been designated as the "dominant operator" of local telephony services in Korea.
The MIC has the authority to review and reject pricing proposals by the dominant operator. Thus,
we believe the potential market power of KT, at least as it relates to pricing, is restrained. In
June 2005, the MIC designated KT as the dominant operator in the broadband Internet access market.
Although our market share has increased to 28.5% as of April 30, 2005 through our merger with
Thrunet, we do not believe we will be designated as the dominant operator given our small market
share compared to that of KT. The nature and content of new regulations will continue to affect
our operations. See also "Item 4.B. Business Overview—Korean Telecommunications Laws and
Regulations," "Item 4.B. Business Overview—Recent Acquisitions and New Services" and "Item 3.D.
Risk Factors—Risks Related to the Telecommunications Industry and Our Business—The Government has
had, and continues to have, significant control and influence over the development of the
telecommunications industry in Korea."
Rapid Technological Change
The telecommunications industry is subject to rapid and ongoing technological change. Due to
the rapidly changing technological capabilities necessary to remain competitive, we may be required
to incur substantial capital expenditures to meet these requirements. The convergence of various
technologies competing to provide similar or related services may also dictate technological change
and attendant expenditure (if, for example, one technology offers a combination of benefits that
prove more attractive to subscribers than our then-current technology). See "Item 3.D. Risk
Factors—Risks Related to the Telecommunications Industry and Our Business—The telecommunications
industry is capital intensive and subject to rapid changes in technology."
Critical Accounting Estimates and Judgments
Our financial statements are prepared in accordance with Korean GAAP. The preparation of
these financial statements requires management to make estimates and judgments that affect the
reported
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amounts of assets, liabilities, revenue and expenses as well as the disclosure of contingent
assets and liabilities. Management bases its estimates and judgments on historical experience and
other factors that are believed to be reasonable under the circumstances. We believe the following
are among our critical accounting policies:
Allowance for doubtful accounts
We maintain an allowance for doubtful accounts for estimated losses, which result from the
inability of our customers to make the required payments. We base our allowance on the likelihood
of recoverability of accounts receivable based on past experience and taking into account current
collection trends that are expected to continue. If economic or specific industry trends worsen
beyond our estimates, actual losses could exceed estimated losses, and we would need to increase
our allowance for doubtful accounts by recording additional expense.
Estimated useful lives of property and equipment
The useful lives are estimated at the time the asset is acquired and are based on historical
experience with similar assets, as well as taking into account anticipated technological or other
changes. If technological changes were to occur more rapidly than anticipated or in a different
form than anticipated, the useful lives assigned to these assets may need to be shortened,
resulting in the recognition of increased depreciation expense in future periods. Alternatively,
these types of technological changes could result in the recognition of an impairment charge to
reflect the write-down in value of the asset. We review these types of assets for impairment
annually, or when events or circumstances indicate that the carrying amount may not be recoverable
over the remaining lives of the assets.
We changed the useful lives of certain types of tangible assets, effective from January 1,
2004, to more accurately reflect our own experience as well as the rapidity of technological change
in the telecommunications industry. These changes increased our depreciation expense by Won 8.0
million for the fiscal year ended December 31, 2004. The changes in estimated useful lives were:
Previous useful lives
Revised useful lives
Buildings and structures.
50 years
40 years
Machinery (duct lines).
8 years
15 years
Machinery (terminal equipment)
8 years
6 years
Vehicles and other.
5-8 years
4 years
In addition, after a review by management of equipment values in 2004, we determined that
certain equipment had become obsolete or had significantly deteriorated and wrote off Won 20.7
billion of such equipment in 2004. As a result of a further review by management, we have written
off Won 60.6 billion of equipment in 2005.
Impairment of investments in non-listed equity securities
We have investments in non-listed equity securities that are stated at acquisition cost. If
we determine that a decline in the net asset value below the book value of an investee is temporary
and recoverable, such unrecognized valuation loss is not reflected as a reduction of shareholders'
equity. If the net asset value of an investee declines compared to the acquisition cost and is not
expected to recover, the carrying value of the non-listed equity security is adjusted to the net
asset value, with the resulting valuation loss charged to current operations. As part of this
evaluation, we consider the investee's results of operations, the investee's performance forecast
and general market conditions. If economic or specific industry trends worsen beyond our
estimates, valuation losses previously determined to be recoverable may need to be charged as a
valuation loss in current operations.
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Impairment of goodwill
We record the excess of acquisition cost over the fair value of net identifiable assets
acquired that are related to entities being consolidated as goodwill, which is amortized on a
straight-line base over its estimated economic useful life.
We review goodwill for impairment whenever events or changes in circumstance indicate that the
carrying amount may not be recoverable. In addition, we evaluate our goodwill for impairment each
year as part of our annual forecasting process. An impairment loss will be recognized when the
carrying amount of goodwill exceeds estimated discounted future cash flows expected from the
entities that are being consolidated and its eventual disposition is less than its carrying amount.
As a result of an impairment test, we have impaired Won 79.6 billion of intangibles (including
goodwill) in 2005.
U.S. GAAP Reconciliation
In 2004, we recorded net income of Won 14.8 billion under U.S. GAAP compared to net income
of Won 13.0 billion under Korean GAAP, primarily because of the different accounting treatment of
development costs, interest capitalization and amortization of goodwill and other GAAP differences.
In 2005, we recorded a net loss of Won 203.2 billion under U.S. GAAP compared to a net loss of
Won 209.3 billion under Korean GAAP, primarily because of the different accounting treatment of
development costs, interest capitalization and amortization of goodwill.
Shareholders' equity under U.S. GAAP is higher than that under Korean GAAP by Won 23.7
billion and Won 28.7 billion at December 31, 2004 and 2005, respectively, primarily as a result
of:
— the difference in the treatment of licensing costs;
— the difference in the treatment of interest capitalization;
— the difference in the treatment of loans to employees;
— the difference in the treatment of development costs; and
— the difference in the treatment of goodwill.
Earnings per share under U.S. GAAP was higher than earnings per share under Korean GAAP for
2004 by Won 36 and loss per share under U.S. GAAP was higher than loss per share under Korean
GAAP for 2005 by Won 426 because the calculation of earnings per share under U.S. GAAP reflects
the effect of the reverse stock split that took place on May 3, 2006.
Results of Operations
Year ended December 31, 2005 compared to year ended December 31, 2004
Operating Revenues
Our total revenue for the year ended December 31, 2005 was Won 1,589.3 billion, an increase
of Won 139.7 billion, compared to total revenue of Won 1,449.6 billion in 2004. The increase
in total revenue in 2005 was primarily due to a Won 89.0 billion increase in broadband revenue
attributable to Thrunet after the acquisition, and a Won 84.1 billion increase in voice revenue
from Won 291.2 billion in 2004 to Won 375.3 billion in 2005.
The following table provides revenue data for the several segments of our operations:
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Year Ended December 31,
2004
2005
Revenue:
(billions of Won)
Broadband
Won
985.4
Won
1,074.4
Voice
291.2
375.3
Leased Line
39.8
44.3
Others
133.2
95.5
Total
Won
1,449.6
Won
1,589.3
Broadband revenues for 2005 increased by Won 89.0 billion compared to Won 985.4
billion in 2004. The increase is primarily attributable to additional revenues from Thrunet of
Won 145.4 billion after the acquisition. Without the positive effect attributable to Thrunet,
our broadband revenues decreased from Won 985.4 billion in 2004 to 937.9 billion in 2005 as a
result of increased competition following our acquisition of Thrunet and the launch of Powercomm's
services.
Voice revenues increased primarily due to (1) the continued growth in voice subscribers, (2)
the re-categorization of revenues relating to VoIP services into voice revenues from other revenues
in accordance with the MIC policy announced in December 2004, and (3) the effect of recognizing a
full year of revenues from our domestic long distance telephony services and international long
distance telephony services, which were commercially launched in July 2004.
Other revenues for 2005 decreased to Won 95.5 billion compared to Won 133.2 billion for
2004. The decrease was primarily due to the re-categorization of revenues relating to VoIP
services into voice revenues from other revenues.
Operating Expenses
Our total operating expenses for the fiscal year ended December 31, 2005 were Won 1,550.8
billion, an increase of Won 215.2 billion, compared to total operating expenses of Won 1,335.6
billion in 2004.
The following table presents significant accounts of operating expenses:
Year Ended December 31,
2004
2005
(billions of Won)
Salaries and wages
Won
103.0
Won
122.8
Provision for severance indemnities
14.1
14.9
Welfare
25.0
26.0
Rent
6.1
9.3
Taxes and dues
7.4
8.2
Depreciation
442.3
498.1
Advertising
39.5
30.1
Ordinary research and development cost
4.0
4.4
Utilities
22.0
26.8
Telecommunication equipment lease expenses
140.8
164.4
Bad debt
29.9
19.1
Maintenance
51.5
59.3
Selling expenses
6.8
10.8
Sales commissions
178.4
249.7
Interconnection charges
142.0
164.7
Commissions
68.5
84.6
Outsourcing services
24.7
30.8
Other
29.7
26.7
Total
Won
1,335.6
Won
1,550.8
The increase in operating expenses in 2005 was primarily due to increases of Won 71.4
billion in sales commissions, Won 55.8 billion in depreciation and Won 23.6 billion in
telecommunications equipment lease expenses. Our acquisition of Thrunet increased operating
expenses by Won 151.2 billion, including increases in sales commissions, depreciation and
telecommunications equipment lease expenses of Won 45.7 billion, Won 33.5 billion and Won
38.3 billion, respectively. In addition, our sales
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commissions increased as we responded to heightened competition to retain our subscriber base.
Telecommunications equipment lease expenses also increased Won 23.6 billion, mainly due to the
additional Won 38.3 billion of expenses attributable to our acquisition of Thrunet partially
offset by our efforts to reduce such expenses by increasing our owned last-mile network.
Interconnection charges increased Won 22.7 billion to Won 164.7 billion for 2005 as a result of
increased call traffic and subscribers.
These increases were partially offset by decreases in (1) bad debt expenses resulting from our
efforts to have subscribers consent to automatic bank withdrawals to pay monthly fees and (2)
advertising expenses as we shifted our marketing efforts from trying to obtain new customers
through general advertisements to retaining existing customers and target marketing our voice
services to our broadband subscribers.
Operating Income
Our total operating income for the year ended December 31, 2005 was Won 38.5 billion, a
decrease of Won 75.4 billion, compared to a total operating income of Won 113.9 billion in
2004. The decrease in our total operating income in 2005 was primarily due to increased expenses
attributable to our acquisition of Thrunet and increased marketing expenses to retain our
subscribers. For segment information on operating income, see note 24 to our consolidated
financial statements for the years ended December 31, 2005 and 2004 included in this Annual Report.
Non-Operating Income
Our non-operating income for the year ended December 31, 2005 was Won 83.2 billion, an
increase of Won 21.0 billion, compared to non-operating income of Won 62.2 billion in 2004.
The following table presents data for non-operating income:
Year Ended December 31,
2004
2005
Non-Operating Income:
(billions of Won)
Interest income
Won
18.5
Won
16.6
Gain on disposal of short-term investment securities
—
—
Gain on disposal of long-term investment securities
0.1
0.4
Gain on disposal of investment securities using the equity method
—
25.4
Gain on disposal of property and equipment
0.9
4.0
Gain on foreign currency transactions
1.4
8.9
Gain on foreign currency translation
33.8
11.7
Gain on early redemption of debentures
—
—
Gain on valuation of forward exchange contract
—
—
Gain on transaction of forward exchange contract
0.2
—
Other
7.2
16.2
Total
Won
62.2
Won
83.2
The increase in non-operating income in 2005 was primarily due to gain on disposal of
investment securities using the equity method of Won 25.4 billion relating to our sale of shares
in Hanaro Web¨ÚTV and Media Holdings. Our gain on foreign currency translations decreased by Won
22.1 billion from Won 33.8 billion in 2004 to Won 11.7 billion in 2005 as the Korean Won
appreciated less against the U.S. dollar in 2005 than it did in 2004. With the appreciation of the
Korean Won, our gain on foreign currency transactions in 2005 increased by Won 7.5 billion
compared to 2004, mainly due to increased debt repayment, including through the refinancing of our
senior secured credit facility. The Korean Won has continued to appreciate against the U.S.
dollar from Won 1,192.60 to U.S.$1.00 as of December 31, 2003 to Won 1,035.00 to U.S.$1.00 as
of December 31, 2004, and to Won 1,004.50 to U.S.$1.00 as of December 31, 2005.
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Non-Operating Expenses
Our non-operating expenses for the year ended December 31, 2005 were Won 313.5 billion, an
increase of Won 151.2 billion, compared to non-operating expenses of Won 162.3 billion in 2004.
The following table presents data for non-operating expenses:
Year Ended December 31,
2004
2005
Non-Operating Expenses:
(billions of Won)
Interest expense
Won
100.9
Won
98.8
Asset Backed Securities payable expense
0.5
—
Loss on foreign currency transactions
0.4
0.3
Loss on foreign currency translation
0.0
1.1
Loss on disposal of short-term investment securities
0.9
0.0
Loss on disposal of long-term investment securities
0.0
1.4
Loss on valuation of trading securities
—
—
Impairment loss on short-term investment securities
0.5
1.1
Impairment loss on long-term investment securities
2.5
4.0
Donations
0.3
0.3
Loss on early redemption of debentures
—
0.2
Loss on early redemption of long-term debt
—
2.2
Loss on redemption of long-term obligation under capital leases
—
0.0
Loss on valuation using the equity method
—
—
Loss on disposal of property and equipment
1.2
2.2
Loss on disuse of property and equipment
20.7
60.6
Loss on valuation of forward exchange contract
34.0
19.8
Loss on transaction of forward exchange contract
0.2
—
Impairment loss on intangibles
0.0
79.6
Other bad debt
—
12.1
Non-operating expense—other
—
22.0
Other
0.9
7.6
Total
Won
162.3
Won
313.5
The increase in non-operating expenses in 2005 was primarily due to (1) an increased
level of loss on disuse of property and equipment, (2) impairment loss on intangibles when we
acquired Thrunet, and (3) early retirement allowance payments in connection with our restructuring
initiatives in 2005.
Loss on disuse of property and equipment increased to Won 60.6 billion in 2005 mainly due to
the Won 29.0 billion loss on disuse of Thrunet property and equipment and the increased loss on
disuse of our own property and equipment as we discontinued the use of such property and equipment
in connection with our network upgrades.
We recorded Won 122.4 billion of goodwill for the Thrunet shares that we acquired in 2005.
At the end of 2005, we recognized an impairment loss of Won 79.2 billion with respect to such
goodwill. After the amortization of goodwill in 2005 and the impairment loss, we had Won 32.9
billion of goodwill relating to Thrunet as of December 31, 2005.
In late 2005, we implemented an early retirement program as part of our efforts to improve our
operating efficiency. Through such measure, we reduced the combined head count of us and Thrunet
by about 260, or 16%. We paid early retirement allowance in connection with such measure of Won
21.9 billion. We expect that reduction in head count through the early retirement program will
have a positive impact on salaries and wages.
Net Income (Loss)
As a result of the various factors discussed above, we recorded a net loss of Won 209.3
billion for the year ended December 31, 2005 compared to net income of Won 13.0 billion for the
same period in 2004.
47
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Year ended December 31, 2004 compared to year ended December 31, 2003
Operating Revenues
Our total revenue for the year ended December 31, 2004 was Won 1,449.6 billion, an increase
of Won 66.1 billion, compared to total revenue of Won 1,383.5 billion in 2003.
The following table provides revenue data for the several segments of our operations:
Year Ended December 31,
2003
2004
Revenue:
(billions of Won)
Broadband
Won
982.7
Won
985.4
Voice
249.0
291.2
Leased Line
38.0
39.8
Others
113.8
133.2
Total
Won
1,383.5
Won
1,449.6
The increase in total revenue in 2004 was primarily due to an increase in revenue of
Won 42.2 billion from our voice services from Won 249.0 billion in 2003 to Won 291.2 billion
in 2004. The primary reason for the increase in voice revenues was the net addition of 411,892
subscribers, compared to the level as of December 31, 2003 (including additions of 149,733 during
the third quarter of 2004). This was due to an extensive marketing campaign targeted at Seoul and
Busan in the third quarter of 2004 seeking to capitalize on fixed-line number portability. VoIP
also contributed to the growth of revenues from voice services. This increase resulted from (1)
the improved quality of VoIP vis-à-vis standard Public Switched Telephone Network, commonly
referred to as "PSTN," telephony and (2) a marketing campaign aimed at promoting this new service.
The significant percentage growth, however, represents an increase over a very small base.
Broadband revenues for 2004 increased slightly by Won 2.7 billion compared to Won 982.7
billion in 2003. The slight increase is primarily attributable to an increase in the number of
active subscribers. In effect we recorded an increase of 23,171 subscribers as of December 31,
2004 compared to the corresponding date in 2003 as we deactivated approximately 240,000 inactive
subscribers in the fourth quarter of 2003. As noted elsewhere, we have focused on the retention of
customers (reflected in lower churn rates) and have been able to maintain a relatively stable cash
flow from our broadband Internet access operations.
Other revenues for 2004 increased to Won 133.2 billion compared to Won 113.8 billion for
2003 primarily due to increased sales volume of VoIP services and PABX services.
Operating Expenses
Our total operating expenses for the fiscal year ended December 31, 2004 were Won 1,335.6
billion, an increase of Won 22.8 billion, compared to total operating expenses of Won 1,312.8
billion in 2003.
The following table presents significant accounts of operating expenses:
Year Ended December 31,
2003
2004
(billions of Won)
Salaries and wages
Won
92.4
Won
103.0
Provision for severance indemnities
13.4
14.1
Welfare
19.4
25.0
Rent
14.7
6.1
Taxes and dues
8.3
7.4
Depreciation
428.5
442.3
Advertising
27.5
39.5
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Table of Contents
Year Ended December 31,
2003
2004
(billions of Won)
Ordinary research and development cost
Won
4.9
Won
4.0
Utilities
19.5
22.0
Telecommunication equipment lease expenses
165.7
140.8
Bad debt
25.7
29.9
Maintenance
42.6
51.5
Selling expenses
6.4
6.8
Sales commissions
196.0
178.4
Interconnection charges
131.1
142.0
Commissions
70.9
68.5
Outsourcing services
20.5
24.7
Other
25.3
29.7
Total
Won
1312.8
Won
1335.6
The increase in operating expenses in 2004 was primarily due to increases of Won 13.8
billion in depreciation and amortization, Won 12.1 billion in advertising expenses and Won 10.9
billion in interconnection charges. The increase in depreciation and amortization was caused by
increases in depreciable plant and equipment. The increase in advertising expense in 2004 was the
result of significant advertising campaigns in the second and third quarters of 2004 to promote our
change in corporate identity and logo, our newly branded "hanafone" telephony services and
fixed-line number portability. Although lower interconnection fee rates set by the MIC took effect
in January 2004, interconnection charges increased primarily due to an increase in the number of
our local telephony services subscribers.
These increases were partially offset by decreases in (1) sales commission expenses resulting
from the slower growth in subscribers during 2004 compared to growth in 2003, (2)
telecommunications equipment lease expense due to reduced dependence on cable lines leased to us by
Powercomm and a reclassification of expenses relating to long distance calls as interconnection
fees, and (3) certain promotional expenses attributable to our increased focus on entering into
strategic alliances with certain system operators and relay operators and our seeking to avoid
predatory pricing practices.
Operating Income
Our total operating income for the year ended December 31, 2004 was Won 113.9 billion, an
increase of Won 43.2 billion, compared to a total operating income of Won 70.7 billion in 2003.
The increase in our total operating income in 2004 was primarily due to an increase in our voice
revenues in 2004. For segment information on operating income, see note 24 to our consolidated
financial statements for the years ended December 31, 2003 and 2004 included in this Annual Report.
Non-Operating Income
Our non-operating income for the year ended December 31, 2004 was Won 62.2 billion, an
increase of Won 35.2 billion, compared to non-operating income of Won 27.0 billion in 2003.
The following table presents data for non-operating income:
Year Ended December 31,
2003
2004
Non-Operating Income:
(billions of Won)
Interest income
Won
18.5
Won
18.5
Gain on disposal of short-term investment securities
0.3
—
Gain on disposal of long-term investment securities
0.1
0.1
Gain on disposal of investment securities using the equity method
—
—
Gain on disposal of property and equipment
1.1
0.9
Gain on foreign currency transactions
0.3
1.4
Gain on foreign currency translation
0.0
33.8
Gain on early redemption of debentures
0.9
—
Gain on valuation of forward exchange contract
0.2
—
Gain on transaction of forward exchange contract
0.3
0.2
Other
5.3
7.2
Total
Won
27.0
Won
62.2
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The increase in non-operating income in 2004 was primarily due to increases in gain on
foreign currency translations. Our gain on foreign currency translations increased by Won 33.8
billion from Won 19 million in 2003 to Won 33.8 billion in 2004 primarily due to the appreciation
of the Korean Won against the U.S. dollar and an increase in our dollar-denominated liabilities in
2004. The Korean Won slightly depreciated against the U.S. dollar from Won 1,186.30 to U.S.$1.00
as of December 31, 2002 to Won 1,192.60 to U.S.$1.00 as of December 31, 2003, but appreciated
against the U.S. dollar to Won 1,035.00 to U.S.$1.00 as of December 31, 2004.
Non-Operating Expenses
Our non-operating expenses for the year ended December 31, 2004 were Won 162.3 billion, a
decrease of Won 96.3 billion, compared to non-operating expenses of Won 258.6 billion in 2003.
The following table presents data for non-operating expenses:
Year Ended December 31,
2003
2004
Non-Operating Expenses:
(billions of Won)
Interest expense
Won 139.3
Won 100.9
Asset Backed Securities payable expense
9.0
0.5
Loss on foreign currency transactions
0.8
0.4
Loss on foreign currency translation
0.1
0.0
Loss on disposal of short-term investment securities
2.1
0.9
Loss on disposal of long-term investment securities
—
0.0
Loss on valuation of trading securities
0.3
—
Impairment loss on short-term investment securities
0.9
0.5
Impairment loss on long-term investment securities
3.4
2.5
Donations
0.8
0.3
Loss on early redemption of debentures
0.3
—
Loss on early redemption of long-term debt
—
—
Loss on redemption of long-term obligation under capital leases
—
—
Loss on valuation using the equity method
23.1
—
Loss on disposal of property and equipment
1.3
1.2
Loss on disuse of property and equipment
61.3
20.7
Loss on valuation of forward exchange contract
—
34.0
Loss on transaction of forward exchange contract
—
0.2
Impairment loss on intangibles
—
0.1
Other bad debt
—
—
Non-operating expense-other
4.5
—
Other
11.1
0.9
Total
Won 258.6
Won 162.3
The decrease in non-operating expenses in 2004 was primarily due to lower interest
expense as we reduced our debt levels, particularly those with higher interest rates. The level of
write-off of property and equipment also decreased compared to 2003. In addition, the significant
losses attributable to Dreamline were not reflected in our income statement under the equity method
following the reclassification of our interest in Dreamline to a long-term investment. See note 8
to our consolidated financial statements for a detailed discussion relating to Dreamline. These
improvements in non-operating expenses were, however, partially offset by losses of Won 34.0
billion on valuation of forward exchange contract. See note 15 to our consolidated financial
statements for more a detailed discussion.
Net Income (Loss)
As a result of the various factors discussed above, we recorded net income of Won 13.0 billion
for the year ended December 31, 2004 compared to a net loss of Won 161.3 billion for the same
period in 2003.
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Impact of Inflation
In view of our operating history, we believe that inflation in Korea has not had a material
impact on our results of operations. Inflation in Korea in 2001, 2002, 2003, 2004 and 2005 was
4.1%, 2.7%, 3.6%, 3.6% and 2.7%, respectively.
Impact of Foreign Currency Fluctuations
See "Item 11. Quantitative and Qualitative Disclosures about Market Risk—Foreign Currency
Risk."
B. Liquidity and Capital Resources
Our primary uses of cash are to fund working capital, service indebtedness and fund capital
expenditures. Our primary sources of liquidity and capital requirements traditionally have been
from equity and debt financings, as cash flows from operations had not been sufficient to meet our
needs. Our cash flow from operations, however, has been increasing in recent periods, and this, in
turn, has led, among other things, to a reduced need for short term financing. In 2006, we expect
that our capital expenditures will not increase significantly from the level of 2005 and that they
will focus mostly on upgrades of our fiber LAN network. In addition, we have approximately Won
220.4 billion of long-term debt obligations maturing within 2006, out of which we have repaid Won
190 billion due in February 2006 with the issuance of corporate debentures amounting to Won 100.0
billion, our cash on hand and available credit lines.
As a result of the issuance and sale of the $500 million aggregate principal amount of 7%
notes due 2012 in February 2005, our debt-to-equity ratio changed from 59.1% as of December 31,
2004 to 63.2% as of December 31, 2005. As of March 31, 2006, we had Won 287.4 billion of principal
payments and contracted commitments coming due in the remainder of 2006 through the end of 2008.
With the combination of our cash on hand, increased cash flow from operations, and our
improved liquidity position attributable to the issuance and sale of our 7% notes in February 2005
and the refinancing of the secured credit facility in May 2005, we believe that we have sufficient
funding to meet our currently anticipated debt repayment, capital expenditure and debt service
requirements, as well as our working capital and other funding objectives for the next 12 months.
In order to maintain our competitive position and continue to meet the increasing demands for
service quality, availability and competitive pricing and to further build our network, we may need
to incur capital expenditures in addition to those currently anticipated. Our actual future
financing requirements and our ability to obtain additional financing will depend on our future
performance, market conditions and other factors, many of which are beyond our control and cannot
be predicted with certainty. We believe that adequate financing will be available in the event we
need additional funds for such purposes. Nevertheless, we cannot assure you that such financing
will be available on favorable terms. If we are unable to obtain such financing, we may need to
modify, delay or abandon elements of our strategy.
Cash Flows
The following table sets forth selected information concerning our combined cash flows during
the periods indicated:
Year ended December 31,
2003
2004
2005
(in billions of Won)
Cash flows from operating activities
Won 303.0
Won 469.9
Won 489.1
Cash flows from investing activities
(250.8
)
(209.2
)
(574.6
)
Cash flows from financing activities
(135.1
)
(294.9
)
(48.4
)
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Cash flows from operating activities have increased during the three years ended December
31, 2005, primarily due to the improvement in operating performance and the change in working
capital.
Cash flows used in investing activities have generally show a decreasing trend in the past
three years due to decreased acquisitions of short-term financial instruments. In 2005, however,
cash flows used in investing activities increased significantly as a result of our acquisition of
Thrunet shares and bonds. Acquisitions of property and equipment in 2005 increased to Won 311.7
billion from Won 212.5 billion for 2004 as we made capital expenditures to reduce our dependence on
our leased last-mile network from Powercomm by further building out our own network. In addition,
we did not acquire any property and equipment through capital leases in 2005 compared to the Won
37.7 billion of property and equipment acquired through capital leases in 2004.
Cash flows from financing activities have turned negative from 2003, reflecting decreased
levels of financing activity and our repayment of indebtedness. Cash flows used in financing
activities were Won 48.4 billion in 2005, reflecting a continuation of the factors primarily
responsible for the earlier trend partially offset by the proceeds from the issuance of $500
million aggregate principal amount of bonds issues in February 2005.
See "—Liquidity and Capital Resources—Long Term Indebtedness and Capital Lease Payments" for
information regarding future repayments.
Equity Investment
On November 18, 2003, we issued 182,812,500 common shares (representing an aggregate of 39.6%
equity interest) at a purchase price of Won 3,200 per share by way of a private placement to a
consortium of investors led by AIG, Newbridge and TVG, which resulted in aggregate proceeds of Won
585.0 billion. These proceeds were a primary source for our debt repayments in 2003 and 2004 as
well as for meeting our debt service requirements. See "Item 7.B. Related Party
Transactions—Relationship with AIG-Newbridge-TVG Consortium."
Long Term Indebtedness and Capital Lease Payments
Our contractual obligations, including commitments for future payments under lease
arrangements and short-term and long-term debt arrangements, are summarized below and are fully
disclosed in notes 11 and 13 to our consolidated financial statements included elsewhere in this
Annual Report.
Balance
Payments due during
December 31,
Year ended December 31,
2005
2006
2007
2008
2009
2010
(in billions of Won and millions of U.S. dollars)
Korean corporate debentures
Won
190.0
Won
190.0.
Won
—
Won
—
Won
—
Won
—
Global corporate debentures
(1)
$
500.0
$
—
$
—
$
—
$
—
$
—
Syndicated loan:
Won
79.8
—
19.2
22.3
25.5
12.8
Dollar
$
201.8
$
30.3
$
80.7
$
90.8
$
—
$
—
Capital leases
Won
39.4
Won
26.7
Won
12.3
Won
0.4
Won
—
Won
—
Total — Won
Won
309.2
Won
216.7
Won
31.5
Won
22.7
Won
25.5
Won
12.8
— Dollar
$
701.8
$
30.3
$
80.7
$
90.8
$
—
$
—
(1)
The maturity for the $500 million aggregate principal amount of global bond is February 2012.
As of December 31, 2005, we had outstanding long-term debt (including current portions of
long term debt) in an aggregate amount of Won 974.8 billion (of which the current portion was Won
220.4 billion). Of that amount, 20.8% was denominated in U.S. dollars and 79.2% was denominated in
Korean Won. The Won-denominated long-term debt consisted of (1) Korean corporate debentures, (2)
amounts borrowed from the senior secured credit facility and (3) the capital lease agreements.
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Korean Corporate Debentures
. As of December 31, 2005, we had outstanding Korean corporate
debentures of Won 190.0 billion (of which the current portion was Won 190.0 billion). The
creditors include various Korean financial institutions. The scheduled maturity of these
debentures is on February 24, 2006 and the interest rate for these debentures is 6% per annum.
Global Corporate Debentures
. As of December 31, 2005, we had outstanding global corporate
debentures of U.S.$500 million. The scheduled maturity of these debentures is February 2012, and
the interest rate for these debentures is 7% per annum.
Senior Secured Credit Facility
. As of December 31, 2005, we had outstanding Won 79.8 billion
of Won-denominated indebtedness and U.S.$201.8 million of dollar-denominated indebtedness under our
senior secured credit facility. The senior secured credit facility provided for a term loan
facility in the aggregate amount of Won 660.0 billion and a revolving credit facility in the
aggregate amount of Won 60.0 billion. The Won-denominated debt under the senior secured credit
facility bore interest rates of 6.36% per annum and the dollar-denominated debt under the senior
secured credit facility bore an interest rate of 6.18% per annum.
Capital Lease Agreements.
We also have capital lease agreements with Korea HP Financial
Service Co., LG Card Services Corp. and Cisco Systems Capital Korea Ltd. for certain machinery and
equipment. As of December 31, 2005, the amount of payments attributable to the debt portion of our
lease obligations was Won 39.4 billion (of which the portion due in 2006 was approximately Won 26.7
billion).
A portion of the proceeds from the notes offering and the borrowings under the new secured
credit facility was applied to repay some of our outstanding debt obligations. Between January 1,
2005 and April 30, 2005, we repaid at maturity or prepaid prior to maturity the following amounts:
•
Won 120 billion aggregate principal amount of Korean corporate debentures,
including Won 100 billion of prepayments;
•
all outstanding amounts under the Information Promotion Fund loan amounting to Won
66.7 billion;
•
Won 39.0 billion of the Won 40.0 billion outstanding amount under the Citibank
Korea loan;
•
all outstanding amounts under the previous senior secured credit facility; and
•
Won 25.6 billion of lease obligations due under our capital lease agreements,
including Won 7.1 billion of prepayments.
Other Financial Transactions
On December 19, 2003, we entered into a cross-currency swap contract with Korea Development
Bank (pursuant to which we exchanged Won 75.0 billion for U.S.$63.1 million with a final maturity
dated as of November 13, 2008), in connection with the Senior Secured Credit Facility agreement
dated April 21, 2005, to hedge the exposure to changes in the foreign currency exchange rate at Won
1,190.0 per U.S.$1.00. This contract also includes an interest rate swap under which we agreed to
pay a fixed rate of 7.72% per annum on the notional principal amount and are to receive payments
based on LIBOR plus a 3.25% spread.
As of December 31, 2005, we provided a blank promissory note as collateral to LG Card Services
Corp. in connection with the lease agreements. It is common practice for Korean companies to issue
blank promissory notes with a maximum note amount to financial institutions as collateral in credit
transactions. In the event a holder of a blank promissory note attempts to claim an amount in
excess of the maximum note amount, the issuer of such promissory note will be required to pay the
entire note amount. However, in such event, the issuer has a right of indemnification from such
holder with respect to the excess amount.
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Table of Contents
On February 10, 2004, we entered into cross-currency swap contracts under which we exchanged
an aggregate of Won 161.8 billion (Won 116.6 billion with Korea Development Bank, Won 21.9 billion
with Korea Exchange Bank and Won 23.3 billion with Calyon Bank [formerly "Credit Lyonnais Bank")
for U.S.$138.7 million with a maturity date of November 13, 2008 to hedge exposure to changes in
the foreign currency exchange rate at Won 1,166.2 per U.S.$1.00. These contracts also include
interest rate swaps under which we agreed to pay a fixed rate of 7.60% per annum on the notional
principal and are to receive three month LIBOR plus a spread of 3.25%.
On January 26, 2005, we entered into cross-currency swap contracts under which we exchanged an
aggregate of Won 258.8 billion (Won 103.5 billion with Korea Development Bank, Won 103.5 billion
with DBS Bank and Won 51.8 billion with Shinhan Bank) for U.S.$250.0 million with a final maturity
date of February 1, 2012 to hedge the exposure to changes in the foreign currency exchange rate at
Won 1,035.0 per U.S.$1.00. These contracts also include interest rate swap arrangements under
which we agreed to pay a fixed rate of 7.13% per annum on the notional principal pursuant to the
contracts with Korea Development Bank and DBS Bank and a fixed rate of 7.15% per annum on the
notional principal pursuant to the contract with Shinhan Bank, and are to receive a 7.00% fixed
coupon.
On January 28, 2005, we entered into cross-currency swap contracts under which we exchanged an
aggregate of Won 154.0 billion (Won 102.7 billion with ABN AMRO Bank and Won 51.3 billion with
JPMorgan Chase Bank N.A.) for U.S.$150.0 million with a final maturity date of February 1, 2012 to
hedge the exposure to changes in the foreign currency exchange rate at Won 1,026.5 per U.S.$1.00.
These contracts also include interest rate swap arrangements under which we agreed to pay a fixed
rate of 6.89% per annum on the notional principal pursuant to the contract with ABN AMRO Bank and a
fixed rate of 6.98% per annum on the notional principal pursuant to the contract with JPMorgan
Chase Bank N.A., and are to receive a 7.00% fixed coupon.
On February 1, 2005, we entered into cross-currency swap contracts under which we exchanged an
aggregate of Won 102.9 billion (Won 82.3 billion with Shinhan Bank [formerly "Chohung Bank"] and
Won 20.6 billion with Societe Generale) for U.S.$100.0 million with a final maturity date of
February 1, 2012 to hedge the exposure to changes in the foreign currency exchange rate at Won
1,028.6 per U.S.$1.00. These contracts also include interest rate swap arrangements under which we
agreed to pay a fixed rate of 7.23% per annum on the notional principal and are to receive a 7.00%
fixed coupon.
Capital Expenditures
The following table sets forth the amount of our capital expenditures incurred from 2002 to
2005:
Year ended December 31,
2002
2003
2004
2005
(in billions of Won)
hanarotelecom:
Backbone network
Won 128.5
Won 111.1
Won 99.2
Won 73.5
Last mile connection
205.9
191.7
135.0
183.1
Others
27.9
34.7
47.5
54.7
Subtotal
362.3
337.5
281.7
311.3
Consolidated subsidiaries
58.4
0.3
0.8
15.5
Total
Won 420.7
Won 337.8
Won 282.5
Won 326.8
Our capital expenditures differ from investments in property and equipment in our cash
flow statements, as capital expenditures also include capital lease payments and transfer of
inventories to property and equipment. Our capital expenditures over the last three years
consisted primarily of purchasing and deploying switchboards, fiber optic cable lines and other
telecommunications equipment. In 2005, we recorded Won 311.3 billion in capital expenditures, out
of which a substantial amount of our capital expenditures was incurred in the fourth quarter due to
the timing of expenditures on several planned projects and because certain investments related to
the integration of our network with Thrunet's network. At this time, we expect that our capital
expenditures in 2006 will not increase significantly from the level of 2005 and that they will
focus mostly on upgrades of our fiber LAN network.
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Table of Contents
Other Contractual Obligations
We, as well as other license holders, are required to make annual contributions to public
research and development funds under the terms of the licenses granted to us by the Government to
operate our business. On May 9, 2002, the MIC announced that, effective from 2002, only the NSPs
whose total broadband (from 2005 onwards), voice and leased line services revenue amount for the
preceding year was more than Won 30 billion and that realized a net profit in the preceding year
are required to make annual payments for the purpose of research and development in the amount of
0.5% of the total broadband (from 2005 onwards), voice and leased line services revenue, to the
extent that the amount of such payment does not exceed the amount of the net profit for the
preceding year. The "net profit" which the MIC will use in its determination of the amount of
these contributions is calculated using accounting standards and policies specified by the MIC
which differ in certain respects from Korean GAAP. Based on the MIC accounting standards, we did
not realize a net profit in 2004 and are not required to make a contribution in 2005. We do not
anticipate that we will realize a net profit based on the MIC accounting standards in 2005 and
therefore do not anticipate that we will be required to make a contribution in 2006.
Under Korean law, an employee with more than one year of service is entitled to receive from
the company a lump-sum payment upon termination of his or her employment, based on the length of
service and the rate of pay at the time of termination. In 2004, we made severance payments of Won
5.1 billion and Won 19.7 billion in 2005, respectively. Our accrued severance indemnities as of
December 31, 2005 was Won 36.0 billion.
As of December 31, 2004 and as of December 31, 2005, we had provided loans to our employees in
the amount of Won 13.1 billion and Won 9.8 billion, respectively, for the purchase of our common
shares through our employee stock ownership association. The loans are secured by the shares
purchased. As of December 31, 2005, we had also provided housing loans and other loans for medical
expenses and dependent educational expenses to our employees in the amount of Won 8.6 billion and
Won 0.2 billion, respectively. These loans are secured by accrued severance benefits of the
borrowing employees. As of December 31, 2005, we had not experienced any defaults under these
loans. The loans are provided as a perk to our employees and are not required by Korean law. Our
officers and directors are not eligible for these loans.
For time to time, we have provided secured or guaranteed interest-free loans to cable network
operators. The terms of each of those loans require repayment after a specified period (ranging
from one year to three years) from the date of the loan by equal installments on a quarterly basis
for two years. As of December 31, 2005, we provided a guarantee of one loan with an outstanding
balance of Won 70 million. The loan agreements require the cable network operators to use the loan
proceeds to upgrade their systems so that our services can be provided over their networks. The
loan agreements also require the borrower to lease to us its cable network for our HFC-based
Internet access services upon completion of the system upgrade.
C. Research and Development, Patents and Licenses, etc.
We engage in ordinary research and development to improve our technologies. We have not spent
a significant amount on such research and development activities.
D. Trend Information
See "Item 5.A. Operating Results" above.
E. Off-balance Sheet Arrangements
There were no off-balance sheet arrangements that have or are reasonably likely to have a
current or future effect on our financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or capital resources that is
material to investors.
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Table of Contents
F. Tabular Disclosure of Contractual Obligations
The following table sets forth information with respect to our known contractual obligations
as of December 31, 2005:
Payments due by period
Total
Less than 1 year
1-3 years
3-5 years
More than 5 years
(in billions of Won)
Long-term debt obligations
Won
974.8
Won
220.4
Won
213.8
Won
38.3
Won
502.3
Capital lease obligations
39.4
26.7
12.7
—
—
Operating lease obligations
0.8
0.6
0.2
—
—
Purchase obligations
30.3
30.3
—
—
—
Total
Won
1,045.3
Won
278.0
Won
226.7
Won
38.3
Won
502.3
G. Safe Harbor
See discussion under "Forward-Looking Statements."
Item 6. Directors, Senior Management and Employees.
A. Directors and Senior Management
The following table sets out our directors, their age, their position on the board and audit
committee and the shareholder, if any, who nominated them.
Name
Age
Position
Nominated by
Byung-Moo Park
44
Representative
Director and Chief
Executive Officer
Wilfried Kaffenberger
61
Non-standing Director
AIG Asian Infrastructure Fund II
David Yeung
56
Non-standing Director
AIG Asian Opportunity Fund
Paul Chen
41
Outside Director
Outside Director Candidate Nominating Committee
Varun Bery
48
Outside Director
Outside Director Candidate Nominating Committee
Sung Kyou Park
67
Outside Director &
Chairman of Audit
Committee
Outside Director Candidate Nominating Committee
Sun Woo Kim
65
Outside Director &
Member of Audit
Committee
Outside Director Candidate Nominating Committee
Steven J. Schneider
47
Outside Director
Outside Director Candidate Nominating Committee
Afshin Mohebbi
43
Outside Director
Outside Director Candidate Nominating Committee
Peter Whang
39
Non-standing
Director & Member of
Audit Committee
AIG Asian Infrastructure Fund II
Byung-Moo Park
was appointed as Representative Director on March 24, 2006 and prior to
that served as our outside Director since November 2003. Since 2003, he has served as a managing
director of Newbridge Capital Korea Ltd. Prior to joining Newbridge, he served as Chief Executive
Officer of PLENUS Entertainment Inc. Prior to that, he was a partner in the law firm of Kim &
Chang in Korea. Mr. Park is a graduate of the College and the Graduate School of Law at Seoul
National University and received his masters in business administration from Yonsei University and
an LL.M. from Harvard Law School. Mr. Park is a member of the Korean and New York Bar
Associations.
Wilfried Kaffenberger
has served as our non-standing Director since November 2003. He is
currently serving as Managing Director of Emerging Markets Partnership and as Chief Executive
Officer of AIG Asian Infrastructure Fund II. Prior to joining Emerging Markets Partnership, he was
with International Finance Corporation for over 25 years in various capacities, including as a Vice
President Investment Operations. Mr. Kaffenberger received a bachelor of science in chemical
engineering from Princeton University in 1966 and masters in business administration from Harvard
Graduate School of Business in 1968.
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David Yeung
has served as our non-standing Director since November 2003. He is currently
serving as Head of AIG's infrastructure investments in developing markets and as Managing Director
of AIG Global Investment Corp in Hong Kong. Prior to joining AIG in Hong Kong in 1995, Mr. Yeung
was with Bell Canada Enterprise and Northern Telecom managing telecom and technology investments in
North America. Mr. Yeung received a bachelor of science from Indiana University in 1972 and
masters in business administration from The Graduate School of Business, University of Chicago in
1974. He is a U.S. certified public accountant as well as a Canadian chartered accountant.
Paul Chen
has served as our outside Director since November 2003. He is currently a Managing
Director of Newbridge Capital based in Hong Kong. Mr. Chen played a key role in Newbridge's
investments in hanarotelecom and Korea First Bank and currently serves as a member of our Director
and Compensation Committee and as a Director and Audit Committee member of Korea First Bank. Prior
to joining Newbridge in 1996, Mr. Chen worked in the investment banking division at Morgan Stanley
& Co. in New York and Hong Kong as well as Bankers Trust Company in New York. Mr. Chen has a
bachelor of science in applied economics and business management from Cornell University and
masters in business administration from Harvard Business School.
Varun Bery
has served as our outside Director since March 2004. In April 1998, he co-founded,
and has since served as a managing director of TVG. From May 1995 until March 1998, he served as a
Director of the Telecom Group at the Asian Infrastructure Fund. From September 1992 until May
1995, he served as a Director of the Telecom Investment Banking Division at Credit Suisse First
Boston. From September 1985 until August 1992, he was a management consultant with McKinsey & Co.
in New York and Tokyo. Mr. Bery received a bachelor of arts from Yale University in 1981 and a
masters in business administration from Harvard University.
Sung Kyou Park
has served as our outside Director and chairman of our audit committee since
March 2000. From 1987 until 1995, he served as President of Daewoo Telecom. From 1995 until 1997,
he served as Chairman and Chief Executive Officer of Daewoo Telecom. From 1998 until 1999, he
served as Chairman and Chief Executive Officer of Daewoo Maghreb S.A. From 1996 until 1998, Dr.
Park served as Chairman of the Telecommunications Industry Association of Korea. He has a bachelor
of electronics engineering from MIT. He also received masters in electronics engineering from
Northeastern University in 1966 and a Ph.D. in electronics engineering from the University of Texas
at Austin in 1971.
Sun Woo Kim
has served as our outside Director and member of our audit committee since March
2003. Since May 2004, he has served as a chairman of the board of directors of Korea Digital
Satellite Broadcasting. From 2000 until 2003, he served as a director of Korea Broadcasting
System. He has been a member of the Advisory Council on Democratic and Peaceful Unification since
1997. From 1992 until 1999, he served as an Executive Director of Busan Daily. Mr. Kim received a
bachelor of arts in political science from the Seoul National University in 1965 and masters in
business administration from Dankook University in 1983.
Steven J. Schneider
has served as our outside Director since March 2006. He earned a bachelor
of arts in business administration from Grove City College. From 2001 until 2005, he served as
Chairman and CEO of GE China, and from 2005, also served as CEO of GE Asia-Pacific. Since November
2005, he has been a Managing Director of Newbridge Capital.
Afshin Mohebbi
has served as our outside Director since March 2006. He received his masters in
business administration from University of California Irvine and has been serving as President and
Chief Operating Officer of Qwest Communications International Inc. since 1999. He is currently a
member of the board of directors of BearingPoint, Inc.
Peter Whang
has served as our Director and a member of our audit committee since March 2006.
He received a masters in business administration from the University of Chicago. He worked at the
Chairman's Office of LG Group before serving as Representative Director of AIGGIC Korea. Although
Mr. Whang does not meet the Nasdaq requirements for outside (independent) directors, he satisfies
the requirements for audit committee members under the Korean Securities and Exchange Act.
Accordingly, as
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a person specially related to the largest shareholder (AIF II NT), he was appointed as a
non-standing Director who serves as a member of our audit committee.
The following table sets out information on our principal senior executive officers who are
not members of the board of directors.
Name
Age
Position
Jin Ha Kim
50
Senior Executive Vice President and Chief Technology Officer
Dominic A. Gomez
51
Senior Executive Vice President and Chief Operating Officer
Soon Man Hong
47
Senior Executive Vice President and Head of the Convergence Headquarters
Eric Choi
49
Senior Executive Vice President and Head of the Sales Channel
Management Headquarters
Mark D. Pitchford
42
Executive Vice President and Chief Marketing Officer
Janice Lee
44
Senior Executive Vice President and Chief Financial Officer
Matt Lee
48
Executive Vice President and Chief Business Officer
Kyu Shik Shin
49
Executive Vice President and Head of the Corporate Business Headquarters
Chong Hoon Park
41
Executive Vice President and Head of the External
Collaboration/Strategy Headquarters
Young Bo Chang
47
Senior Vice President
Geon Jun Park
48
Senior Vice President
Sang Hwan Oh
48
Senior Vice President
Seok Ho Lee
52
Senior Vice President
Myong Heon Choi
48
Senior Vice President
Sang Jin Jeun
41
Senior Vice President
Marshall J. Cochrane
63
Senior Vice President and Chief Procurement Officer
Kyoung Yu Min
46
Senior Vice President
Yeon Ho Kim
42
Senior Vice President
Myung Joo Ko
42
Senior Vice President
Baeky Rhee
45
Senior Vice President
Jin Ha Kim
has served as our Senior Executive Vice President and Chief Technology Officer
since January 2006. Mr. Kim joined us in December 1997 as Executive Vice President, Head of
Network Facility Unit and served in such role until November 2003. Before joining us, he served as
Director at Dacom from July 1997 and various other roles at Dacom before then.
Dominic A. Gomez
has served as our Senior Executive Vice President and Chief Operating Officer
since May 2005. Mr. Gomez previously served as an Executive Vice President at Lantern
Communications from 2002 to 2004 and Chief Operating Officer at EdgeNet Communications from 2000 to
2002. He received a bachelor of public administration in 1977 from University of Southern
California and completed PMD Business Administration at Harvard University.
Soon Man Hong
has served as our Senior Executive Vice President and Head of the Convergence
Headquarters since April 2006. He was appointed as an Executive Vice President on February 1, 2006,
promoted from the Head of the Marketing Headquarters to a Senior Executive Vice President on April
17, 2006 and appointed as Head of the Convergence Headquarters on April 30, 2006. He received a
bachelor of science in aerospace engineering from Seoul National University and a masters of
business administration from the Helsinki School of Economics and Business Administration. Mr. Hong
served as Deputy Senior Manager of the PC Business Department of IBM Korea, Senior Vice President
of the Enterprise Computing Group of Compaq Korea between 1998 and 2002, Senior Vice President of
the Enterprise Solution Group of HP Korea between June 2002 and December 2002 and Representative
Director of Cybase Korea from February 2003 until he joined us.
Eric Choi
has served as our Senior Executive Vice President and Head of the Sales Channel
Management Headquarters since January 2006. He was appointed on January 1, 2006. He served as
President & CEO of SAP Korea from 2000 until 2002, President & CEO of webMethods Korea from 2003
until 2005 and President of Siebel Systems Korea in 2005.
Mark D. Pitchford
has served as our Executive Vice President and Chief Marketing Officer since
May 2006. He received a masters in business administration from Santa Clara University. He served
as Vice President of Consumer Marketing at Pacific Bell from 1984 to 1997, Vice President of
Consumer
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Marketing at SBC Communications, Inc. from 1997 to 1999 and Senior Vice President of Marketing
at Qwest from 1999 to 2005. He served as our International Sales & Marketing Consultant from 2005
to April 2006, when he was promoted to Head of the Marketing Headquarters of hanarotelecom.
Janice Lee
has served as our Senior Executive Vice President since January 2006 and Chief
Financial Officer since May 2004. From December 1998 until May 2004, she served as Chief Financial
Officer and Financial Projects Manager of Volvo Construction Machinery Korea. From 1993 until
November 1998, she served as Financial Controller at Daewoo Heavy Industries America. Ms. Lee
received a bachelor of arts in English from Ewha Womans University in 1983, masters in finance from
Ohio State University in 1986, masters in accounting from Cleveland State University in 1990 and
executive masters in business administration from the University of Chicago in 2003.
Matt Lee
has served as our Executive Vice President since January 2006 and Chief Business
Officer since January 2005. He previously served as Vice President of Nokia Networks, Managing
Director of Excel Tech, General Manager of Hyundai Electronics, and Member of Technical Staff in
AT&T Bell Laboratories. Mr. Lee received a bachelor of arts in mathematics in 1984, masters in
mathematics in 1985 and masters in statistics in 1986 from the University of Illinois,
Urbana-Champaign.
Kyu Shik Shin
has served as a Executive Vice President and the Head of Corporate Business
Headquarters of hanarotelecom since January 2006. From 1985 to 2003, he served 10 years in IBM, 9
years in COMPAQ and HP as an Enterprise sales director. Mr. Shin received a bachelor of food
technology from Seoul National University in 1981.
Chong Hoon Park
has served as an Executive Vice President and the Head of External
Collaboration/Strategy Headquarters at hanarotelecom since January 2006. From June 1999 to
December 2004, Mr. Park served as a Research Fellow of Telecom Policy Division at KISDI. He
received a bachelor of economics and mathematics from University of Wisconsin at Madison, an MBA
from George Washington University and a Ph.D. in economics from Northwestern University.
Young Bo Chang
has served as a Senior Vice President and the Head of the Financial Management
Unit of hanarotelecom since January 2005. From February 2004 to December 2004, he served as the
Vice President and Head of the Investor Relations team. Mr. Chang previously served as a Senior
Director at Jardine Fleming Securities from 1995 to 2000 and as a Vice President at JPMorgan from
2000. He received a bachelor of political and diplomatic science at Yonsei University in Korea and
MBA from the Kellogg School of Management of Northwestern University in 1986.
Geon Jun Park
has served as our Senior Vice President and the Head of Network Operation Unit
since March 2004. From December 1992 to October 1997, he served as Director of Network Cable
Planning of Dacom. Mr. Park received a bachelor of electronic engineering from Ah-ju University in
1983.
Sang Hwan Oh
has served as a Senior Vice President and the Head of the Business Alliance Unit
(Vice President) since January 2005. He served as a Senior Manager of the Mass Marketing Division
of Dacom before joining hanarotelecom as the Head of the Honam Branch Office in 2005. He was
promoted to Senior Vice President on January 1, 2006. He became the Head of the Business Alliance
Unit in March 2006.
Seok Ho Lee
has served as a Senior Vice President and the Head of the Busan Branch Office
since January 2006. He was promoted from Vice President to Senior Vice President on January 1,
2006. He worked at the Corporate Business Headquarters of Dacom before becoming the Head of the
Busan Branch Office of hanarotelecom in December 2003.
Myung Heon Choi
has served as a Senior Vice President and the Head of the Choongchung Branch
Office since January 2006. He was promoted from Vice President to Senior Vice President on January
1, 2006. He worked at the Local Network Facility Headquarters of Dacom before joining hanarotelecom
as the Head of the Choongchung Branch Office in December 2003.
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Sang Jin Jeun
has served as a Senior Vice President and the Head of the Communications Unit
since January 2006. He was appointed on January 1, 2006. He received a bachelor of arts in
government and international affairs from Augustana College in 1989 and a master of arts in east
Asian studies from University of Illinois at Urbana-Champaign in 1991. From October 2005 and January
2006, he served as head of the Internal Communications of SC First Bank.
Marshall J. Cochrane
has served as a Senior Vice President and Chief Procurement Officer since
February 2006. He was appointed on February 27, 2006. He received a bachelor of arts in sociology
from United States International University and a masters in industrial administration from
Carnegie Mellon University. He has served as Vice President of Pac TelSBC Corp and Chief
Procurement Officer of Cochrane Consulting Services.
Kyung Yu Min
has served as a Senior Vice President and the Head of the Kyungbuk Branch Office
of hanarotelecom since April 2006. He served as the Head of the Leased Line Team Facilities Part at
Dacom prior to joining hanarotelecom as the Head of the Product Planning Unit (Vice President) in
2005. He was promoted to the Head of the Kyungbuk Branch Office (Senior Vice President) on April
17, 2006.
Yeon Ho Kim
has served as a Senior Vice President and the Head of the Kangnam Branch Office
since April 2006. He worked at the SI Headquarters of Samsung SDS before joining hanarotelecom as
the Head of the Business Development 1 Team (Vice President) under the Business Development Unit on
February 14, 2005. After working as the Head of the Information and Technology Unit (Senior Vice
President), he became the Head of the Kangnam Branch Office (Senior Vice President) on April 17,
2006.
Myung Ju Ko
has served as a Senior Vice President and the Head of the Human Resources
Headquarters Unit since April 2006. He received a bachelor of arts in archaeology and art history
from Seoul National University. He worked at Daewoo Motor, Hungkuk Life Insurance, Daehan Synthetic
Fiber and Sehwa Girls' High School. On April 1, 2006, he joined hanarotelecom as the Head of the
Human Resources Headquarters Unit (Senior Vice President).
Baeky Rhee
has served as a Senior Vice President and an Executive Vice President of Hanaro
T&I, Inc. since April 2006. He received a bachelor of engineering from Inha University and a master
of arts from the Graduate School of Business Administration of Ajou University. He served as a
partner of PWC Consulting, general manager of Customer Relationship Management at Locus
Technologies and general manager of telemarketing at AIG Life Insurance. On April 24, 2006, he
became a Senior Vice President of hanarotelecom and an Executive Vice President of Hanaro T & I, an
affiliate of hanarotelecom.
There are no family relationships between our directors and officers.
The board of directors and executive officers may be contacted through our headquarters at
hanarotelecom incorporated., 17-7 Yeouido-dong, Yeongdeungpo-gu, Seoul 150-874, Korea.
B. Compensation
We paid an aggregate of Won 2.0 billion as compensation during 2005 to our directors and
executive officers as a group. In addition, we set aside or accrued during 2005 an aggregate
amount of Won 1.88 billion to provide retirement and severance benefits for our directors and
executive officers (including our statutory auditor). Of this amount, Won 1.79 billion was paid to
directors and outside directors and Won 0.08 billion was paid to our audit committee members in
2005. In particular, the paid amount includes retirement and severance benefits paid to our former
Representative Director Chang Bun Yoon, who resigned on August 12, 2005.
We also granted to our directors and executive officers 2,922,250 stock options during 2005
and 2006 under our stock option plan. For a detailed description of the stock options, as well as
the stock option plan, see "Item 6.E. Share Ownership—Stock Option Plan."
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From January 1, 2005 to March 31, 2006, a total of 5,260,000 stock options were granted and
2,337,750 stock options were cancelled. As of the end of April 2006, we have outstanding employee
stock options to purchase a total of 17,936,481 common shares.
C. Board Practices
Board of Directors
General
. The board of directors has the ultimate responsibility for the administration of the
affairs of hanarotelecom. Our Articles of Incorporation, as currently in effect, provide for a
board of directors comprised of standing directors and non-standing directors, including outside
directors. Non-standing directors have the same rights and duties as those of standing directors,
but are not officers, or otherwise employees, of hanarotelecom. Under the Korean Commercial Code
and our Articles of Incorporation, directors serve a three-year term but if the term ends prior to
the date of the ordinary general meeting of shareholders in the last fiscal year of their term, the
term will be extended until the close of the ordinary general meeting of shareholders. Our
Articles of Incorporation provide for a board of directors consisting of up to ten directors in
total. Our Articles of Incorporation further provide that any person who is employed by a company
that conducts business in Korea that is in competition with our business objectives or a company
belonging to the same group of companies as such competitor company pursuant to the Monopoly
Regulation and Fair Trade Act, cannot be a director of hanarotelecom and any existing director
(including those who were appointed prior to the amendments to the Articles of Incorporation) shall
immediately lose his or her directorship if the foregoing restriction becomes applicable. The
directors are elected at a general meeting of shareholders by a majority of the vote of the
shareholders present or represented, subject to such majority equaling at least one-quarter of all
issued and outstanding shares with voting rights. None of our directors is party to a service
contract with us that provides for benefits upon termination of employment.
Shareholders' Agreement
. Our major shareholders that form the investment consortium led by
AIG, Newbridge and TVG are parties to a shareholders' agreement governing the terms of their
investments in us. See "Item 7.A. Major Shareholders" for more information with respect to the
beneficial ownership of our common shares by the major shareholders. Wilfried Kaffenberger, David
Yeung, Paul Chen, Varun Bery, Steven J. Schneider, Afshin Mohebbi, Peter Whang and Byung Moo Park
were appointed to the board of directors of hanarotelecom pursuant to the terms of the agreement.
Under the Korean Commercial Code and our board regulations, any director that has a special
interest with respect to the agenda of a board meeting may not exercise his voting rights in such
board meeting.
Audit Committee
. Under the Korean Securities and Exchange Act, we must establish an audit
committee instead of appointing a statutory internal auditor. Our Articles of Incorporation and
Audit Committee Regulations provide that the Audit Committee, which must consist of three or more
directors, and of which at least two-thirds should be outside directors, is responsible for
examining internal transactions and potential conflicts of interest and reviewing accounting and
other relevant matters. The Audit Committee has the right to request the board of directors to
convene a shareholders' meeting by providing a document that sets forth the agenda and reasons.
Our board of directors established the Audit Committee on March 17, 2000 in accordance with
our Articles of Incorporation. Our Audit Committee consists of three outside directors: Sung Kyu
Park, Sun Woo Kim and Peter Whang. Mr. Sung Kyou Park serves as the chairman of the Audit
Committee. Byung Moo Park was appointed as Representative Director and Peter Whang was appointed as
an audit committee member who is specially related to the largest shareholder.
Remuneration Committee
. We have a President Compensation Committee and an Officers
Compensation Committee. The President Compensation Committee is composed of our outside directors,
Varun Bery and Paul Chen, and our non-standing directors, David Yeung and Wilfried Kaffenberger.
David Yeung serves as chairman of the four-member committee. The Officers Compensation Committee is
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composed of our Representative Director Byung-Moo Park, outside directors, Varun Bery and Paul
Chen, and non-standing directors, David Yeung and Wilfried Kaffenberger. David Yeung serves as
chairman of the five-member committee.
Outside Directors.
Our outside directors are appointed from among those persons who do not
have a special relationship with us that would interfere with the exercise of their independent
judgment. Our Articles of Incorporation prohibit a person who does not have the qualifications
under the Korean Securities and Exchange Act or any other statutes from being appointed as an
outside director, and in the event that an outside director falls under one of these categories,
then he or she will be disqualified from office.
Paul Chen, Varun Bery, Steven J. Schneider, Afshin Mohebbi, Sung Kyou Park and Sun Woo Kim
currently serve on the board of directors as outside directors.
For additional information on board practices, see "Item 6.A. Directors and Senior
Management."
D. Employees
As of December 31, 2005, we had a total of 1,461 employees and an additional 128 full-time
employees employed on a contractual basis. The following chart shows the number of permanent
employees by functional areas.
As of December 31,
2003
2004
2005
Planning and management.
169
258
171
Information technology
54
55
57
Marketing and sales
565
480
479
Network and engineering.
647
684
711
Research and development
54
55
43
Total
1,489
1,532
1,461
We have a trade union, called "hanarotelecom Trade Union," which is a member organization
of the Federation of Korean Trade Union. Of the 1,199 employees who could apply for the union
membership, 92.9% or 1,114 are members, of which seven members are serving as full-time union
members. We have not experienced any work stoppages. We consider our relations with employees to
be good.
As with most other Korean companies, our employees are granted wage increases annually. In
addition, we provide other benefits to our employees, including subsidized housing, medical care
and financial assistance with the education of their children.
In accordance with Korean labor laws, employees who terminate their employment with more than
one year of service are entitled to receive a lump sum payment based on the length of their service
and their rate of pay at the time of leaving our employment. They do not receive a pension annuity
from us.
As of December 31, 2005, we have provided loans and guarantees to our employees in the amount
of Won 15.1 billion for the purchase of our common shares through our employee stock ownership
association. The loans are secured by the shares purchased. As of May 31, 2006, we have also
provided housing loans to our employees in the amount of Won 8.6 billion, of which 1.45 billion was
newly provided during 2005. These loans are secured by accrued severance benefits of the borrowing
employees. As of May31, 2006, we have not experienced any defaults under these loans. The loans
are provided as a benefit to our employees and are not required under Korean law. Our officers and
directors are not eligible for these loans.
During 2005, we averaged 13 part-time employees at the end of each month.
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E. Share Ownership
No director or member of senior management beneficially owns 1.0% or more of our shares on an
individual basis.
Stock Option Plan
We may, by special resolution of the shareholders, grant stock options to our officers and
employees who have contributed or are qualified to contribute to our establishment, management and
technical innovation pursuant to our Articles of Incorporation and the Korean Securities and
Exchange Act, exercisable for up to an aggregate of 15% of our total number of issued and
outstanding shares, provided that up to an aggregate of 1% of our total number of issued and
outstanding shares may be granted by resolution of the board of directors. However, stock options
may not be granted to (1) our largest shareholder or its related parties, (2) any shareholder or
its related parties who owns, directly or indirectly, 10% or more of our outstanding shares having
voting rights or certificates of capital contribution of paid-in capital, or (3) an officer or
employee who becomes a major shareholder as described in paragraph (2) above upon exercise of the
stock option.
According to our Articles of Incorporation, the stock options are exercisable for our common
shares at an exercise price per share determined according to relevant laws and regulations. The
stock option must be exercised within five years from the date on which the stock option may first
be exercised.
The stock option may be cancelled by a resolution of our board of directors (1) if the officer
or employee holding the option resigns voluntarily or is discharged from office; (2) if the officer
or employee holding the option by willful misconduct or by negligence inflicts substantial or
material damage to us, or (3) in the event of the occurrence of any cause for cancellation of stock
options specified in the stock option agreement between us and the officer or employee.
On March 1, 1999, we granted stock options to our then Director, President and Chief Executive
Officer, Mr. Yun-Sik Shin. Mr. Shin resigned from his offices on March 28, 2003. Until his
options are cancelled by a resolution of our board of directors, Mr. Shin may exercise his options
to purchase 50,000 shares of common shares at the price of Won 5,630 per share during the period
beginning on March 1, 2002 and ending February 27, 2007. On October 1, 1999, we granted stock
options to some of our directors, officers and statutory internal auditor to purchase 120,000
shares of common shares at the price of Won 19,910 during the period beginning on October 1, 2002
and ending on September 30, 2007. The exercise price per share was set at the minimum price
permitted under the working rules of the Korean Securities and Exchange Act applicable at the time
the options were granted. Pursuant to the working rules of the Korean Securities and Exchange Act,
the formula for determining permissible price for the stock options granted on March 1, 1999 and
October 1, 1999 was the higher of (1) the average of the closing prices of the common shares during
a three month period prior to the date of the special resolution of the shareholders granting the
stock option and (2) the par value of the common shares.
On March 17, 2000, we granted 882 of our employees (including certain directors and officers),
employed by us as of December 31, 1999, stock options to purchase a total of 1,771,566 common
shares at a price of Won 17,750 per share during the period beginning March 18, 2003 and ending
March 17, 2008. We allocated the stock options based on employee seniority and position. The
employees' exercise price per share was set at the minimum price permitted under the amendment of
the working rules of the Korean Securities and Exchange Act, effective from March 15, 2000. Under
the price formula currently in effect, the option price per share shall be the higher of (1) the
average of (x) the weighted average of the closing prices of the common shares during a two-month
period immediately preceding the option granting date, (y) the weighted average of the closing
prices of the common shares during the one-month period immediately preceding the option granting
date, and (z) the weighted average of closing prices of the common shares during the one week
period immediately preceding the option granting date, and (2) the par value of the common shares.
No stock options were granted at the shareholders' meetings held in 2001, 2002 and 2003.
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On December 16, 2004, we granted 1,451 of our employees (including certain directors and
officers), employed by us as of October 25, 2004, stock options to purchase a total of 19,772,890
common shares at a strike price currently of Won 5,000 per share during the period beginning
December 17, 2006 and ending December 16, 2011.
On March 25, 2005, we granted seven of our officers stock options to purchase a total of
610,000 common shares at a price of Won 5,000 per share during the period beginning March 26, 2007
and ending March 25, 2012.
On February 27, 2006, we cancelled stock options granted to 13 former and current officers
(including Senior Executive Vice President Janice Lee) to purchase a total of 1.9 million common
shares (following a voluntary surrender of such options by the holders), and on March 8, 2006 we
cancelled stock options granted to seven officers (including then Chairman and CEO Soon Yub Kwon)
to purchase a total of 2.13 million common shares (following a voluntary surrender of such
options by the holders). On March 24, 2006, we granted seven of our officers (including Senior
Executive Vice President Janice Lee) stock options to purchase a total of 4.65 million common
shares. The exercise price is Won 5,000, and the exercise period is from March 25, 2008 to March
24, 2013.
We have outstanding employee stock options to purchase a total of 17,936,481 common shares.
Stock Ownership Association
An employee stock ownership association under the Employee Welfare Basic Law is an association
formed by the employees of a corporation for the purpose of acquiring and managing stocks issued by
such corporation. Only full-time workers of a corporation may join the employee stock ownership
association and officers elected by a shareholders' meeting, shareholders of such corporation
(excluding certain minority shareholders), and part-time workers are not qualified to become a
member of the association. The right to become a member of the employee stock ownership
association must be available to all full-time employees and the regulations governing the
association must contain certain matters relating to the operation and management of the
association.
We established our employee stock ownership association in November 1997. As of December 31,
2004, 500 employees of hanarotelecom were depositing members of the employee stock ownership
association and the association held 2,667,982 shares of our common shares. As of March 31, 2006,
370 employees of hanarotelecom were members of the employee stock ownership association and the
association held 1,088,823 common shares.
Item 7. Major Shareholders and Related Party Transactions.
A. Major Shareholders
The following table sets forth information with respect to the beneficial ownership of our
common shares, on a fully diluted basis, as of December 31, 2005, by each person known to us to own
beneficially more than 1% of our common shares.
Shares Beneficially Owned as of
December 31, 2005
Name
Number
Percent
AIG-Newbridge-TVG Consortium
182,812,500
39.56
%
SK Telecom
22,090,000
4.78
Dacom and its affiliated companies
18,727,291
4.05
Korea Investment and Trust Management Co., Ltd.
15,993,227
3.46
Daewoo Securities
12,000,000
2.60
Credit Suisse Financial
6,054,513
1.31
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Shares Beneficially Owned as of
December 31, 2005
Name
Number
Percent
NTC-SAUDI ARAB MASTER FU
4,999,155
1.08
The number of shares held by the AIG-Newbridge-TVG Consortium includes shares directly
held by Newbridge Asia HT, L.P., AIF II NT Ltd., AOF NT, Ltd., United Classic Investment Limited
and five other HT Holdings L.P. companies. As of December 31, 2005, Newbridge directly owned
49,535,799 common shares, AIF II NT Ltd. directly owned 38,456,250 common shares, AOF NT, Ltd.
directly owned 24,721,875 common shares, United Classic Investment Limited directly owned
20,392,746 common shares and the HT Holdings L.P. companies directly owned 49,705,830.
The number of shares held by Dacom includes shares directly held by LGEI Inc. and LG Telecom
Co., Ltd. Dacom and the other two companies are members of the LG Group. As of December 31, 2005,
Dacom directly owned 8,964,561 common shares and LG Telecom directly owned 5,397,574 common
shares.
None of hanarotelecom's common shares entitles the holder to any preferential voting rights.
As of April 1, 2001, we and our Korean affiliates have been designated as member companies of
a "business group subject to restrictions on debt guarantees" as well as a "business group subject
to restrictions on mutual shareholding" by the FTC based on the new criteria prescribed by the
amended Monopoly Regulation and Fair Trade Act.
As of the end of 2005, the number of US residents holding ADRs or our original shares
(including Deutsche Bank which was counted as one shareholder) on our shareholder registry was 72
and they owned a total of 7,139,747 common shares, or 1.55% of our outstanding common shares.
We know of no arrangements the operation of which may at a later time result in a change of
control.
B. Related Party Transactions
Relationship with AIG-Newbridge-TVG Consortium
On November 18, 2003, we issued common shares pursuant to an Investment Agreement dated
September 9, 2003. The Investment Agreement provides that we will not take certain significant
corporate actions without the consent of the investors so long as the investors, together with
their affiliates, continue to hold an aggregate of 15.0% or more of our outstanding common shares.
We also entered into an Investors' Rights Agreement with the investors and a Management Rights
Agreement with certain of the investors, each dated as of November 18, 2003.
As of December 31, 2005, the AIG-Newbridge-TVG Consortium beneficially owned an aggregate of
39.56% of our outstanding common shares.
Investors' Rights Agreement
Pursuant to the Investors' Rights Agreement, we have provided certain registration rights to
the investors with respect to the shares in which they originally invested. We have agreed to file
with the U.S. Securities and Exchange Commission, or SEC, a shelf registration statement on Form
F-3 covering resales of the investors' shares by the holders thereof within 90 days after the
written request of the investors' representative (made not less than 360 days after November 18,
2003). We are not required to effect and complete more than three such shelf registration
statements. In addition, such holders have certain rights to "piggyback" on other registration
statements relating to our common shares and the right to cause us to effect up to six demand
registrations pursuant to the terms of the Investors' Rights Agreement. The term of this agreement
terminates upon the earlier of (1) the sixth anniversary of November 18, 2003 or (2) the
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date as of which all of the registrable securities have been sold pursuant to a registration
statement or the holders are permitted to sell their registrable securities under Rule 144(k) under
the Securities Act.
Management Rights Agreement
Pursuant to the Management Rights Agreement, we have granted to certain of the investors or
their affiliates, certain management rights in hanarotelecom so long as such investor owns any the
shares in which they originally invested, including, but not limited to, the right to make
proposals, recommendations and suggestions to our board of directors, the right to discuss our and
our subsidiaries' business and affairs with our board of directors, officers and independent
accountants, the right to examine our books, records and documents as may be reasonably requested
and the right to be informed in advance with respect to any significant corporate actions.
Relationship with Dacom
As of December 31, 2005, Dacom and its affiliated companies beneficially owned 4.05% of our
common shares.
We have entered into several interconnection agreements with Dacom with respect to Dacom's
domestic and international long distance networks and data communications network, several of our
local telephony service areas and certain telecommunications facilities. We have also acquired
from Dacom a right to use two Korea — Japan international leased lines each supporting a bandwidth
capacity of 155 Mbps, three Korea — Asia international leased lines (half circuits), two
Korea — Vietnam international leased lines (half circuits) and two Korea — Belgium leased lines (half
circuits). In addition, we have an agreement with Dacom which allows our subscribers who use Dacom
for domestic and international long-distance services to receive only one monthly statement for
local, long-distance and international call charges.
Relationship with SK chaebol
As of December 31, 2005, SK Telecom beneficially owned 4.78% of our outstanding shares. In
December 1998 and in February 2001, we entered into an interconnection agreement with SK Telecom,
under which we interconnect to SK Telecom's mobile telecommunications network and wireless paging
service network. The interconnection charges are based on the standard rates established by the
Korean government. Pursuant to the February 2001 agreement, we entered into a further agreement
with SK Telecom in July 2001, under which SK Telecom's mobile telecommunications network is
connected to our local telephone network in the following cities: Jeon-ju, Chang-won/Masan,
Chung-ju, Chun-ahn and Su-chun.
We also leased our office space of a building in Bundang-Ku, Sungnam from SK Telecom for which
we paid a rental deposit of Won 2.1 billion for five years from May 3, 1999 until May 2, 2004. We
have continued to lease the space under the same terms.
Relationship with Cable Television Network System Operators
On December 15, 2004, we entered into four agreements with the Joong-Ang MSO, a consortium of
12 cable television network system operators pursuant to which we agreed to sell all of our shares
in Hanaro WEB(n)TV to the Joong-Ang MSO for a purchase price of Won 32.0 billion and to outsource
our sales, customer service and HFC cable related services to the Joong-Ang MSO. In addition, the
Joong-Ang MSO has agreed not to engage in the broadband Internet access business or to cooperate
with or enter into similar agreements or arrangements with another ISP for a period of five years
from December 15, 2004.
We have agreements with GS Digital Broadcasting, Korea Cable TV Taegu Broadcasting, Korea
Cable TV Kwangju Broadcasting, Chung-buk Broadcasting and Hanbat Cable Network pursuant to which we
agreed to provide our HFC network to these cable television network system operators. These cable
television network system operators are responsible for maintaining subscriber lines and subscriber
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relationships (including customer service, troubleshooting and related services) within those
areas where they are licensed to provide cable broadcasting services. Through our relationships
with cable television network system operators, we seek to establish mutually beneficial
arrangements with respect to the provision of broadband Internet access, marketing, sales and
customer services.
For time to time, we have provided secured or guaranteed interest-free loans to cable network
operators. These loans were provided pursuant to a loan program we commenced in 2000 as a means of
ensuring that cable television network system operators, with which we had or intended to have
network leasing arrangements, had the funds to upgrade their networks. The terms of each of those
loans require repayment after a specified period (ranging from one year to three years) from the
date of the loan by equal installments on a quarterly basis for two years. As of December 31,
2005, we had outstanding interest-free loans to a cable network operator in the amount of Won 70
million. The loan agreements require the cable network operators to use the loan proceeds to
upgrade their systems so that our services can be provided over their networks. The loan
agreements also require the borrower to lease to us its cable network for our HFC-based Internet
access services upon completion of the system upgrade.
Relationship with Dreamline
In December 2001, we acquired a 32.2% equity interest in Dreamline and in January 2002, we
entered into an agreement with Dreamline to outsource to it our subscriber sales business. Our
equity interest in Dreamline was reduced to 14.18% in January 2004. The scope of the outsourced
business includes management of our subscribers, attracting new subscribers, receipt of
subscriptions and handling other subscription related operations. In April 2002, we also entered
into an agreement with Dreamline to outsource to it the business of managing our marketing channels
and regional sales offices and to provide installation and customer services to our subscribers in
our HFC service areas. The term of each of these agreements is one year (renewable for one year
periods), and has been renewed on the same terms and is currently in effect. Under a stock purchase
agreement with CJ Corporation, the previous controlling shareholder of Dreamline, CJ Corporation,
has an obligation not to compete, directly or indirectly, with us in the leased line and broadband
services or other related or similar services for five years from the closing of the stock purchase
agreement. However, affiliates of CJ Corporation have been engaged in business in those service
areas, and we filed certain lawsuits against CJ Corporation to enjoin its affiliates from providing
such services and to seek monetary compensation caused by said violation and CJ Corporation's
failure to disclose certain contingent tax liabilities. See "Item 8.A. Consolidated Statements
and Other Financial Information — Legal Proceedings."
C. Interests of Experts and Counsel
Not applicable.
Item 8. Financial Information.
A. Consolidated Statements and Other Financial Information
The information required by this item is set forth in our consolidated financial statements
starting on page F-1 of this Annual Report.
Legal Proceedings
Legal Proceeding related to Horizontal Collusion with other Telecommunications Companies
In 2005, the Korean Fair Trade Commission, or the FTC, announced that, together with KT, we
formed a price cartel with other telecommunications companies with respect to local telephony
service, leased line service, domestic long distance telephony service and broadband service, and
imposed an
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aggregate fine of Won 2,498 million and certain administrative orders, including publication
of our violation in a daily newspaper. We have objected to the monetary fine and certain
administrative orders, and have subsequently filed a series of lawsuits against the FTC in the
Seoul High Court, seeking cancellation of the fines and certain administrative orders imposed by
the FTC against us. Currently, three lawsuits are pending, and the outcomes of these lawsuits are
uncertain.
Following the announcement of the FTC decision, a citizen activist group announced its
intention to solicit subscribers harmed by the horizontal collusion to file a civil lawsuit against
us and KT. After such solicitation, in October 2005, a total of 484 of our subscribers for local
telephony service have filed lawsuits seeking monetary damages from us and KT, based on the FTC
conclusion of horizontal collusion with respect to local telephony service. The lawsuits are
pending in the Seoul Central District Court and we are uncertain as to the outcome of the lawsuits.
If damages are awarded to the plaintiffs in these lawsuits, we may face additional actions from
the same subscribers based on findings of horizontal collusion with respect to other services
and/or by other subscribers based on similar grounds. The outcome of current or any possible
related lawsuits may adversely affect our competitive environment.
Legal Proceedings related to Internet Outage
On January 25, 2003, the Slammer Worm originating from countries such as the United States and
Australia infected the MS SQL Server 2000 of Microsoft Corporation and disrupted the Internet
service between Microsoft and a number of other Internet service providers, including us. As a
result, numerous Internet users experienced outages for five hours and five minutes on their email
servers and websites. We are a party to some legal proceedings in relation to such outages,
including one proceeding we assumed from Thrunet as a result of our merger with Thrunet.
On February 25, 2003, with the help of the Green Consumer Network, a citizen activist group,
seven customers filed a petition with the Communications Commission. On October 13, 2003, the
Communications Commission awarded damages to the petitioners according to the terms of our standard
hanafos service agreement. However, the Communications Commission awarded only actual damages for
the disruption of service for five hours, without imposing a penalty on us, which resulted in an
award of Won 1,974 for the seven petitioners. To challenge this award, we filed a countersuit with
the Seoul Central District Court on December 12, 2003, seeking declaratory judgment that we have no
liability against the petitioners.
On April 30, 2003, 1,516 Internet users (out of whom 421 were our customers), 71 Internet cafe
owners and OhmyNews, Co., Ltd., an Internet news media business, also sued a number of Internet
service providers, including us, Microsoft, and the Government for failure to provide stable
Internet service without major disruptions, negligence in maintaining a stable network system and
failure in taking necessary measures to prevent further damage. The total sum claimed by these
plaintiffs is Won 0.1 billion. Among these lawsuits, the court rejected a lawsuit filed by OhmyNews
alleging that the defendant has no obligation to procure a stable network system against OhmyNews.
Co., Ltd., which was not a direct customer under any agreement with the defendant.
The legal proceedings immediately described above (other than the lawsuit raised by OhmyNews
Co., Ltd.) are currently pending in the Seoul Central District Court. We are not certain whether
the outcome of the above legal proceedings will be decided in our favor. If we lose, we may face
additional legal actions based on similar grounds by other customers or Internet users, which could
adversely affect our business, financial condition and results of operations.
Legal Proceedings against CJ corporation
In December 2001, we acquired 32.2% equity interest in Dreamline, which was reduced to 14.18%
in January 2004. Under a stock purchase agreement with CJ Corporation, the previous controlling
shareholder of Dreamline, CJ Corporation, has an obligation not to compete, directly or indirectly,
with us in the leased line and broadband services or other related or similar services for five
years from the closing of the stock purchase agreement. However, CJ Corporation has continuously
been engaged in competition with us in those service areas through its affiliates, and on August
23, 2005, we commenced a
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lawsuit in the Seoul Central District Court against CJ Corporation seeking to enjoin CJ
Corporation from engaging in such business through its affiliates. Our claim also included
compensation for damages caused by said violation and failure of CJ Corporation to disclose certain
contingent tax liabilities in connection with our acquisition of the equity interest in Dreamline
in the amount of about Won 16.8 billion. We also filed a preliminary injunction in the competent
court seeking immediate suspension of CJ Corporation engaging in prohibited business through its
affiliates. We won the preliminary injunction in the Seoul Highest Court, and the court decided in
our favor to impose on CJ Corporation a monetary penalty equivalent to Won 20 million per day, if
CJ Corporation continuously engages in such prohibited business during the period prohibited under
the stock purchase agreement. CJ Corporation appealed the injunction awarded by the court. The
court has not yet issued a final decision on the preliminary injunction, and the main lawsuit has
not been finally determined. We are also discussing with CJ Corporation the possible settlement of
all relevant lawsuits subject to the satisfaction of certain conditions, but a conclusive
settlement has not yet been reached.
Other Legal Proceedings
There are several other legal proceedings to which we are a party. However, such pending
legal proceedings involve minor claims, none of which is likely to have a material adverse effect
on our business or financial condition.
Dividend Policy
Under our Articles of Incorporation, we are permitted to pay dividends to our shareholders
beginning in the first fiscal year in which our aggregate carried-over loss incurred since the date
of commencement of our local telephony services has been made up in full. In addition, the
declaration and payment of dividends are subject to our earnings, our financial condition and other
factors. We may decide that it is not in our best interest to pay dividends in any particular
period. We currently expect to pay no dividends for 2006. If we declare cash dividends, the
dividends will be paid to the depositary for the ADSs in Won and then converted by the depositary
into U.S. dollars.
B. Significant Changes
None.
Item 9. The Offer and Listing
A. Offer and Listing Details
Market Price Information
With the enactment of the Korea Securities and Futures Exchange Act, which came into effect on
January 27, 2005, the three existing spot and futures exchanges (which were the Korea Stock
Exchange, Korean Futures Exchange, and KOSDAQ) and KOSDAQ Committee, a sub-organization of Korea
Stock Dealers Association, were merged and integrated into a newly established joint-stock company
called the Korea Exchange Inc. or the KRX. There are three different markets run by the KRX: the
KRX Stock Market, the KRX KOSDAQ Market and the KRX Futures Market. The KRX, headquartered in
Busan, has one branch located in Seoul. Our common shares are traded on the KRX KOSDAQ Market,
under the symbol "033630." Our shares were listed on Korea Securities Dealers Association
Automated Quotation Market (KOSDAQ) in November 1998.
The KOSDAQ market index is computed by taking the aggregate market capitalization of all
companies included in the index as a percentage of the market capitalization of the base date (July
1, 1996), multiplied by 100. From January 26, 2004, the base figure has changed to 1,000.
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The most widely followed price index of stocks quoted on stock exchanges in Korea is the
Korea Composite Stock Price Index, or KOSPI, an index of all equities listed on the KRX Stock
Market. The KOSPI is computed by aggregating the market capitalization of all listed companies and
(subject to certain adjustments) by expressing this aggregate as a percentage of the aggregate
market capitalization of all listed companies as of the base date (January 4, 1980).
The following table sets forth, for the periods indicated, (1) the high and low sales price
for our common shares as reported on the KRX, (2) the average daily trading volume of our shares,
(3) the highs and lows of the KOSDAQ Index and (4) the highs and lows of the KOSPI:
Price per share of
Average daily
our common shares
trading volume of
KOSDAQ
KOSPI
High
Low
our shares
High
Low
High
Low
Year ended December 31
2001
Won
5,580
Won
1,930
6,508,725
876.50
460.50
704.50
468.76
2002
7,850
3,120
5,082,647
943.00
436.70
937.61
584.04
2003
4,420
2,100
6,339,993
535.00
346.40
822.16
515.24
2004
3,650
2,345
2,073,122
491.53
324.71
936.06
719.59
2005
3,585
2,380
3,471,167
747.96
390.40
1379.37
870.84
Quarter Ended
March 31, 2004
3,650
3,205
1,956,487
458.40
420.28
907.43
821.26
June 30, 2004
3,350
2,345
2,623,955
491.53
361.17
936.06
728.98
September 30, 2004
3,325
2,370
1,798,398
383.84
324.71
857.15
719.59
December 31, 2004
3,640
3,165
1,930,121
382.71
350.70
895.92
808.14
March 31, 2005
3,585
2,865
3,192,942
515.04
390.40
1,022.79
870.84
June 30, 2005
2,880
2,380
2,049,783
503.21
423.30
1,010.80
911.30
September 30, 2005
2,920
2,400
5,136,015
571.95
492.66
1,231.22
1,018.02
December 31, 2005
2,860
2,515
3,443,690
747.96
573.19
1,379.37
1,140.72
March 31, 2006
3,000
2,345
5,240,090
754.97
601.33
1,421.79
1,297.43
June 30, 2006 (through May 31)
6,270
2,600
4,617,081
704.57
620.20
1,464.70
1,295.76
Month Ended
December 31, 2005
2,665
2,515
3,666,427
747.96
688.23
1,379.37
1,305.98
January 31, 2006
3,000
2,510
7,593,154
754.97
601.33
1,421.79
1,297.43
February 28, 2006
2,720
2,395
5,895,930
682.36
639.92
1,375.97
1,303.84
March 31, 2006
2,690
2,345
2,397,764
679.19
637.41
1,367.70
1,309.83
April 30, 2006
3,090
2,600
5,218,837
704.57
677.28
1,452.53
1,379.75
May 31, 2006
6,270
5,710
3,187,909
691.89
620.20
1,464.70
1,295.76
A reverse stock split (2:1) without payment to shareholders was approved at our annual
shareholders' meeting held on March 24, 2006. As a result, the number of total outstanding shares
decreased from 463,353,012 to 231,676,506 and paid-in capital decreased from Won 2,316,765,060,000
to 1,158,382,530,000 as of May 3, 2006, the effective date of capital reduction. Due to the
closing of the shareholder register, trading was suspended from April 27, 2006 through May 18,
2006. The data set forth above does not include any retroactive adjustments to the price and
trading volume of our shares for the reverse stock split. In addition, the above data were
tabulated excluding the price and trading volume of our shares during the trading suspension
period.
As of May 2, 2006, the number of our shareholders was 105,502. On May 19, 2006, the first day
of trading after capital reduction, the closing price of our common shares was Won 6,270 per share.
As of May 30, 2006, the closing price was Won 5,880 per share.
Our ADSs have been quoted on the NASDAQ National Market under the symbol "HANA"("HANAD" for 20
trading days from May 19, 2006, which was the first day of trading after capital reduction ) since
March 29, 2000. The price of our ADSs on NASDAQ as of its close of trading on May 31, 2006 was
$5.59 per ADS. The table below shows the high and low closing prices of the ADSs on NASDAQ since
our listing. The following figures regarding the price and trading volume of the ADSs include the
retroactive adjustments to reflect the reverse stock split to all periods prior to such
transaction.
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Average daily
Price per share of our ADS
trading volume of
High
Low
our shares
Year ended December 31
2001
$
8.40
$
2.84
19,970
2002
11.36
5.00
4,449
2003
7.54
3.48
9,981
2004
8.76
3.82
19,860
2005
7.26
4.50
5,420
Quarter Ended
March 31, 2004
8.76
5.30
40,812
June 30, 2004
5.74
4.12
15,710
September 30, 2004
5.98
3.82
16,844
December 31, 2004
6.88
5.72
6,598
March 31, 2005
7.26
5.46
7,016
June 30, 2005
5.80
4.66
7,495
September 30, 2005
5.80
4.70
2,842
December 31, 2005
5.36
4.50
4,384
March 31, 2006
6.00
4.58
3,903
June 30, 2006 (through May 31)
6.30
4.58
4,963
Month Ended:
December 31, 2005
5.10
4.50
6,939
January 31, 2006
6.00
4.80
5,526
February 28, 2006
5.60
4.62
2,352
March 31, 2006
5.22
4.58
3,775
April 30, 2006
6.30
5.20
6,085
May 31, 2006
5.85
4.58
2,437
B. Plan of Distribution
Not applicable.
C. Markets
Our ADSs have been quoted on the NASDAQ National Market under the symbol "HANA" since March
29, 2000. We have decided to pursue deregistration from the SEC and delisting of our ADSs from
NASDAQ and the decision was filed with the SEC on February 22, 2006. We will pursue the delisting
and deregistration process after the relevant law of the United States is enacted and we meet the
basic requirements for such process.
Our common shares have been traded on the KRX KOSDAQ Market under the symbol "033630" since
November 1998.
Description of KOSDAQ
The KOSDAQ was launched on July 1, 1996 as an alternative investment market to the Korea Stock
Exchange, the principal stock exchange in Korea. With the enactment of the Korea Stock and Futures
Exchange Act, which came into effect on January 27, 2005, the three existing spot and futures
exchanges (which were the Korea Stock Exchange, Korean Futures Exchange, and KOSDAQ) and KOSDAQ
Committee, a sub-organization of Korea Stock Dealers Association, were merged and integrated into a
newly established joint-stock company called the Korea Exchange Inc. The KOSDAQ, which became KRX
KOSDAQ Market, a division of newly established KRX, is originally modeled after the NASDAQ National
Market. However, unlike NASDAQ, shares listed on the KRX KOSDAQ Market are traded by the KRX
KOSDAQ Market participants and their brokers through market-makers at a physical exchange located
in Seoul, Korea. The participants also use a central electronic trading system designed to
increase the speed at which orders are matched. The trading hours for the KRX KOSDAQ Market are
9:00 a.m. to 3:00 p.m. Margin trading is not permitted on the KRX KOSDAQ Market and daily price
changes are limited to a range of 15%% of the closing price for the previous trading day.
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The KRX KOSDAQ Market has grown significantly since its inception. As of May 31, 2006, 925
companies were listed on the KRX KOSDAQ Market with an aggregate market capitalization of Won 66.3
trillion. The average daily turnover for 2005 was Won 1,793 billion. Market capitalization on the
KRX KOSDAQ Market is heavily concentrated in the larger companies, with the top 10 companies
comprising approximately 22.70% of total market capitalization and the companies that rank in the
top 5% accounting for 38.41% of total market capitalization as of May 31, 2006. Companies listing
on the KRX KOSDAQ Market must meet its listing requirements and register with the Financial
Supervisory Commission of Korea.
D. Selling Shareholders
Not applicable.
E. Dilution
Not applicable.
F. Expenses of the Issue
Not applicable.
Item 10. Additional Information.
A. Share Capital
On March 24, 2006, our shareholders approved a capital reduction to improve our financial
structure. The capital reduction was completed on May 3, 2006, and as a result, our issued and
outstanding shares changed to 231,676,506 common shares from 463,353,012 common shares and our
paid-in capital changed to Won 1,158,382,530,000 from Won 2,316,756,060,000.
B. Memorandum and Articles of Incorporation
The section below provides summary information relating to the material terms of our capital
stock and our Articles of Incorporation. It also includes a brief summary of certain provisions of
the Securities and Exchange Act, the Commercial Code and related laws of Korea, all as currently in
effect.
Objectives
Article 2 of our Articles of Incorporation states our objectives as follows:
•
to play a leading role in the nation's efforts to accomplish a society of
multimedia super-highway telecommunications industry by efficient performance of
telecommunications business;
•
to establish and operate the nation's second basic communication service network,
as a preparation against any national disaster or calamity, by establishing
diversified communication channels and an automatic recovery system; and
•
to enhance the improvement of end users' convenience and public welfare.
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General
Currently, we are authorized to issue 700,000,000 shares of stock. Under our Articles of
Incorporation, we are authorized to issue four classes of stock, which are registered common stock,
registered preferred stock, registered convertible stock and registered redeemable stock. Our
issued and outstanding shares are all registered common stock.
As of June 13, 2006, and as a result of a recent capital reduction, we had a total of
231,676,506 shares issued and outstanding. All of the issued and outstanding shares are fully paid
and non-assessable and are in registered form. We may issue additional shares without further
shareholders' approval as provided in our Articles of Incorporation. The unissued shares remain
authorized until an amendment to our Articles of Incorporation changes the status of the authorized
shares to unauthorized shares. We can issue share certificates in denominations of up to 10,000
shares. Our common shares have a par value of Won 5,000 per share.
Directors
No director who has a special interest in a matter for resolution can exercise his vote upon
such matter. Under the recent amendment of the Korean Securities and Exchange Act, we are
prohibited from lending money (or other equivalent assets) to, or providing security or
guaranteeing in favor of each of our board of directors or any of our major shareholders (including
any specially related person), except in certain circumstances.
Dividends
Under our Articles of Incorporation, we may pay dividends to our shareholders beginning in the
first fiscal year in which our aggregate carried-over losses incurred since the date of
commencement of our local telephony services have been made up in full. From such fiscal year, we
may distribute dividends to our shareholders in proportion to the number of shares owned by each
shareholder following the approval by the shareholders at an annual general meeting of
shareholders. The shares represented by the ADSs have the same dividend rights as common shares.
We will pay full annual dividends on shares issued during such fiscal year.
We may declare dividends at the annual general meeting of shareholders, which is held within
three months after the end of a fiscal year. Dividends will be paid shortly after the annual
general meeting declaring such dividends. We may distribute dividends in cash or in shares.
However, a dividend in shares must be distributed at par value. If the market price of the shares
is less than par value, dividends in shares may not exceed one-half of the annual dividends. We
have no obligation to pay any dividend unclaimed for five years from the payment date.
Under the Korean Commercial Code, we may pay an annual dividend only out of the excess of our
net assets, on a non-consolidated basis, over the sum of (1) our stated capital, (2) the total
amount of our capital surplus reserve and legal reserve accumulated up to the end of the relevant
dividend period and (3) the legal reserve to be set aside for the annual dividend. In addition, we
may not pay an annual dividend unless we have set aside as legal reserve an amount equal to at
least 10% of the cash portion of the annual dividend or unless we have accumulated a legal reserve
of not less than one-half of our stated capital. We may not use legal reserves to pay cash
dividends but may transfer amounts from legal reserves to reduce an accumulated deficit.
Distribution of Free Shares
In addition to paying dividends in shares out of our retained or current earnings, we may also
distribute to our shareholders an amount transferred from our capital surplus or legal reserve to
our stated capital in the form of free shares. We must distribute such free shares to all our
shareholders in proportion to their existing shareholdings.
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Preemptive Rights and Issuance of Additional Shares
We may issue authorized but unissued shares at the times and, unless otherwise provided in the
Korean Commercial Code, on such terms as our board of directors may determine. We must offer new
shares on uniform terms to all shareholders who have preemptive rights and are listed on our
shareholders' register as of the relevant record date.
Our shareholders are entitled to subscribe for any newly issued shares in proportion to the
number of shares they own, except that under our Articles of Incorporation, if the new shares will
be (1) issued to the public in accordance with the Korean Securities and Exchange Act, (2) issued
by public offering in accordance with the Korean Securities and Exchange Act, (3) issued to our
employee stock ownership association as provided in the Korean Securities and Exchange Act, (4)
issued in the form of depositary receipts in accordance with the Korean Securities and Exchange
Act, (5) issued upon the exercise of stock options which are provided in accordance with the
relevant provision of the Korean Securities and Exchange Act, (6) issued to a foreign
telecommunications company or a foreign financial or investment company that has completed the
foreign investment procedures for the purpose of a strategic alliance relating to our business or
(7) issued to domestic and foreign investors or our officers or employees up to an amount not
exceeding 50% of the then current total issued and outstanding shares for the purpose of realizing
our business objectives, including, but not limited to, improving our financial structure and
entering into new business areas, our board of directors may pass a resolution to issue the new
shares to persons other than existing shareholders.
We must give public notice of preemptive rights regarding new shares and their transferability
at least two weeks before the relevant record date. We will notify shareholders who are entitled
to subscribe for newly issued shares of the deadline for subscription at least two weeks prior to
such deadline. If a shareholder fails to subscribe by the deadline, the shareholder's preemptive
rights will lapse. Our board of directors may determine how to distribute shares for which
preemptive rights have not been exercised and fractional shares.
Under the Korean Securities and Exchange Act, employee stock ownership associations of the
companies that are listed or will be listed on the KRX Stock Market generally have a preemptive
right to subscribe for up to 20% of the shares publicly offered. Although we are not a company
whose shares are listed on the KRX Stock Market, we have by our Articles of Incorporation opted to
grant a right of preemption to our employee stock ownership association on the same terms as are
applicable to companies listed on the KRX Stock Market.
General Meeting of Shareholders
We hold the annual general meeting of shareholders within three months after the end of each
fiscal year. Subject to a board resolution or court approval, we may hold an extraordinary general
meeting of shareholders:
•
as necessary;
•
at the request of holders of an aggregate of 3% or more of our outstanding shares;
•
at the request of shareholders holding an aggregate of 1.5% or more of our
outstanding shares for at least six months; or
•
at the request of our audit committee.
We must give shareholders written notice setting out the date, place and agenda of the meeting
at least two weeks prior to the general meeting of shareholders. However, for holders of less than
1% of the total number of issued and outstanding voting shares, we may give notice by placing not
less than two notices in each of the two daily newspapers published in Seoul, Korea such as "The
Seoul Shinmun" and "Maeil Economic Daily Newspaper," at least two weeks in advance of the meeting.
Shareholders not on
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the shareholders' register as of the record date are not entitled to receive notice of the
general meeting of shareholders or attend or vote at the meeting.
Our shareholders' meetings are held in Seoul, Korea.
Voting Rights
Holders of our shares are entitled to one vote for each share. However, shares held by us
(i.e., treasury shares) or by any corporate entity in which we have, directly or indirectly,
greater than a 10% interest, do not exercise voting rights. The Korean Commercial Code permits
cumulative voting pursuant to which each share entitles the holder thereof to multiple voting
rights equal to the number of directors to be elected at such time. A holder of shares may
exercise all voting rights with respect to his or her shares cumulatively to elect one director,
unless the Articles of Incorporation provide otherwise. However, our Articles of Incorporation do
not provide for cumulative voting.
Our shareholders may adopt resolutions by an affirmative vote of the voting shares present or
represented at the meeting, where the affirmative votes also represent at least one-fourth of our
total voting shares then issued and outstanding. However, under the Korean Commercial Code and our
Articles of Incorporation, the following matters require approval by the holders of at least
two-thirds of the voting shares present or represented at a meeting, where the affirmative votes
also represent at least one-third of our total voting shares then issued and outstanding:
•
amending our Articles of Incorporation;
•
removing a director;
•
effecting a capital reduction;
•
effecting any dissolution, merger or consolidation with respect to us;
•
transferring all or any significant part of our business;
•
the acquisition of all of the business of any other company;
•
the acquisition of a part of the business of any other company, which significantly
affects our business;
•
lease of entire business, delegation of business operations, or the execution,
modification or cancellation of agreements from which profit/losses shall affect both
parties;
•
issuing new shares at a price below par value; or
•
any other matters for which a resolution is required under relevant laws and regulations.
Shareholders may exercise their voting rights by proxy. Under our Articles of Incorporation,
the person exercising the proxy does not have to be a shareholder. A person with a proxy must
present a document evidencing its power of attorney in order to exercise such voting rights.
Holders of ADRs exercise their voting rights through the ADR depositary. Subject to the
provisions of the deposit agreement, ADR holders are entitled to instruct the depositary as to how
to vote the shares underlying their ADSs.
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Rights of Dissenting Shareholders
In some limited circumstances, including the transfer of all or any significant part of our
business and our merger or consolidation with another company, dissenting shareholders have the
right to require us to purchase their shares. To exercise this right, shareholders must submit to
us a written notice of their intention to dissent before the applicable general meeting of
shareholders. Within 20 days after the relevant resolution is passed, the dissenting shareholders
must request us in writing to purchase their shares. We are obligated to purchase the shares of
dissenting shareholders within two months after the expiration of the 20-day period. The purchase
price for the shares is required to be determined through negotiations between the dissenting
shareholders and us. If an agreement on the purchase price for the shares is not made within 30
days from the date of our receipt of the dissenting shareholders' request, we or such dissenting
shareholder may request a court in Korea to determine the purchase price. Holders of ADSs will not
be able to exercise dissenter's rights unless they withdraw the underlying common shares and become
our direct shareholders.
Register of Shareholders and Record Dates
Our transfer agent maintains the register of our shareholders at its office in Seoul, Korea.
It registers transfers of shares on the register of shareholders on presentation of the share
certificates.
The record date for annual dividends is December 31 of each year. For the purpose of
determining shareholders entitled to annual dividends, the register of shareholders may be closed
for the period from the day after the record date to the next annual general meeting of
shareholders. Further, for the purpose of determining the shareholders entitled to some other
rights pertaining to the shares, we may, on at least two weeks' public notice, set a record date
and/or close the register of shareholders for not more than three months. The trading of shares
and the delivery of share certificates may continue while the register of shareholders is closed.
Annual Report
At least one week before the annual general meeting of shareholders, we must make our annual
report and audited non-consolidated financial statements available for inspection at our principal
office and at all of our branch offices. In addition, copies of annual reports, the audited
consolidated financial statements and any resolutions adopted at the general meeting of
shareholders will be available to our shareholders.
Under the Korean Securities and Exchange Act, we must file with the Financial Supervisory
Commission and the KRX (1) an annual report within 90 days after the end of our fiscal year, (2) a
half year report within 45 days after the end of the first six months of our fiscal year and (3)
quarterly reports within 45 days after the end of the third month and the ninth month of our fiscal
year. Copies of these reports are or will be available for public inspection at the FSC and the
KRX.
Transfer of Shares
Under the Korean Commercial Code, the transfer of shares is effected by delivery of share
certificates. However, to assert shareholders' rights against us, the transferee must have his
name and address registered on our register of shareholders. For this purpose, a shareholder is
required to file his name, address and seal or specimen signature with our transfer agent. A
non-Korean shareholder may file a specimen signature in place of a seal, unless he is a citizen of
a country with a sealing system similar to that of Korea. In addition, a non-resident shareholder
must appoint an agent authorized to receive notices on his behalf in Korea and file a mailing
address in Korea. The above requirement does not apply to the holders of ADSs.
Under current regulations, Korean securities companies and banks, including licensed branches
of non-Korean securities companies and banks, investment management companies, an entity licensed
to be engaged in futures transaction business under the Korean Futures Transaction Law,
internationally
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recognized foreign custodians and the Korea Securities Depository may act as agents and
provide related services for foreign shareholders. Certain foreign exchange controls and
securities regulations apply to the transfer of shares by non-residents or non-Koreans.
Our transfer agent is Korea Securities Depository, located at 34-6, Yoido-dong,
Youngdeungpo-ku, Seoul, Korea.
Acquisition of Shares by hanarotelecom
We may not acquire our own shares except in limited circumstances, such as reduction in
capital and acquisition of our own shares for the purpose of granting stock options to our officers
and employees. Under the Korean Commercial Code and the Korean Securities and Exchange Act, except
in the case of a reduction of capital (in which case we must retire the shares immediately), we
must resell any shares acquired by us to a third party within a reasonable time. Notwithstanding
the foregoing restrictions, under the Korean Securities and Exchange Act, we may acquire our own
shares through purchases on the KRX KOSDAQ Market or through a tender offer. The aggregate
purchase price for the shares may not exceed the total amount available for distribution of
dividends at the end of the preceding fiscal year less the amounts of dividends and legal reserves
required to be set aside for that fiscal year, subject to certain procedural requirements.
Corporate entities in which we own a 50% or greater equity interest may not acquire our
shares.
Liquidation Rights
In the event of our liquidation, after payment of all debts, liquidation expenses and taxes,
our remaining assets will be distributed among shareholders in proportion to their shareholdings.
Inspection of Books and Records
Under the Korean Commercial Code, any individual shareholder or shareholders having at least
3% of all outstanding shares (irrespective of voting or non-voting shares) of a Korean corporation
may inspect the books and records of the corporation. Under the Korean Securities and Exchange
Act, any individual shareholder or shareholders holding an aggregate of 0.1% or more of all
outstanding shares (irrespective of voting or non-voting shares) of a Korean corporation for at
least six months may inspect the books and records of the corporation.
Effect of Korean Law
For a description of the effect of relevant Korean laws applicable to us, see "Item 4.B.
Business Overview—Korean Telecommunications Laws and Regulations," "Item 10.D. Exchange Controls"
and "Item 10.E. Taxation—Korean Tax Considerations."
B. Material Contracts
Thrunet Acquisition Agreement
On February 4, 2005, we entered into an agreement with the court receiver for Thrunet relating
to the acquisition of Thrunet by us. Under the agreement, we agreed to acquire 99,240,000 Thrunet
common shares and an aggregate of Won 223.3 billion of newly issued debt securities of Thrunet for
a combined purchase price of approximately Won 471.4 billion. On the day of the agreement, we paid
a deposit in the amount of Won 47.1 billion in total, equivalent to 10% of the acquisition price.
Under the amended reorganization plan which was approved by Thrunet's creditors committee,
interested parties' meeting and the bankruptcy court, Thrunet reduced its capital and as a result,
we acquired 96.22% of Thrunet's outstanding common shares. The Thrunet acquisition agreement
requires
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50% of the shares to be acquired by us to be locked up for a one-year period in an account
with the Korea Securities Depository.
The agreement provided for limited indemnification. We are not able to claim any damages from
Thrunet, the reorganization court or the lead manager for the Thrunet acquisition transaction.
Investment Agreement between hanarotelecom and an Investment Consortium led by AIG, Newbridge
and TVG
On September 9, 2003, we entered into an Investment Agreement with AIF II NT, Ltd., AIG Asian
Opportunity Fund L.P. (which later assigned its rights and obligations under the Investment
Agreement to AOF NT, Ltd.) and Newbridge Asia HT, L.P., referred to as the sponsors below,
providing for, among other things, the issuance by us and purchase by the sponsors, together with
co-investors designated by the sponsors (together, referred to as the "investors"), of an aggregate
of 182,812,500 common shares of hanarotelecom at a purchase price of Won 3,200 per share having an
aggregate value of Won 585 billion. The Investment Agreement provides that we will not take
certain significant corporate actions without the consent of the investors so long as the
investors, together with their affiliates, continue to hold an aggregate of 15% or more of our
outstanding common shares. In connection with the Investment Agreement, we entered into an
Investors' Rights Agreement with the investors and a Management Rights Agreement with certain of
the investors, each dated as of November 18, 2003. A summary of each such agreement is set forth
below.
Investors' Rights Agreement
Pursuant to the Investors' Rights Agreement, we have provided certain registration rights to
the investors with respect to the shares, in which they invested. We have agreed to file with the
SEC a shelf registration statement on Form F-3 covering resales of those shares by the holders
thereof within 90 days after the written request of the investors' representative (made not less
than 360 days after November 18, 2003). We are not required to effect and complete more than three
such shelf registration statements. In addition, the holders have certain rights to "piggyback" on
other registration statements relating to our common shares and the right to cause us to effect up
to six demand registrations pursuant to the terms of the Investors' Rights Agreement. The term of
this agreement terminates upon the earlier of (1) the sixth anniversary of November 18, 2003 or (2)
the date as of which all of the registrable securities have been sold pursuant to a registration
statement or the holders are permitted to sell their registrable securities under Rule 144(k) under
the Securities Act.
Management Rights Agreement
Pursuant to the Management Rights Agreement, we have granted to certain of the investors or
their affiliates, certain management rights in hanarotelecom so long as such investor owns any
shares, in which they invested, including the right to make proposals, recommendations and
suggestions to our board of directors, the right to discuss our and our subsidiaries' business and
affairs with our board of directors, officers and independent accountants, the right to examine our
books, records and documents as may be reasonably requested and the right to be informed in advance
with respect to any significant corporate actions.
Indenture relating to 7% Notes due 2012
On February 1, 2005, we issued an aggregate principal amount of $500 million of 7% notes due
2012 pursuant to an indenture between us and Deutsche Bank Trust Company Americas, as trustee.
Principal, Maturity and Interest
. The notes are limited in initial aggregate principal amount
to $500 million and will mature on February 1, 2012. Interest on the notes accrues at the rate of
7% per annum and is payable semiannually on February 1 and August 1 of each year, commencing August
1, 2005.
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We will pay Korean taxes imposed upon the payment of the principal, interest and premium,
unless deduction or withholding is required by law, or otherwise required under the indenture.
We may enter into supplemental indentures for various purposes, with or without consent of
existing security holders. If the holders of at least a majority in principal amount of the
outstanding securities consent, we and the trustee may enter into a supplemental indenture for the
purpose of changing the provisions of the indenture. However, no such supplemental indenture will:
(1) change the stated maturity of the securities; (2) reduce the principal amount of, or any
interest on, or additional amounts payable on, the securities; (3) change the place or currency in
which the securities are payable; (4) impair the right to institute suit for the enforcement of any
payment on any security; or (5) reduce the quorum requirements to modify the indenture.
Ranking
. The notes will rank equally in right of payment to all existing and future unsecured
debt of hanarotelecom which is not subordinated to the notes by its express terms.
Covenants
. The indenture constrains our ability to assume additional external indebtedness
secured by a lien on particular properties. In addition, we are prohibited from entering into any
sale/leaseback transaction unless otherwise provided in the indenture. Moreover, under certain
conditions of the indenture, we are restricted in our ability to consolidate or merge into, or
sell, transfer, lease or convey our assets to any corporation organized under Korean law.
Redemption
. We will make an offer to redeem all outstanding securities at a redemption price
equal to 101% of the principal amount thereof, plus accrued and unpaid interest and applicable
Korean taxes, in the event that a change of control of hanarotelecom and subsequent reduction in
rating with respect to the securities occurs after November 13, 2008, or after the cancellation of
hanarotelecom's senior secured credit facility agreement with various financial institutions.
hanarotelecom is not required to redeem outstanding securities under the above conditions if a
third party offers to redeem all outstanding securities at the same or a higher redemption price.
The outstanding securities may also be redeemed at our option in whole at a redemption price
equal to 100% of the aggregate outstanding principal amount of the securities, plus accrued
interest, if a change in Korean law would oblige hanarotelecom to pay additional taxes with respect
to the securities and such obligation cannot be avoided by the use of reasonable measures available
to us.
Events of Default
. Events of default under the indenture include, among other things: (1)
defaults in the payment of principal or any installment of interest; (2) default in the compliance
with covenants contained in the indenture; (3) default on an aggregate outstanding principal amount
of $10 million or more of other indebtedness; (4) reduction in rating in connection with a merger
transaction that occurs after November 13, 2008, or after the cancellation of hanarotelecom's
senior secured credit facility agreement with various financial institutions; (5) a governmental
finding of hanarotelecom's bankruptcy or insolvency; and (6) hanarotelecom's voluntary commencement
of a case of bankruptcy or insolvency.
Upon the occurrence of an event of default, the trustees or the holders of at least 25% of the
aggregate principal amount of the outstanding securities may declare the principal amount of the
securities immediately due and payable. The holders of a majority in aggregate principal amount of
the outstanding securities may annul the acceleration of payment if: the annulment does not
conflict with any judgment or decree; all existing events of default have been cured or waived
except nonpayment of the principal amount plus premium and default interest; and compensation to
the trustee has been paid.
Secured Credit Facility Agreement
On April 21, 2005, we entered into a secured credit facility agreement with a number of
financial institutions, with The Korea Development Bank acting as paying agent and security agent.
Under this agreement, the lenders provided to us four credit facilities that consist of the
following:
•
a U.S. dollar denominated term loan facility in an aggregate amount equal to
U.S.$201,809,520, referred to as the "Facility A Loan" below,
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•
a Korean Won denominated term loan facility in the aggregate amount equal to Won
250,047,620,000, referred to as the "Facility B1 Loan" below,
•
a U.S. dollar denominated term loan facility in the aggregate amount equal to
U.S.$208,142,860, referred to as the "Facility B2 Loan" below, and
•
a revolving credit facility in the aggregate amount equal to Won 60,000,000,000,
referred to as the "Facility C Loan" below.
Repayment of Term Loans
. We will repay the loan facilities in installments by repaying a
certain percentage of the principal amount on dates specified in the agreement. For the Facility A
Loan, the first installment was made on February 13, 2006, and the last installment will be made on
November 13, 2008. The percentage of principal to be repaid in any single installment ranges from
3.75% to 11.25%. For the Facility B1 Loan and Facility B2 Loan, the initial installments will be
made on February 13, 2007, and the last installments will be made on May 13, 2010. The percentage
of principal to be repaid in any single installment ranges from 6.0% to 8.0%.
Change of Control
. The agreement provides that upon the occurrence of a "change of control
triggering event," we will be required to repay the full amount of the outstanding loan and cancel
the lender's obligations under the facilities. For the purposes of the agreement, a "change of
control triggering event" means the occurrence of both a change of control and a reduction in the
rating with respect to our debt securities or, in the event that our debt securities cease to be
outstanding or rated, our company rating. A change of control means the consummation of any
transaction in which any person or group other than AIG Investors, the Newbridge Investor, TVD Ltd.
or any other company or partnership that is directly or indirectly controlled by American
International Group, Inc., Newbridge Capital, Inc. or TVG Ltd. is or becomes the beneficial owner
of more than 45% of our voting stock.
Voluntary Cancellation
. Subject to certain conditions, we may cancel a lender's available
commitments with respect to a facility, in whole or in part. The minimum amount we may cancel is
Won 25 billion or the equivalent amount.
Voluntary Prepayments
. Subject to some conditions, we are permitted to prepay all or a part
of the loans and the amount prepaid is applied pro rata towards prepayment of the loans in the
following order:
•
First, towards prepayment of outstanding amounts under the Facility B1 Loan and
Facility B2 Loan on a pro rata basis according to their respective outstanding
amounts,
•
Second, towards prepayment of outstanding amounts under the Facility A Loan, and
•
Finally, towards prepayment of outstanding amounts under the Facility C Loan.
The minimum amount we may prepay is Won 25 billion or the equivalent amount.
Interest and Expenses
. Borrowings under each loan will bear interest at the rate which is the
aggregate of the applicable base rate and the applicable margin. The interest period starts on the
date on which the loan is made or on the last day of its precedent interest period, and ends on the
next following quarterly date in the case of the Facility A loan or Facility B2 Loan or annual date
in the case of the Facility B1 Loan. The interest period for a loan under Facility C Loan starts
on the date on which the loan is made and ends on the next following quarterly date. The agreement
also provides for certain conditions, including a market disruption event, under which the
calculation of interest may change. The following table summarizes the applicable interest rates
for each loan:
Base Rate
Margin
(1)
Facility A Loan
3-month LIBOR
1.850
%
Facility B1 Loan
3-year A+-rated corporate bond base rate
2.050
%
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Base Rate
Margin
(1)
Facility B2 Loan
3-month LIBOR
2.050
%
Facility C Loan
91-day CD base rate
2.075
%
(1)
The margins may be adjusted by up to 0.75 percentage points if our credit rating is upgraded.
Ranking
. Our payment obligations under the secured credit facility agreement rank
equally with the claims of all of our other unsecured and unsubordinated creditors, except for
obligations mandatorily preferred by law. We have granted a security interest with respect to a
significant portion of our property to the lenders under the secured credit facility agreement.
Events of Default
. Events of default under the agreement include, among other things: (1)
default in payment; (2) breach of certain covenants and other obligations under the agreement; (3)
misrepresentation; and (4) insolvency. In the event of default, all commitments are immediately
cancelled and all loans, together with accrued interest and other outstanding amounts, are
immediately due and payable.
Covenants
. The agreement contains various affirmative, negative and financial covenants.
Limitations upon us under the agreement relate to, among other things: (1) aggregate capital
expenditure; (2) corporate status; (3) hedging arrangements; (4) subsidiary guarantees; (5)
disposal of assets; (6) liens and lease transactions; (7) corporate restructuring; (8)
acquisitions; (9) loans and guarantees; and (10) dividends and distributions.
TV-Portal and IP-TV Business Cooperation Agreement among hanarotelecom, Celrun Co., Ltd. and
CelrunTV
On February 6, 2006, we signed a Memorandum of Understanding with Celrun Co., Ltd., CelrunTV
(whose corporate name was changed to hanaromedia Inc. and became our affiliated company on May 2,
2006) and Young-Min Kim, who is Representative Director and shareholder of CelrunTV, regarding the
transfer of a portion of the common shares of CelrunTV and the future issuance of new shares of
CelrunTV. We also signed a business cooperation agreement. Pursuant to the agreements, we
initially acquired 780,000 registered common shares of CelrunTV, representing 65% of its total
outstanding shares (par value of Won 5,000 per share), for Won 5.5 billion.
Following our initial acquisition, CelrunTV carried out a capital increase amounting to Won 20
billion through a new share issue at the end of March 2006. The Memorandum of Understanding
provides that we will acquire 65% of such newly issued shares at Won 13 billion, Won 6.5 billion of
which was acquired at the end of March 2006, and the other Won 6.5 billion of which will be
acquired by the end of June 2006.
Provision of services.
We will provide our broadband Internet subscribers with TV-Portal
service, Internet-based TV video-on-demand, or VOD, service and Internet-based IP-TV service.
Revenues accrued from the provision of these services will be recognized as our revenues. For
broadband subscribers of other Internet service providers and B2B subscribers, CelrunTV will
provide the services, and the relevant revenues will be recognized as revenues of CelrunTV.
Exclusive use and provision of services.
We have agreed to obtain the services only through
CelrunTV for five years from the date of the agreement unless Celrun Co., Ltd.'s stake in CelrunTV
becomes less than 10%. Celrun Co., Ltd. will be the exclusive supplier of set-top boxes for two
years if it can supply them at the lowest unit price compared to other suppliers and will not
discontinue supplying set-top boxes or after-sale services as long as we or CelrunTV provide the
services.
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D. Exchange Controls
General
The Korean Foreign Exchange Transaction Law and the Presidential Decree and regulations under
such Act and Decree (collectively, the "Foreign Exchange Transaction Laws") regulate investment in
Korean securities by non-residents and issuance of securities outside Korea by Korean companies.
Under the Foreign Exchange Transaction Laws, non-residents may invest in Korean securities only to
the extent specifically allowed by such laws or otherwise permitted by the MOFE. The FSC has also
adopted, pursuant to its authority under the Korean Securities and Exchange Act, regulations that
restrict investment by foreigners in Korean securities.
Under the Foreign Exchange Transaction Laws, if the government deems that certain emergency
circumstances, including, but not limited to, extreme difficulty in stabilizing the balance of
payments or substantial disturbance in the Korean financial and capital markets, are likely to
occur, it may impose any necessary restrictions, such as requiring foreign investors to obtain
prior approval from the MOFE for the acquisition of Korean securities or for the repatriation of
dividends or sales proceeds arising from Korean securities or from disposition of such securities.
Reporting Requirements for Holders of Substantial Interests
Any person whose direct or beneficial ownership of shares (whether in the form of shares or
ADSs), certificates representing the right to subscribe for shares and certain equity-related debt
securities, such as convertible bonds and bonds with warrants (collectively, the "Equity
Securities"), together with the Equity Securities beneficially owned by certain related persons or
by any person acting in concert with such person that account for 5% or more of the total
outstanding Equity Securities, is required to report the status and purpose (in terms of whether
the purpose of shareholding is to affect control over management of the issuer) of such holding to
the FSC and the KRX within five business days after reaching the 5% ownership interest threshold.
In addition, any change (1) in the ownership interest subsequent to such report which equals or
exceeds 1% of the total outstanding Equity Securities, or (2) in the shareholding purpose, is
required to be reported to the FSC and the KRX within five business days from the date of such
change. However, the reporting deadline of such reporting requirement is extended for
institutional investors who hold shares for purposes other than management control to the tenth day
of the month immediately following the month in which the shares were acquired or the shareholdings
were otherwise changed. Those who report that the purpose of their shareholding is to affect
control over management of the issuer are prohibited from exercising their voting rights and
acquiring additional shares for five days subsequent to the report under the recently amended
Korean Securities and Exchange Act.
Violation of these reporting requirements may subject a person to criminal sanctions, such as
fines or imprisonment, and may result in a loss of voting rights with respect to the ownership of
Equity Securities exceeding 5%. Furthermore, the FSC may issue an order to dispose of such
non-reported Equity Securities.
Restrictions Applicable to ADSs
No Korean governmental approval is necessary for the sale and purchase of ADSs in the
secondary market outside Korea or for the withdrawal of shares underlying ADSs and the delivery
inside Korea of shares in connection with such withdrawal, provided that a foreigner who intends to
acquire such shares must obtain an Investment Registration Card from the Financial Supervisory
Service as described below. The acquisition of such shares by a foreigner must be reported
immediately by the foreigner or his standing proxy in Korea to the Governor of the Financial
Supervisory Service (the "Governor").
Persons who have acquired shares as a result of the withdrawal of shares underlying the ADSs
may exercise their preemptive rights for new shares, participate in free distributions and receive
dividends on shares without any further governmental approval.
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Restrictions Applicable to Shares
As a result of amendments to the Foreign Exchange Transaction Laws and FSC regulations
(together, the "Investment Rules") adopted in connection with the stock market opening from January
1992 and after that date, foreigners may invest, with certain exceptions and subject to certain
procedural requirements, in all shares of Korean companies, whether listed on the KRX Stock Market
or the KRX KOSDAQ Market, unless prohibited by specific laws. Foreign investors may trade shares
listed on the KRX Stock Market or the KRX KOSDAQ Market only through the KRX Stock Market or the
KRX KOSDAQ Market, except in limited circumstances, including:
•
odd-lot trading of shares;
•
acquisition of shares by exercise of warrant, conversion right under equity-linked
securities or withdrawal right under depositary receipts issued outside of Korea by a
Korean company ("Converted Shares");
•
acquisition of shares by foreign companies as a result of merger;
•
acquisition of shares as a result of inheritance, donation, bequest or exercise of
shareholders' rights, including preemptive rights or rights to participate in free
distributions and receive dividends;
•
acquisition of shares offered and subscribed overseas for listing on foreign
securities exchanges;
•
over-the-counter transactions between foreigners of a class of shares for which the
ceiling on aggregate acquisition by foreigners, as explained below, has been reached
or exceeded;
•
acquisition of underlying shares by an overseas depositary in relation to the
issuance of depositary receipts;
•
disposition of shares through the exercise of dissenting shareholder's appraisal
right;
•
acquisition of shares by direct investment pursuant to the Foreign Investment
Promotion Act and disposition of shares so acquired;
•
acquisition or disposition of shares through a tender offer; and
•
acquisition or disposition of shares through the electronic over-the-counter market
brokerage companies.
For over-the-counter transactions of shares between foreigners outside the KRX Stock Market or
the KRX KOSDAQ Market for shares with respect to which the limit on aggregate foreign ownership has
been reached or exceeded, a securities company licensed in Korea must act as an intermediary.
Odd-lot trading of shares outside the KRX Stock Market or the KRX KOSDAQ Market must involve a
licensed securities company in Korea as the other party. Foreign investors are prohibited from
engaging in margin transactions by using securities borrowed from securities companies in Korea
with respect to shares that are subject to a foreign ownership limit.
The Investment Rules require a foreign investor who wishes to invest in shares on the KRX
Stock Market or the KRX KOSDAQ Market (including Converted Shares) to register its identity with
the FSS prior to making any such investment; however, such registration requirement does not apply
to foreign investors who acquire Converted Shares with the intention of selling such Converted
Shares within three months from the date of acquisition thereof. Upon registration, the FSS will
issue to the foreign investor an Investment Registration Card which must be presented each time the
foreign investor opens a brokerage
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account with a securities company. Foreigners eligible to obtain an Investment Registration
Card include foreign nationals who are individuals residing abroad for more than six months,
foreign governments, foreign municipal authorities, foreign public institutions, international
financial institutions or similar international organizations, corporations incorporated under
foreign laws and any person in any additional category designated by decree of the MOFE. All
Korean offices of a foreign corporation as a group are treated as a separate foreigner from the
offices of the corporation outside Korea. However, a foreign corporation or depositary issuing
depositary receipts may obtain one or more Investment Registration Cards in its name in certain
circumstances as described in the relevant regulations.
Upon a foreign investor's purchase of shares through the KRX Stock Market or the KRX KOSDAQ
Market, no separate report by the investor is required because the Investment Registration Card
system is designed to control and oversee foreign investment through a computer system. However, a
foreign investor's acquisition or sale of shares outside the KRX Stock Market (as discussed above)
must be reported by the foreign investor or his standing proxy to the Governor at the time of each
such acquisition or sale; provided, however, that a foreign investor must ensure that any
acquisition or sale by it of shares outside the KRX Stock Market or the KRX KOSDAQ Market, in the
case of trades in connection with a tender offer, odd-lot trading of shares or trades of a class of
shares for which the aggregate foreign ownership limit has been reached or exceeded, is reported to
the Governor by the securities company engaged to facilitate such transaction. A foreign investor
must appoint one or more standing proxies from among the Korea Securities Depository, foreign
exchange banks (including domestic branches of foreign banks), asset management companies,
internationally recognized foreign custodians, the entity licensed to be engaged in futures
transaction business under Korean Futures Transaction Law, and securities companies (including
domestic branches of foreign securities companies) which have obtained a license to act as a
standing proxy to exercise shareholders' right, place an order to sell or purchase shares or
perform any matter related to the foregoing activities if the foreign investor does not perform
these activities himself. However, a foreign investor may be exempted from complying with these
standing proxy rules with the approval of the Governor in cases deemed inevitable by reason of
conflict between laws of Korea and the home country of such foreign investor.
Certificates evidencing shares of Korean companies must be kept in custody with an eligible
custodian in Korea. Only foreign exchange banks (including domestic branches of foreign banks),
securities companies (including domestic branches of foreign securities companies), asset
management companies, entities licensed to be engaged in futures transaction business under Korean
Futures Transaction Law, internationally recognized foreign custodians and the Korea Securities
Depository are eligible to act as a custodian of shares for a nonresident or foreign investor. A
foreign investor must ensure that his custodian deposits such shares with the Korea Securities
Depository. However, a foreign investor may be exempted from complying with this deposit
requirement with the approval of the Governor in circumstances where such compliance is made
impracticable, including cases where such compliance would contravene the laws of the home country
of such foreign investor.
Under the Investment Rules, with certain exceptions, foreign investors may acquire shares of a
Korean company without being subject to any foreign investment ceiling. As one such exception,
designated public corporations are subject to a 40% ceiling on the acquisition of shares by
foreigners in the aggregate. Furthermore, an investment by a foreign investor of not less than 10%
of the outstanding shares of a Korean company is defined as a direct foreign investment under the
Foreign Investment Promotion Law, which is, in general, subject to the report to, and acceptance
by, the Ministry of Commerce, Industry and Energy which delegates its authority to Korea
Trade-Investment Promotion Agency, or foreign exchange banks (including domestic branches of
foreign banks) under the relevant regulations. The acquisition of shares of a Korean company by a
foreign investor may also be subject to certain foreign shareholding restrictions in the event that
such restrictions are prescribed in each specific law which regulates the business of such Korean
company. For example, we are currently subject to a foreign shareholding ceiling of 49% pursuant
to the Telecommunications Business Law. A foreigner who has acquired shares in excess of such
ceiling may not exercise his voting rights with respect to the shares exceeding such limit, and the
MIC may take corrective action pursuant to the Telecommunications Business Law.
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Under the Foreign Exchange Transaction Laws, a foreign investor who intends to acquire shares
must designate a foreign exchange bank at which he must open a foreign currency account and a Won
account exclusively for stock investments. No approval is required for remittance into Korea and
deposit of foreign currency funds in the foreign currency account. Foreign currency funds may be
transferred from the foreign currency account at the time required to place a deposit for, or
settle the purchase price of, a stock purchase transaction to a Won account opened at a securities
company. Funds in the foreign currency account may be remitted abroad without any governmental
approval.
Dividends on shares are paid in Won. No governmental approval is required for foreign
investors to receive dividends on, or the Won proceeds of the sale of, any such shares to be paid,
received and retained in Korea. Dividends paid on, and the Won proceeds of the sale of, any such
shares held by a nonresident of Korea must be deposited either in a Won account with the investor's
securities company or his Won account. Funds in the investor's Won account may be transferred to
his foreign currency account or withdrawn for local living expenses up to certain limitations.
Funds in the Won account may also be used for future investment in shares or for payment of the
subscription price of new shares obtained through the exercise of preemptive right.
Securities companies (including domestic branches of foreign securities companies) in Korea
are allowed to open foreign currency accounts and Won accounts with foreign exchange banks
exclusively for accommodating foreign investors' stock investments in Korea. Through such
accounts, these securities companies may enter into foreign exchange transactions on a limited
basis, such as conversion of foreign currency funds and Won funds, either as a counterparty to or
on behalf of foreign investors, without such investors having to open their own accounts with
foreign exchange banks.
E. Taxation
Korean Tax Considerations
The following is a summary of the principal Korean tax consequences to owners of our shares
that are non-resident individuals or non-Korean corporations without a permanent establishment in
Korea to which the relevant income is attributable ("non-resident holders"). The statements
regarding Korean tax laws set forth below are based on the laws in force and as interpreted by the
Korean taxation authorities as of the date hereof. This summary is not exhaustive of all possible
tax considerations which may apply to a particular investor, and prospective investors are advised
to satisfy themselves as to the overall tax consequences of the acquisition, ownership and
disposition of our shares, including specifically the tax consequences under Korean law, the laws
of the jurisdiction of which they are resident, and any tax treaty between Korea and their country
of residence, by consulting their own tax advisors.
Dividends on the Shares or ADSs
We will deduct Korean withholding tax from dividends paid to you at a rate of 27.5%. If you
are a resident in a country that has entered into a tax treaty with Korea, you may qualify for a
reduced rate of Korean withholding tax. For example, if you are a qualified resident of the United
States for purposes of the tax treaty between the United States and Korea and you are the
"beneficial owner" of a dividend, a reduced withholding tax rate of 11% or 16.5%, including local
surtax, generally will apply. If you are a beneficial owner of ADSs, you will generally be
entitled to benefits under the tax treaty between the United States and Korea if you:
•
are an individual U.S. resident, a U.S. corporation or a partnership or trust to
the extent your income is subject to taxation in the United States as the income of a
U.S. resident;
•
are not also a resident of Korea for purposes of the tax treaty between the United
States and Korea;
•
are not subject to any anti-treaty shopping article that applies in limited
circumstances; and
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•
do not hold ADSs in connection with the conduct of business in Korea through a
permanent establishment or the performance of independent personal services in Korea
through a fixed base.
In order to obtain the benefits of a reduced withholding tax rate under a tax treaty, you must
submit to us, prior to the dividend payment date, such evidence of tax residence as may be required
by the Korean tax authorities. Evidence of tax residence may be submitted to us through the Korea
Securities Depository. Excess taxes withheld generally are not recoverable even if you
subsequently produce evidence that you were entitled to have tax withheld at a lower rate.
If we distribute to you free shares representing transfer of certain capital reserves or asset
revaluation reserves into paid-in capital, that distribution may be regarded as dividend and, as
such, subject to Korean withholding tax.
Taxation of Capital Gains
You are exempt from Korean taxation if you sell through the KRX Stock Market or the KRX KOSDAQ
Market less than 25% of our total issued and outstanding shares that you have owned, together with
certain related parties at any time during the year of sale and the five calendar years before the
year of sale, provided that you are either an individual or you are a corporate entity with no
permanent establishment in Korea (if you are an individual it is irrelevant whether or not such
capital gains are attributable to the permanent establishment). If you are a resident of the
United States for purposes of the tax treaty between the United States and Korea, you will be
exempt from Korean taxation on the capital gains realized by the disposition of ADSs. Further, the
Korean taxation authorities have issued a tax ruling confirming that capital gains earned by a
non-Korean holder (whether or not it has a permanent establishment in Korea) from the transfer of
ADSs outside of Korea are exempt from Korean taxation by virtue of the Tax Exemption Limitation
Law.
If you are subject to tax on capital gains with respect to the sale of ADSs, or of shares
which you acquired as a result of a withdrawal, your gain will be calculated based on your cost of
acquiring the ADSs representing such shares, although there are no specific Korean tax provisions
or rulings on this issue. In the absence of the application of a tax treaty which exempts or
reduces the rate of tax on capital gains, the amount of Korean tax imposed on your capital gains
will be the lesser of 11% of the gross realization proceeds and, subject to the production of
satisfactory evidence of the acquisition and transfer costs of the ADSs, 27.5% of the net capital
gains. The gain is calculated as the gross realization proceeds less the acquisition cost and
transfer expenses.
If you sell your shares or ADSs, the purchaser or, in the case of the sale of shares on the
KRX Stock Market or through a licensed securities company in Korea, the licensed securities company
is required to withhold Korean tax from the sales price in an amount equal to 11% of the gross
realization proceeds and to make payment thereof to the Korean tax authority, unless you establish
your entitlement to an exemption or lower rate of taxation under an applicable tax treaty or
produce satisfactory evidence of its acquisition and transfer costs for the ADSs. In order to
obtain the benefit of an exemption or reduced rate of tax pursuant to a tax treaty, you must submit
to the purchaser or the securities company (or through the Korea Securities Depository), as the
case may be, prior to or at the time of payment, such evidence of your tax residence as the Korean
tax authorities may require in support of its claim for treaty protection. Furthermore, in order
for you to obtain the benefit of a tax exemption on certain Korean source income (e.g., capital
gains) under an applicable tax treaty, Korean tax law requires you (or your agent) to submit the
application for tax exemption along with a certificate of your tax residency issued by a competent
authority of your country of tax residence, subject to certain exceptions. Such application should
be submitted to the relevant district tax office by the ninth day of the month following the date
of the first payment of such income. However, excess taxes withheld are generally not recoverable
even if you subsequently produce evidence that you were entitled to have taxes withheld at a lower
rate.
Because the Korean taxation authorities have issued a tax ruling that the trading of the ADSs
on the NASDAQ National Market will be regarded as the transfer of the ADSs outside Korea under the
Tax
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Exemption Limitation Law, it is likely that a non-Korean seller of the ADSs on the NASDAQ
National Market will not be required to make any withholdings as described.
Inheritance Tax and Gift Tax
If you die while holding an ADS or transfer an ADS as a gift, it is unclear whether you will
be treated as the owner of the shares underlying the ADSs for Korean inheritance and gift tax
purposes. If you are treated as the owner of the shares, the heir or the donee (or you, if the
donee fails to pay) will be subject to Korean inheritance or gift tax presently at the rate of 10%
to 50%, provided that the value of such ADSs or shares is greater than a specified amount.
Securities Transaction Tax
You will not pay a securities transaction tax on your transfer of ADSs. If you transfer
shares, you will be subject to a securities transaction tax at the rate of 0.15% and an agriculture
and fishery special tax at the rate of 0.15% of the sale price of the share when traded on the KRX
Stock Market. If you transfer shares through the KRX KOSDAQ Market, you will be subject to a
securities transaction tax at the rate of 0.3% of the sales price of the shares. If your transfer
of shares is not made on the KRX Stock Market or the KRX KOSDAQ Market, subject to certain
exceptions, you will be subject to a securities transaction tax at the rate of 0.5% and will not be
subject to an agriculture and fishery special tax.
According to a tax ruling issued by the Korean tax authorities, foreign shareholders will not
be subject to a securities transaction tax upon the deposit of underlying shares and receipt of
depositary shares or upon the surrender of depositary shares and withdrawal of originally deposited
underlying shares. Moreover, to date, the imposition of securities transaction tax has not been
enforced on the transfers of ADSs. However, the MOFE recently issued a ruling on February 25, 2004
to the Korean National Tax Service, holding that depositary shares fall under the meaning of share
certificates that are subject to the securities transaction tax. In the ruling, the Ministry of
Finance and Economy treats the transfers of depositary shares the same as the transfer of the
underlying Korean shares. Under Korean tax laws, transfers of depositary shares listed or
registered on the New York Stock Exchange, NASDAQ National Market, or other foreign exchanges
designated by the Ministry of Finance and Economy (which are the Tokyo Stock Exchange, London Stock
Exchange, German Stock Exchange, and a stock exchange with functions similar to the other three
exchanges, on which trading is done by standardized procedure as set forth in the Enforcement
Regulation of the Korean Securities and Exchange Act) will be exempted from the securities
transaction tax.
Securities transaction tax, if applicable, must be paid in principle by the transferor of the
shares or the rights to subscribe to such shares. When the transfer is effected through a
securities settlement company, the settlement company is generally required to withhold and pay the
tax to the tax authority. When the transfer is made through a securities company, the securities
company is required to withhold and pay the tax. Where the transfer is effected by a non-resident
without a permanent establishment in Korea, other than through a securities settlement company or a
securities company, the transferee is required to withhold the securities transaction tax.
The failure to pay the securities transaction tax will result in a penalty of 10% of the tax
amount due, plus interest at 10.95% per annum on the unpaid tax amount for the period from the day
immediately following the last day of tax payment period to the day of issuance of tax notice. The
penalty is imposed on the party responsible for paying the securities transaction tax or, if the
securities transaction tax is to be withheld, the penalty is imposed on the party that has the
withholding obligation.
U.S. Federal Income Tax Considerations
The following discussion describes the material U.S. federal income tax considerations that
may be relevant to a holder of our common shares or ADSs that is a U.S. Holder (as defined below)
with respect to the receipt of distributions on, and the disposition of, common shares or ADSs.
This discussion is based on the Internal Revenue Code of 1986, as amended (the "Code"), existing
and proposed Treasury
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regulations, revenue rulings, administrative interpretations and judicial decisions (all as of
the date hereof and all of which are subject to change, possibly with retroactive effect, and
different interpretations). Except as specifically set forth herein, this discussion deals only
with common shares and ADSs held by a U.S. Holder as capital assets within the meaning of Section
1221 of the Code. This discussion does not address all of the tax consequences that may be
relevant to prospective purchasers of common shares or ADSs in light of their particular
circumstances or to persons subject to special tax rules, such as insurance companies, banks,
financial institutions, regulated investment companies, real estate investment trusts, dealers in securities or foreign currencies, traders that elect to use a mark-to-market method of accounting for their securities holdings,
tax-exempt investors, persons
holding common shares or ADSs as a position in a "straddle," as a part of a short-sale, or as part
of a hedging, conversion or other integrated transaction, persons owning, directly, indirectly or
constructively, 10% or more of the voting stock of hanarotelecom or persons whose functional
currency (as defined in Section 985 of the Code) is not the U.S. dollar. U.S. Holders should
consult with their own tax advisors regarding the application of the U.S. federal income tax laws
to their particular situations as well as to any additional tax consequences of purchasing, holding
or disposing of common shares or ADSs, including the applicability and effect of the tax laws of
any state, local or foreign jurisdiction.
As used in this section, the term "U.S. Holder" means a beneficial owner of a common share or
ADS who or that is for U.S. federal income tax purposes (1) a citizen or individual resident of the
United States, (2) a corporation or other entity treated as a corporation for U.S. federal income
tax purposes created or organized in or under the laws of the United States or of any state or
political subdivision thereof, (3) an estate the income of which is subject to U.S. federal income
taxation regardless of its source, or (4) a trust if (A) a U.S. court is able to exercise primary
supervision over the administration of the trust and one or more U.S. persons have the authority to
control all substantial decisions of the trust or (B) the trust has a valid election in effect
under applicable U.S. Treasury regulations to be treated as a U.S. person.
If a partnership or other pass-through entity holds common shares or ADSs, the tax treatment
of a partner in or owner of the partnership or pass-through entity will generally depend upon the
status of the partner or owner and the activities of the entity. We urge partners and owners of
partnerships or other pass-through entities holding common shares or ADSs to consult their own tax
advisors.
Special adverse U.S. federal income tax rules apply if a U.S. Holder holds common shares or
ADSs of a company that is treated as a "passive foreign investment company," a "foreign personal
holding company" (for 2004 and earlier years) or a "controlled foreign corporation" for any taxable
year during which the U.S. Holder held common shares or ADSs. We believe that we are not and will
not become a "passive foreign investment company," a "foreign personal holding company" (for 2004
and earlier years) or a "controlled foreign corporation" for U.S. federal income tax purposes.
In general, for U.S. federal income tax purposes, U.S. Holders of ADRs evidencing ADSs will be
treated as the owners of the common shares represented by the ADSs.
Cash Distributions
To the extent that a distribution on common shares or ADSs is paid to a U.S. Holder out of
our current or accumulated earnings and profits (as determined for U.S. federal income tax
purposes), such distribution will be includible in the U.S. Holder's gross income as foreign source
dividend income in an amount equal to the U.S. dollar value of such distribution (without reduction
for any applicable foreign withholding tax). A corporate U.S. Holder will not be entitled to a
dividends received deduction with respect to distributions on common shares or ADSs by
hanarotelecom.
Therefore, in the event that any Korean tax is withheld from a distribution on common shares
or ADSs, a U.S. Holder generally will be required to report gross income in an amount greater than
the cash received. However, subject to certain conditions and limitations (including certain
minimum holding period requirements), the U.S. dollar value of the Korean income taxes, if any,
withheld from a distribution to a U.S. Holder on the common shares or ADSs may be claimed as a
credit against the U.S. Holder's U.S. federal income tax liability. Alternatively, a U.S. Holder
may claim a deduction for such amount of
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Korean income taxes withheld in a taxable year, but only
if such U.S. Holder does not elect to claim a foreign tax credit in respect of any foreign taxes paid by it in the taxable year. Dividends
on common shares or ADSs generally will constitute "passive income" or, in the case of certain U.S.
Holders, "financial services income" for U.S. foreign tax credit purposes for taxable years
beginning before January 1, 2007. For taxable years beginning after December 31, 2006, dividends
generally will be "passive category income" or "general category income" for purposes of computing
the foreign tax credit allowable to a U.S. Holder. Special rules apply to certain individuals
whose foreign source income during the taxable year consists entirely of "qualified passive income"
and whose creditable foreign taxes paid or accrued during the taxable year do not exceed $300 ($600
in the case of a joint return).
To the extent that the amount of any distribution on the common shares or ADSs exceeds the
current and accumulated earnings and profits of hanarotelecom (as determined for U.S. federal
income tax purposes), a U.S. Holder's pro rata share of such excess amount would be treated first
as a nontaxable return of capital that would be applied against and would reduce the U.S. Holder's
tax basis in its common shares or ADSs (but not below zero), and then as capital gain.
Distributions in excess of our current and accumulated earnings and profits (as determined for U.S.
federal income tax purposes) generally will not give rise to foreign source income and a U.S.
Holder may be unable to claim a foreign tax credit in respect of any foreign withholding tax
imposed on such distributions unless (subject to applicable limitations) the U.S. Holder has other
foreign source income in the appropriate category for foreign tax credit purposes.
The rules relating to foreign tax credits are extremely complex and the availability of a
foreign tax credit depends on numerous factors. Prospective purchasers of common shares or ADSs
should consult their own tax advisors concerning the application of the U.S. foreign tax credit
rules to their particular situations.
For taxable years that begin before 2011, dividends paid by hanarotelecom should be taxable
to a non-corporate U.S. Holder at the special reduced rate normally applicable to capital gains, provided hanarotelecom qualifies as a Qualified Foreign Corporation, or QFC. A company
may qualify as a QFC if it is eligible for benefits of a comprehensive income tax treaty with the United States which the Secretary of the Treasury has determined is satisfactory
for QFC treatment and which includes a provision for the exchange of information. Korea has a comprehensive income tax treaty with the United States which satisfies the two
requirements above. The reduced rate should apply if the distribution is made with respect to equity rather than indebtedness and is made out of earnings and profits. Dividends
paid by a foreign corporation will not qualify for the reduced rates, however, if that corporation is treated, for the tax year in which the dividend is paid or the preceding tax
year, as a passive foreign investment company for U.S. federal income tax purposes. A U.S. Holder will be eligible for the reduced rate only if it has held the common shares or ADSs
for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date and satisfies certain other requirements. All U.S. Holders are urged to consult their own
tax advisers regarding the special reduced rates for dividends paid by QFCs.
The U.S. dollar value of any distribution to a U.S. Holder on common shares or ADSs that is
paid in a foreign currency will be calculated by reference to the exchange rate in effect at the
time the distribution is received by the U.S. Holder (or a depositary nominee, custodian or other
agent of the U.S. Holder). A U.S. Holder generally should not recognize any foreign currency gain
or loss if such foreign currency is converted into U.S. dollars on the day received. If a U.S.
Holder does not convert such foreign currency into U.S. dollars on the date of receipt, however,
such Holder will have a basis in such foreign currency equal to the U.S. dollar value on the date
of receipt, and such Holder may recognize United States source foreign currency gain or loss (which
generally will be taxable as United States source ordinary income or loss) upon a subsequent sale
or other disposition of the foreign currency.
Sale of Common Shares and ADSs
A U.S. Holder generally will recognize gain or loss upon a sale or other disposition of common
shares or ADSs in an amount equal to the difference between the U.S. dollar value of the amount
realized on the sale or other disposition and the U.S. Holder's adjusted tax basis in the common
shares or ADSs. Such gain or loss generally will be capital
gain or loss and, in the case of certain non-corporate U.S.
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Holders, may be subject to U.S. federal
income tax at a preferential rate where the U.S. Holder's holding period exceeds one year. Any
gain or loss recognized by a U.S. Holder on a sale or other disposition of common shares or ADSs
generally will be treated as United States source gain or loss for foreign tax credit purposes. A
U.S. Holder's ability to deduct capital losses in respect of common shares and ADSs is subject to
limitations.
Securities Tax
Holders should note that any Korean securities transaction tax will not be treated as a
creditable foreign tax for U.S. federal income tax purposes, although U.S. Holders may be entitled
to deduct such taxes, subject to applicable limitations under the Code.
Backup Withholding
"Backup" withholding and information reporting requirements may apply to payments made within
the United States of dividends on common shares or ADSs and to
certain payments of proceeds of a sale or redemption of a common share or ADS paid to a U.S. Holder. hanarotelecom, our agent,
a broker, the Trustee or any paying agent, as the case may be, may be required to withhold tax from
any payment that is subject to backup withholding at a current rate of 28% (subject to reduction in
future years) of such payment if the U.S. Holder fails to furnish the U.S. Holder's taxpayer
identification number, to certify that such U.S. Holder is not subject to backup withholding, or to
otherwise comply with the applicable requirements of the backup withholding rules. If a U.S.
Holder is required to and does not provide a correct taxpayer identification number, the U.S.
Holder may be subject to penalties imposed by the IRS. Certain U.S. Holders (including, among
others, corporations) are not subject to the backup withholding and information reporting
requirements. Any amounts withheld under the backup withholding rules from a payment to a U.S.
Holder generally may be claimed as a credit against such U.S. Holder's U.S. federal income tax
liability or refundable to the extent it exceeds such liability, provided that the required
information is furnished to the U.S. Internal Revenue Service.
Estate and Gift Tax
As discussed in "—Korean Tax Considerations—Inheritance Tax and Gift Tax," Korea may impose
an estate tax on a descendent who owns our common shares (and possibly ADSs), even if the
descendent is a non-resident. Subject to certain conditions and limitations, the amount of any
inheritance tax paid to Korea may be eligible for credit against the amount of U.S. federal estate
tax imposed on the estate of a U.S. Holder. The Korean gift tax generally will not be treated as a
creditable foreign tax for U.S. tax purposes. Prospective purchasers should consult their personal
tax advisors regarding the consequences of the imposition of the Korean inheritance or gift tax.
F. Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
H. Documents on Display
We file periodic reports and other information with the SEC. You may read and copy any
document that we file with the SEC at the SEC's public reference room at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the SEC's regional offices. Please
call the SEC at 1-800-732-0330 for further information on the operation of its public reference
rooms. The SEC also maintains a web site that contains reports, proxy and information statements,
and other information regarding registrants that file electronically with the SEC
(http://www.sec.gov). You may also inspect our
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SEC reports and other information at the New York
Stock Exchange, Inc., 20 Broad Street, New York, New York 10005. Some of this information may also
be found on our website at http://www.hanaro.com.
You may request a copy of these filings, at no cost, by writing or telephoning us at Asia One
Building, 17-7 Yeoido-dong, Yeongdeungpo-gu, Seoul, Korea, 150-874, Attention: Investor Relations
Team, telephone number: (+82-2) 6266-4629.
I. Subsidiary Information.
Please refer to discussion under "Item 4.C. Organizational Structure."
Item 11. Quantitative and Qualitative Disclosures about Market Risk.
We are exposed to the impact of interest rate changes, foreign currency fluctuations and
changes in the estimated fair values of our investments.
Interest Rate Risk
Our exposure to risk for changes in interest rates relates primarily to our short-term
investments and our syndicated loan which has a floating interest rate.
Investments in both fixed rate and floating rate interest earning investments carry some
interest rate risk. The fair value of fixed rate securities may fall due to a rise in interest
rates, while floating rate securities may produce less income than expected if interest rates fall.
Partly as a result of this, our future interest income may fall short of expectations due to
changes in interest rates or we may suffer losses in principal if we are forced to sell securities,
which have fallen in estimated fair value due to changes in interest rates.
Our cash and cash equivalents consist of cash on hand, passbook accounts and money market
deposit accounts. We do not expect any material loss with respect to our cash and cash equivalents
as a result of interest rate changes, and the estimated fair value of our cash and cash equivalents
approximates original cost.
Our short-term financial instruments consist of time deposits, money market deposit accounts
and repurchase agreement securities. As our short-term financial instruments are readily
convertible to known amounts of cash and have short maturities, we do not expect material loss with
respect to our short-term financial instruments as a result of interest rate changes.
The risk of exposure to variable interest rates has been hedged by entering into swap
contracts with Korea Development Bank and other banks under which we receive variable interest
rates and pay fixed interest rates. Therefore, we do not expect any material loss with respect to
our syndicated loan as a result of interest rate changes.
Foreign Currency Risk
Most of our expenses and all of our revenues are incurred in Korean Won, which is our
functional currency. As of December 31, 2005, Won 705.0 billion, representing 72.3% of our total
debt, is denominated in U.S. dollars. Of the Won 705.0 billion of our U.S. dollar denominated
debt, Won 502.3 billion relates to February 2005 Notes and Won 202.7 billion relates to borrowings
under the Senior Secured Credit Facility. We have entered into foreign currency swap contracts
with respect to all our U.S. dollar denominated debt.
Currently, we have no other significant foreign currency denominated liabilities. Because
substantially all of our revenues are denominated in Won, any significant changes in exchange rates
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between the Won and the U.S. dollar will affect us due to the effect of such changes on the amount
of funds required by us to make interest and principal payments on our U.S. dollar denominated
debt. In December 2003 and February 2004 and on February 1, 2005, we entered into foreign currency
swap contracts with Development Bank of Singapore, Korea Development Bank and other banks in
connection with the Senior Secured Credit Facility and the February 2005 Notes to hedge the
exposure to changes in the foreign currency exchange rate. As a result, we do not expect to incur
any material losses with respect to the Senior Secured Credit Facility or the February 2005 Notes
as a result of foreign exchange rate changes.
We estimate that any losses we would incur from any depreciation of the Won against the U.S.
dollar resulting from unhedged U.S. dollar denominated liabilities would be negligible. This is
due to our policy that all foreign currency denominated liabilities be fully hedged.
Third Party Credit Risk
It is our policy to limit the amount of our credit exposure to any one issuer. We are averse
to principal loss and seek to preserve our invested funds by limiting default risk, market risk and
reinvestment risk. We mitigate default risk by investing only in high credit quality securities
that we believe to be low risk and by positioning our portfolio to respond appropriately to a
significant reduction in the credit rating of any investment issuer or guarantor. In addition, it
is our policy that all foreign exchange investments be fully hedged. Substantially all of our
floating rate debt is hedged.
Item 12. Description of Securities Other Than Equity Securities.
Not applicable.
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PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies.
None.
Item 14. Material Modifications of the Rights of Security Holders and Use of Proceeds.
None.
Item 15. Controls and Procedures.
Mr. Byung Moo Park, our Chief Executive Officer and Representative Director, and Ms. Janice
Lee, our Chief Financial Officer and Senior Executive Vice President, after evaluating the
effectiveness of our disclosure controls and procedures (as defined in the United States Exchange
Act Rule 13a-15(e)) as of the end of the period covered by this Form 20-F, have concluded that, as
of such date, these controls and procedures were effective.
There have been no changes in internal control over financial reporting during the fiscal year
ended December 31, 2005, that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting. During this period, however, we changed the
accounting treatment of certain lease and commission expenses, which were previously recorded on an
invoice basis, to an accrual basis. The financial results reported in this Form 20-F for prior
periods have been restated to reflect such accounting treatment correction.
Item 16. [Reserved]
Item 16A. Audit Committee Financial Expert
Our Audit Committee consists of three outside directors: Sung Kyou Park, Sun Woo Kim and
Peter Whang. Mr. Byung Moo Park resigned from our audit committee and was appointed as our
Representative Director at our annual shareholders' meeting held on March 24, 2006. Peter Whang was
appointed as a member of our audit committee at the annual shareholders' meeting held on March 24,
2006. All of the Audit Committee members comply with the requirements under applicable Korean law
and stock exchange rules. In addition, Sung Kyou Park and Sun Woo Kim are independent directors as
defined in Rule 4200(15) of the NASDAQ Marketplace Rules.
Our board of directors has determined that Mr. Sung Kyou Park is an "audit committee financial
expert" as defined in Item 16A of Form 20-F, in light of his extensive experience with management
responsibilities for over 10 years, and in particular, his experience in actively supervising
principal financial officers, controllers, accounting officer or persons performing similar functions in
preparing, auditing, analyzing and evaluating financial statements of companies. See "Item 6.
Directors, Senior Management and Employees" for more information on Mr. Park's educational
background, qualifications and work experience.
Item 16B. Code of Ethics
In April 2003, we adopted a written code of ethics for our directors, officers and employees.
The original Korean version of our code of ethics is available on our website at www.hanaro.com.
There has been no amendment to our code of ethics since its inception except the change of our
corporate name from "Hanaro Telecom Inc." to "hanarotelecom incorporated" effective from March 30,
2005.
Item 16C. Principal Accountant Fees and Services
Deloitte HanaAnjin LLC (formerly known as Anjin Deloitte LLC), a member firm of Deloitte
Touche Tohmatsu, has served as our independent accountants for each of the fiscal years in the
three-year
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period ended December 31, 2005. The following table presents the aggregate fees for
professional services and other services rendered by Deloitte HanaAnjin LLC to us in 2004 and 2005:
2004
2005
(millions of Won)
(a) Audit Fees
(1)
Won 370
Won 410
(b) Audit-Related Fees
(2)
85
40
(c) Tax Fees
(3)
—
—
(d) All Other Fees
(4)
—
50
(1)
Audit Fees consist of aggregate fees billed by Deloitte HanaAnjin LLC in connection with the
audit of our annual financial statements and the review of our interim financial statements.
(2)
Audit-related Fees consist of aggregate fees billed by Deloitte HanaAnjin LLC for advisory
services relating to analyses of multiple accounting issues .
(3)
Tax Fees consist of aggregate fees billed by Deloitte HanaAnjin LLC for the preparation of
income tax return and tax advisory services (of which there were none for 2004 and 2005).
(4)
All Other Fees include fees billed by Deloitte HanaAnjin LLC principally for due diligence
services relating to our call center and accounting assistance (of which there were none for
2004).
Our Audit Committee reviews and pre-approves the scope and the cost of all audit and
permissible non-audit services performed by the independent accountants, other than those for de
minimus services which are approved by the Audit Committee prior to the completion of the audit.
Item 16D. Exemptions from the Listing Standards for Audit Committees
As a foreign private issuer, we are exempt from some corporate governance-related obligations
required by NASDAQ with respect to audit committees. NASDAQ Rule 4350(d) requires issuers to adopt
a formal written audit committee charter that includes certain specified provisions. Rule 4350(d)
further requires issuers to have an audit committee with at least three independent directors. We
follow Korean practices in lieu of certain NASDAQ requirements as set forth below:
NASDAQ Rule 4350(d)(1) requires that issuers adopt a formal written audit committee charter
and that the audit committee review and reassess the adequacy of the formal written charter on an
annual basis. Korean law does not require a company's audit committee to adopt a written charter.
Furthermore, a formal written audit committee charter, if adopted by a Korean company, would become
null and void if it were to violate any Korean law or the articles of incorporation of the company.
Our board of directors has adopted the Audit Committee Regulations, or ACR, pursuant to our
Articles of Incorporation, but the ACR does not obligate our Audit Committee to review and reassess
the adequacy of the ACR on an annual basis. Our ACR, in our view, is not in violation of
applicable Korean laws or our Articles of Incorporation.
NASDAQ Rule 4350(d)(1) sets forth certain responsibilities of an audit committee in relation
to outside auditors that must be specified in the formal written charter of an issuer's audit
committee. Under Korean law, an audit committee has the statutory duty to examine the company's
financial statements and the business reports, and based on such examination, to report its opinion
to shareholders at the annual general meetings of shareholders. The audit committee also has the
statutory duty to oversee the administration of the company's affairs by the board of directors.
Consistent with Korean law, our ACR provides that the appointment of outside auditors is subject to
approval by the Audit Committee. Korean law does not impose specific responsibilities on an audit
committee in relation to outside auditors in the way that the NASDAQ Rule does, and our ACR has not
imposed any such responsibilities.
Furthermore, NASDAQ Rule 4350 requires independent directors to serve various roles in the
Company's corporate governance practices, and Rule 4200(15) defines the requirements for an
"independent director." With respect to independent directors, we follow Korean practices in lieu
of certain NASDAQ requirements as set forth below:
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NASDAQ Rule 4350(c)(1) requires a majority of a company's board of directors to be independent
directors. Under the Korean Commercial Code, or KCC, the Korean Securities and Exchange Act, or
KSEA, and related legislation, there is no legal concept which is the same as an independent
director within the meaning given by the NASDAQ Marketplace Rules. The KSEA does, however, set
forth requirements for outside directors. Under the KSEA, an outside director is defined as a
director who does not engage in the day-to-day business operations of the company and who is
appointed pursuant to the Section 191-16 of the KSEA. Under the KSEA, individuals with special
relationships with a listed company which may interfere with the exercise of independent judgment,
are excluded from becoming outside directors of such company. The KSEA further requires that at
least one-quarter of the total number of directors of a company listed on the KRX Stock Market or
the KRX KOSDAQ Market be outside directors. Moreover, a company, such as ours, with total assets
of KRW 2 trillion or more as of the end of the most recent financial year must have outside
directors making up more than one-half of the total number of directors. Consistent with this
statutory requirement, our Articles of Incorporation require that more than half of the total
number of directors be outside directors and that an outside director satisfy the eligibility
standards under the KSEA or any other applicable statute. Six out of our ten directors were outside
directors as of May 31, 2006.
NASDAQ Rule 4350(c)(2) requires regularly scheduled meetings of independent directors at which
only independent directors are present. The KCC, KSEA or other corporate governance-related Korean
statutes do not require regular meetings attended solely by outside directors. Our outside
directors do not conduct regularly scheduled meetings at which only outside directors are present.
The failure to hold such meetings does not violate applicable Korean laws or regulations relating
to corporate governance.
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
There have been no purchases made by or on behalf of us or any affiliated purchaser of our
shares or ADSs.
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PART III
Item 17. Financial Statements.
We have elected to provide the financial statements and related information specified in Item
18 in lieu of 17.
Item 18. Financial Statements.
See pages starting on F-1 following Glossary.
Item 19. Exhibits.
The following documents are filed as exhibits to this Annual Report:
Exhibits
Description
1.1.
Articles of Incorporation, as amended on March 24, 2006 (English translation)
4.1.
Memorandum of Understanding between Celrun Inc. and Kim Young-min, hanarotelecom Inc. and
CelrunTV Inc., dated February 6, 2006 (English translation)
4.2.
Business Cooperation Agreement among hanarotelecom, inc., Celrun Co., Ltd. and CelrunTV,
dated March 6, 2006 (English translation)
8.1.
List of hanarotelecom's significant subsidiaries. (See "Item 4.C. Organizational Structure.")
11.1.
Code of Ethics (English translation)
12.1.
Section 302 Certification of Chief Executive Officer pursuant to Rule 13a-14(a)
12.2.
Section 302 Certification of Chief Financial Officer pursuant to Rule 13a-14(a)
13.1.
Section 906 Certifications required by Rule 13a-14(b) and 18 U.S.C. Section 1350
96
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Signature
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F
and that it has duly caused and authorized the undersigned to sign this Annual Report on its
behalf.
hanarotelecom incorporated
By:
/s/ Janice Lee
Name:
Janice Lee
Title:
Senior Executive Vice President
and Chief Financial Officer
Date: June 29, 2006
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Glossary
Set forth below are definitions of some of the terms used in this Offering Circular:
ADSL
Asymmetric Digital Subscriber Line. ADSL is a technology
that allows more data to be sent over existing copper
telephone lines. ADSL supports data rates of 1.5 to 9.0
Mbps when receiving data (known as the downstream rate),
and 16 to 640 Kbps when sending data (known as the
upstream rate). ADSL requires a special ADSL modem.
ATM
Asynchronous Transfer Mode. ATM is a high bandwidth,
low-delay, high-speed transmission technology. ATM is a
communication standard that provides for information
transfer in the form of fixed-length cells of 53 bytes
each. The ATM format can be used to deliver voice, video
and data traffic at varying rates.
backbone
A centralized high-speed network that interconnects
smaller, independent networks.
bandwidth
The number of bits of information which can move over a
communication medium in a given amount of time. Typically
measured in Kbps and Mbps.
bps
Bits per second. A measure of digital information
transmission rates. A rate of one bps can transmit one
bit in a second.
cable modem
A modem designed to operate over HFC lines. Because HFC
lines generally provide much greater bandwidth than
telephone lines, a cable modem can be used to achieve
faster access to the world wide web.
dedicated line
Telecommunication lines dedicated or reserved for use by
particular subscribers along predetermined routes.
DSL
Digital Subscriber Line. DSL is a technology for bringing
high bandwidth information to homes and small businesses
over ordinary copper telephone lines.
Gbps
Gigabits per second. A measure of digital information
transmission rates. One Gbps equals l,000 Mbps, one
million Kbps, or one billion bps.
GHz
Gigahertz. A unit of frequency denoting one billion
cycles per second, used to measure band and bandwidth.
HFC
Hybrid Fiber Coaxial. HFC cable is used in broadband
telecommunication systems. HFC can transmit between 500
MHz to 1,000 MHz of bandwidth in both directions.
IDC
Internet data center. IDC provides services such as
co-location, dedicated server hosting, security, backup,
storage hosting and network equipment rental services.
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IMT-2000
International Mobile Telecommunications 2000. IMT-2000,
or "3G," is an initiative of the International
Telecommunication Union to unify the diverse
second-generation systems in the global wireless industry
that are currently largely incompatible by establishing
certain global standards for third-generation systems that
will provide a common air interface capable of offering
wireless multimedia service globally at transmission
speeds of up to 348 Kbps on the move and 2 Mbps when
stationary or indoors.
Internet
A global network connecting millions of computers. More
than 100 countries are linked into exchanges of data, news
and opinions.
ISP
Internet Service Provider. An ISP is a company that
provides access to the Internet. For a monthly fee, the
service provider provides a software package, user name,
password and access phone number. Equipped with a modem,
the user can then log on to the Internet and browse the
world wide web.
Kbps
Kilobits per second. A measure of digital information
transmission rates. One Kbps equals 1,000 bps.
KHz
Kilohertz. A unit of frequency denoting one thousand
cycles per second, used to measure band and bandwidth.
LAN
Local Area Network. A LAN is a group of computers and
associated devices that share a common communications line
and typically share the resources of a single processor or
server within a small geographic area (for example, within
an office building). Usually, the server has applications
and data storage that are shared in common by multiple
computer users.
leased line
A permanent telephone connection between two points set up
by a network service provider. Typically, leased lines
are used by business to connect geographically distant
offices. The fee for the connection is usually a fixed
monthly rate.
Mbps
Megabits per second. A measure of digital information
transmission rates. One Mbps equals 1,000 Kbps or one
million bps.
MHz
Megahertz. A unit of frequency denoting one million
cycles per second, used to measure band and bandwidth.
MIC
Ministry of Information and Communication of Korea.
NSP
Network Service Provider.
remote terminal
A system that multiplexes voice and data signals into
synchronous data streams and transmits them as optical
signals.
router
A device that forwards data packets between interconnected
network segments.
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VDSL
Very high bit rate Digital Subscriber Line. VDSL is a
technology that allows final delivery of data over
existing copper telephone lines. VDSL supports data rates
of up to 52 Mbps when receiving data (known as the
downstream rate).
VoIP
Voice over Internet Protocol (that is, voice delivered
using the Internet Protocol) is a term used in Internet
Protocol telephony for a set of facilities for managing
the delivery of voice information using the Internet
Protocol. This means sending voice information in digital
form in discrete packets rather than in the traditional
circuit-committed protocols of the public switched
telephone network.
WiBro
A 2.3 GHz wireless broadband technology.
WLL
Wireless Local Loop. A local loop using fixed radio
access technology to provide low to medium speed Internet
services.
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hanarotelecom incorporated AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2005
AND REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
F-1
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of
hanarotelecom incorporated:
We have audited the accompanying consolidated balance sheets of hanarotelecom incorporated and its
subsidiaries (collectively referred to as the "Company") as of December 31, 2004 and 2005, and the
related consolidated statements of operations, shareholders' equity and cash flows for each of the
three years in the period ended December 31, 2005, all expressed in Korean won. These financial
statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of its internal control
over financial reporting. Our audit included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the circumstances but
not for the purpose of expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also 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 financial statements referred to above present fairly, in all material
respects, the financial position of hanarotelecom incorporated and its subsidiaries as of December
31, 2004 and 2005, and the results of their operations, changes in shareholders' equity and their
cash flows for each of the three years in the period ended December 31, 2005, in conformity with
financial accounting standards in the Republic of Korea.
Our audits also comprehended the translation of Korean won amounts into U.S. dollar amounts and, in
our opinion, such translation has been made in conformity with the basis stated in Note 2. Such
U.S. dollar amounts are presented solely for the convenience of readers in the United States of
America.
Accounting practices used by the Company in preparing the accompanying financial statements conform
with generally accepted accounting principles in the Republic of Korea, but do not conform with
generally accepted accounting principles in the United States of America. The description of the
significant differences and the reconciliation of net loss and shareholders' equity to U.S.
generally accepted accounting principles are set forth in Note 28.
Deloitte Anjin LLC
Seoul, Korea
April 14, 2006
F-2
Table of Contents
hanarotelecom incorporated AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2004 AND 2005
Translation into
Korean Won
U.S. Dollars (Note 2)
ASSETS
2004
2005
2005
(In millions)
(In thousands)
CURRENT ASSETS:
Cash and cash equivalents (Note 3)
W
168,346
W
154,918
$
153,384
Short-term financial instruments (Notes 4 and 5)
193,716
23,350
23,119
Short-term investment securities (Note 6)
1,121
—
—
Trade receivables, net of allowance for doubtful accounts
of
W
62,216 million in 2004 and
W
99,387
million in 2005
205,600
221,259
219,068
Short-term loans, net of discount on present value of
W
209 million in 2004 and
W
400 million in 2005 (Note 9)
7,631
10,260
10,158
Accounts receivable-other, net of allowance for doubtful
accounts of
W
55 million in 2004 and
W
27,000 million in
2005, and discount on present value of nil in 2004 and
W
273 million in 2005 (Note 20)
1,306
8,820
8,733
Accrued income
2,083
758
750
Prepaid expenses
13,240
23,537
23,304
Refundable income tax
3,037
3,224
3,192
Advanced payments
26,853
114
113
Inventories
1,864
134
133
624,797
446,374
441,954
NON-CURRENT ASSETS:
Long-term financial instruments (Notes 4 and 5)
68
1,622
1,606
Long-term investment securities (Note 7)
28,816
31,471
31,159
Long-term trade receivables, net of allowance for
doubtful accounts of
W
535 million in 2004 and
W
981
million in 2005
1,083
2,349
2,326
Long-term loans, net of allowance for doubtful accounts
of nil in 2004 and
W
2,487 million in 2005, and discount
on present value of
W
2,709 million in 2004 and
W
1,570
million in 2005 (Note 9)
16,086
9,234
9,143
Long-term non-trade receivables, net of allowance for
doubtful accounts of nil in 2004 and
W
1,069 million in
2005, and discount on present value of nil in 2004 and
W
145 million in 2005
—
7,203
7,132
Key-money deposits (Note 20)
72,193
76,359
75,603
Long-term prepaid expenses
12,352
12,729
12,603
Deferred income tax assets (Note 19)
607
195
193
Property and equipment, net (Notes 10, 11, 13 and 24)
2,372,845
2,337,884
2,314,737
Intangibles (Notes 12, 13 and 24)
56,265
108,840
107,762
2,560,315
2,587,886
2,562,264
Total Assets
W
3,185,112
W
3,034,260
$
3,004,218
(Continued)
F-3
Table of Contents
hanarotelecom incorporated AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
AS OF DECEMBER 31, 2004 AND 2005
Translation into
Korean Won
U.S. Dollars (Note 2)
LIABILITIES AND SHAREHOLDERS' EQUITY
2004
2005
2005
(In millions)
(In thousands)
CURRENT LIABILITIES:
Trade payables (Note 20)
W
28,803
W
30,319
$
30,019
Other accounts payable
138,443
138,051
136,684
Advances received
9,983
11,564
11,450
Accrued expenses (Notes 20 and 28)
81,490
144,479
143,049
Withholdings
16,263
19,715
19,520
Income tax payable
653
92
91
Current maturities of long-term debt, net of
discount on debentures of
W
6,543 million in 2004
and
W
482 million in 2005, and discount on present
value of nil in 2004 and
W
3,844 million in 2005
(Notes 11 and 13)
413,526
242,801
240,397
Forward exchange contracts (Note 15)
33,802
47,420
46,950
Interest swap (Note 15)
17,623
1,859
1,841
Deferred income tax liabilities (Note 19)
—
20
19
Deposits received
1,924
1,856
1,838
742,510
638,176
631,858
LONG-TERM LIABILITIES:
Long-term debt, net of current portion (Note 13)
399,154
244,979
242,554
Debentures, net (Note 13)
189,518
493,206
488,323
Long-term obligation under capital leases (Note 11)
32,541
12,704
12,578
Long-term advances received
13,142
11,969
11,850
Accrued severance indemnities, net (Note 2)
32,932
32,698
32,374
Long-term deposits received
23,709
27,448
27,176
690,996
823,004
814,855
Total Liabilities
1,433,506
1,461,180
1,446,713
COMMITMENTS AND CONTINGENCIES (Note 21)
SHAREHOLDERS' EQUITY (Note 1):
Capital stock (Note 16)
2,310,676
2,310,676
2,287,799
Paid-in capital in excess of par value
341,033
340,917
337,542
Accumulated deficit (Note 28)
(887,158
)
(1,096,222
)
(1,085,368
)
Capital adjustments:
Stock compensation (Note 17)
7,227
11,465
11,351
Valuation
gain (loss) on available-for-sale
securities, net
(5,764
)
3,183
3,151
Valuation loss on interest swap (Note 15)
(17,623
)
(1,859
)
(1,841
)
Minority interests
3,215
4,920
4,871
Total Shareholders' Equity
1,751,606
1,573,080
1,557,505
Total Liabilities and Shareholders' Equity
W
3,185,112
W
3,034,260
$
3,004,218
See accompanying notes to consolidated financial statements.
F-4
Table of Contents
hanarotelecom incorporated AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
Translation into
Korean Won
U.S. Dollars (Note 2)
2003
2004
2005
2005
(In millions, except per share amount)
(In thousands, except
per share amount)
OPERATING REVENUE (Notes 20 and 24)
W
1,383,486
W
1,449,569
W
1,589,345
$
1,573,609
OPERATING EXPENSES (Notes 18 and 20)
1,312,792
1,335,639
1,550,823
1,535,468
OPERATING INCOME (Note 24)
70,694
113,930
38,522
38,141
NON-OPERATING INCOME:
Interest income
18,465
18,497
16,637
16,472
Gain on disposal of short-term investment securities
315
—
—
—
Gain on disposal of long-term investment securities
145
109
439
435
Gain on disposal of investment securities using the
equity method
—
—
25,391
25,140
Gain on disposal of property and equipment
1,102
885
3,962
3,923
Gain on foreign currency transactions
267
1,404
8,881
8,793
Gain on foreign currency translation
19
33,823
11,699
11,583
Gain on early redemption of debentures (Note 13)
870
—
—
—
Gain on valuation of forward exchange contract
173
—
—
—
Gain on transaction of forward exchange contract
(Note 15)
343
242
—
—
Other
5,273
7,215
16,188
16,027
26,972
62,175
83,197
82,373
NON-OPERATING EXPENSES:
Interest expense (Note 13)
139,330
100,882
98,814
97,836
Asset Backed Securities payable expense (Note 14)
9,028
490
—
—
Loss on foreign currency transactions
764
354
264
261
Loss on foreign currency translation
138
11
1,092
1,081
Loss on disposal of short-term investment securities
2,117
86
29
28
Loss on disposal of long-term investment securities
—
1
1,381
1,367
Loss on valuation of trading securities
307
—
—
—
Impairment loss on short-term investment securities
(Note 6)
940
450
1,120
1,109
Impairment loss on long-term investment securities
(Note 7)
3,385
2,539
4,045
4,005
Donations
800
306
312
309
Loss on early redemption of debentures (Note 13)
308
—
165
163
Loss on early redemption of long-term debt (Note 13)
—
—
2,235
2,213
Loss on redemption of long-term obligation under
capital leases (Note 11)
—
—
58
57
Loss on valuation using the equity method (Note 8)
23,142
—
—
—
Loss on disposal of property and equipment
1,326
1,246
2,154
2,133
Loss on disuse of property and equipment (Note 10)
61,333
20,726
60,586
59,986
Loss on valuation of forward exchange contract
(Note 15)
—
33,975
19,842
19,646
Loss on transaction of forward exchange contract
(Note 15)
—
173
—
—
Impairment loss on intangibles (Note 12)
—
86
79,641
78,852
Other bad debt
—
—
12,127
12,007
Non-operating expense-other (Note 2)
4,513
—
22,039
21,821
Other
11,147
931
7,602
7,528
258,578
162,256
313,506
310,402
(Continued)
F-5
Table of Contents
hanarotelecom incorporated AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
Translation into
Korean Won
U.S. Dollars (Note 2)
2003
2004
2005
2005
(In millions, except per share amount)
(In thousands, except
per share amount)
ORDINARY INCOME (LOSS)
W
(160,912)
W
13,849
W
(191,787)
$
(189,888
)
EXTRAORDINARY ITEMS (Note 25)
—
—
(19,018
)
(18,830
)
INCOME (LOSS) BEFORE INCOME TAX
(160,912
)
13,849
(210,805
)
(208,718
)
INCOME TAX EXPENSE (Note 19)
(302
)
(495
)
(434
)
(430
)
MINORITY INTEREST SHARE OF LOSS (INCOME)
(85
)
(308
)
1,921
1,902
NET INCOME (LOSS)
W
(161,299)
W
13,046
W
(209,318)
$
(207,246
)
BASIC AND DILUTED ORDINARY INCOME
(LOSS) PER SHARE (Note 2)
W
(502)
W
28
W
(412)
$
(0.41
)
BASIC AND DILUTED NET INCOME (LOSS)
PER SHARE (Note 2)
W
(502)
W
28
W
(453)
$
(0.45
)
See accompanying notes to consolidated financial statements.
F-6
Table of Contents
hanarotelecom incorporated AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
Korean Won (In millions)
Common
Capital
Accumulated
Capital
Minority
stock
surplus
deficit
adjustments
interests
Total
Balance at December 31, 2002
W
1,396,613
W
689,758
W
(737,987)
W
(5,546)
W
145,477
W
1,488,315
Issuance of common stock
914,063
(348,173
)
—
—
—
565,890
Net loss for 2003
—
—
(161,299
)
—
85
(161,214
)
Effect of changes in consolidated
subsidiaries
—
(808
)
489
—
(144,964
)
(145,283
)
Compensation expense related to
stock options
—
—
—
1,375
—
1,375
Net unrealized loss on
available-for-sale securities
—
—
—
(2,376
)
—
(2,376
)
Net unrealized loss on
investment securities using the
equity method
—
(8,557
)
—
(7
)
—
(8,564
)
Loss on valuation of interest swap
—
—
—
(7,425
)
—
(7,425
)
Foreign-based operations translation
Debit
—
—
—
2
—
2
Balance at December 31, 2003
2,310,676
332,220
(898,797
)
(13,977
)
598
1,730,720
Net income for 2004
—
—
13,046
—
308
13,354
Effect of changes in consolidated
Subsidiaries
—
256
(300
)
22
2,309
2,287
Compensation expense related to
stock options
—
—
—
1,311
—
1,311
Net
recognized gain included in earnings
—
—
—
1,037
—
1,037
Net
unrealized gain on
available-for-sale securities
—
—
—
5
—
5
Effect of changes in investment
securities using the equity method
—
8,557
(1,107
)
7
—
7,457
Loss on valuation of interest swap
—
—
—
(4,565
)
—
(4,565
)
Balance at December 31, 2004
2,310,676
341,033
(887,158
)
(16,160
)
3,215
1,751,606
Net loss for 2005
—
—
(209,318
)
—
(1,921
)
(211,239
)
Effect of changes in consolidated
subsidiaries
—
(116
)
254
1,160
3,626
4,924
Compensation expense related to
stock options
—
—
—
4,238
—
4,238
Net
recognized gain included in earnings
—
—
—
5,643
—
5,643
Net unrealized gain on
available-for-sale securities
—
—
—
2,144
—
2,144
Gain on valuation of interest swap
—
—
—
15,764
—
15,764
Balance at December 31, 2005
W
2,310,676
W
340,917
W
(1,096,222)
W
12,789
W
4,920
W
1,573,080
Translation into U.S. Dollars (In
thousands) (Note 2)
$
2,287,799
$
337,542
$
(1,085,368
)
$
12,661
$
4,871
$
1,557,505
See accompanying notes to consolidated financial statements.
F-7
Table of Contents
hanarotelecom incorporated AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
Translation into
Korean Won
U.S. Dollars (Note 2)
2003
2004
2005
2005
(In millions)
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)
W
(161,299)
W
13,046
W
(209,318)
$
(207,246
)
Addition of expenses not involving cash outflows:
Stock compensation expense
1,375
1,278
4,238
4,195
Provision for severance indemnities
13,444
14,095
14,918
14,770
Amortization of discount on debentures
18,857
10,698
7,631
7,555
Amortization of discount on present value of
long-term debt
408
4,983
5,800
5,743
Recognition of long-term accrued interest
6,171
—
669
662
Employee fringe benefits
944
1,302
638
632
Depreciation and amortization
428,528
442,312
498,087
493,155
Loss on foreign currency translation
138
11
1,092
1,081
Provision for doubtful accounts
25,744
29,933
19,065
18,876
Loss on valuation of trading securities
307
—
—
—
Loss on disposal of property and equipment
1,326
1,246
2,154
2,133
Impairment loss on short-term investment securities
940
450
1,120
1,109
Impairment loss on long-term investment securities
3,385
2,539
4,045
4,005
Loss on disposal of short-term investment securities
2,117
86
29
28
Loss on disposal of long-term investment securities
—
1
1,381
1,367
Loss on valuation using the equity method
23,142
—
—
—
Loss on disuse of property and equipment
61,333
20,726
60,586
59,986
Loss on early redemption of debentures
308
—
165
163
Loss on early redemption of long-term debt
—
—
2,235
2,213
Loss on early redemption of long-term obligation
under capital leases
—
—
58
57
Loss on valuation of forward exchange contract
—
33,975
19,842
19,646
Impairment loss on intangibles
—
86
79,641
78,852
Other bad debt
—
—
12,127
12,007
Extraordinary loss
—
—
12,870
12,743
Minority interest income
85
308
—
—
Ordinary development cost and other
643
548
3,330
3,300
589,195
564,577
751,721
744,278
Deduction of revenues not involving cash inflows:
Gain on disposal of short-term investment securities
315
—
—
—
Amortization of present value discount
2,019
1,506
1,656
1,640
Gain on valuation of forward exchange contract
173
—
—
—
Gain on disposal of property and equipment
1,102
885
3,962
3,923
Gain on disposal of long-term investment securities
145
109
439
435
Gain on disposal of investment securities using the
equity method
—
—
25,391
25,140
Gain on foreign currency translation
19
33,823
11,699
11,583
Gain on early redemption of debentures
870
—
—
—
Minority interest loss
—
—
1,921
1,902
Other
56
224
1,593
1,577
4,699
36,547
46,661
46,200
(Continued)
F-8
Table of Contents
hanarotelecom incorporated AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
Translation into
Korean Won
U.S. Dollars (Note 2)
2003
2004
2005
2005
(In millions)
(In thousands)
Changes in assets and liabilities resulting from operations:
Decrease (Increase) in trade receivables
W
(37,260)
W
(24,643)
W
5,726
$
5,669
Decrease in long-term trade receivables
—
100
—
—
Decrease in accounts receivable-other
2,693
6,494
8,116
8,036
Decrease (Increase) in accrued income
(1,263
)
4,243
2,065
2,045
Decrease (Increase) in prepaid expenses
5,710
(1,629
)
(17,786
)
(17,610
)
Decrease (Increase) in refundable income tax
1,367
(671
)
(2,723
)
(2,696
)
Decrease (Increase) in advanced payments
(1,370
)
(25,529
)
548
543
Increase in inventories
(32,218
)
(30,929
)
(16,319
)
(16,157
)
Increase in forward exchange contract
(1,888
)
—
—
—
Decrease (Increase) in long-term prepaid expenses
1,097
541
(377
)
(373
)
Decrease (Increase) in deferred income tax assets
(51
)
(402
)
203
201
Increase (Decrease) in trade payables
(38,320
)
(7,316
)
1,565
1,550
Increase (Decrease) in other accounts payable
(28,698
)
20,347
(5,404
)
(5,350
)
Increase in advances received
347
4,129
4,349
4,306
Increase (Decrease) in accrued expenses
18,512
(6,948
)
35,569
35,217
Increase (Decrease) in withholdings
7,314
(6,441
)
1,536
1,521
Decrease in forward exchange contract
—
—
(6,224
)
(6,162
)
Increase (Decrease) in income tax payable
(1,436
)
474
(208
)
(206
)
Decrease in long-term advances received
(1,189
)
(1,173
)
(1,173
)
(1,161
)
Increase (Decrease) in deposits received
893
(77
)
167
165
Increase in long-term deposits received
1,013
3,219
3,326
3,292
Increase (Decrease) in deferred income tax liabilities
(1
)
90
(14
)
(13
)
Increase in foreign based operations translation credit
2
—
—
—
Decrease in payments to National Pension
140
23
45
44
Payments of severance indemnities
(15,556
)
(5,090
)
(19,666
)
(19,472
)
(120,162
)
(71,188
)
(6,679
)
(6,611
)
Net cash flows provided by operating activities
303,035
469,888
489,063
484,221
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposal of short-term investment
securities
34,143
303
472
467
Collection of short-term financial instruments
842,882
778,170
354,499
350,989
Redemption of short-term loans
6,771
6,320
3,051
3,021
Redemption of long-term loans
2,734
1,280
4,569
4,524
Proceeds from disposal of long-term investment
securities
406
9,002
6,826
6,758
Proceeds from disposal of investments in consolidated
subsidiaries
—
5,000
4,950
Withdrawal of long-term financial instruments
—
3
—
—
Refund of key-money deposits
18,152
14,642
25,741
25,486
Proceeds from disposal of property and equipment
9,304
8,218
4,447
4,403
Withdrawal of severance insurance deposits
1,009
99
1,438
1,424
Acquisition of short-term financial instruments
(929,616
)
(751,564
)
(182,133
)
(180,330
)
Purchase of short-term investment securities
(17,807
)
—
(500
)
(495
)
Extension of short-term loans
(614
)
(417
)
(694
)
(687
)
Purchase of long-term investment securities
(1,132
)
(190
)
(198,447
)
(196,482
)
(Continued)
F-9
Table of Contents
hanarotelecom incorporated AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
Translation into
Korean Won
U.S. Dollars (Note 2)
2003
2004
2005
2005
(In millions)
(In thousands)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of long-term financial instruments
W
(2)
W
(131)
W
(870)
$
(861
)
Extension of long-term loans
(5,404
)
(2,755
)
(1,449
)
(1,435
)
Extension of long-term non-trade receivables
—
—
(613
)
(607
)
Payment of key-money deposits
(2,324
)
(42,083
)
(20,130
)
(19,931
)
Acquisition of consolidated subsidiaries
—
(3,734
)
(249,110
)
(246,644
)
Acquisition of property and equipment
(196,053
)
(212,522
)
(311,676
)
(308,589
)
Payment of intangibles
(13,118
)
(12,163
)
(13,268
)
(13,137
)
Payment of severance insurance deposits
(124
)
(1,659
)
(1,778
)
(1,760
)
Net cash flows used in investing activities
(250,793
)
(209,181
)
(574,625
)
(568,936
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings
338,000
—
—
—
Proceeds from long-term debt
148,329
322,549
281,697
278,908
Proceeds from issuance of debentures
261,013
—
503,544
498,558
Proceeds from issuance of common stock
565,889
—
—
—
Proceeds from long-term deposits received
1,487
—
—
—
Repayment of short-term borrowings
(230,000
)
(163,000
)
—
—
Repayment of long-term debt
(1,096,800
)
(421,961
)
(833,607
)
(825,353
)
Decrease in Asset Backed Securities payable
(122,972
)
(32,510
)
—
—
Net cash flows used in financing activities
(135,054
)
(294,922
)
(48,366
)
(47,887
)
INCREASE (DECREASE) FROM CHANGES IN
CONSOLIDATED SUBSIDIARIES
(23,758
)
3,013
120,500
119,307
NET DECREASE IN CASH AND CASH
EQUIVALENTS
(106,570
)
(31,202
)
(13,428
)
(13,295
)
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR
306,118
199,548
168,346
166,679
CASH AND
CASH EQUIVALENTS, END OF YEAR
W
199,548
W
168,346
W
154,918
$
153,384
(Continued)
F-10
Table of Contents
hanarotelecom incorporated AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Translation into
Korean Won
U.S. Dollars (Note 2)
2003
2004
2005
2005
(In millions)
(In thousands)
CASH PAID FOR INTEREST
W
125,291
W
82,453
W
78,573
$
77,795
CASH PAID FOR INCOME TAX
1,030
1,348
186
184
TRANSACTIONS NOT INVOLVING CASH:
Transfer of long-term loans to current portion
13,830
4,759
10,032
9,933
Transfer of inventories to property and equipment
41,801
31,480
19,242
19,051
Transfer of debentures to current portion
264,688
306,000
190,000
188,119
Transfer of long-term debt to current portion
103,271
72,956
40,948
40,543
Transfer of long-term obligation under capital
lease to current portion
87,297
53,108
39,255
38,866
Transfer of Asset Backed Securities payable to
current portion
32,510
—
—
—
Recognition of loss on valuation of
available-for-sale securities as capital
adjustments
3,496
681
—
—
Recognition of income on valuation of
available-for-sale securities as capital
adjustments
—
—
3,738
3,701
Transfer of construction in progress to property
and equipment
125,045
70,698
130,869
129,573
Acquisition of property and equipment under long-term lease obligation
98,230
37,731
—
—
Transfer of construction in progress to intangibles
—
—
3,479
3,445
Transfer of short-term loans to long-term loans
—
—
4,855
4,807
Transfer of trade receivables to long-term trade
receivables
—
—
2,142
2,121
Transfer of advanced payments to inventories
—
—
1,193
1,181
Transfer of advanced payments to long-term
investment securities
—
—
24,940
24,693
Transfer of refundable income tax to accounts
receivables-other
—
—
3,012
2,982
Transfer of advances received from proceeds from
disposal of investments in consolidated subsidiaries
—
—
3,200
3,168
Receivable from disposal of consolidated subsidiaries
—
—
23,800
23,564
Transfer of prepaid expenses to long-term present
value discount
—
10,561
7,317
7,245
Transfer of provision for severance indemnities to
construction in progress
—
620
790
782
Transfer of other current liabilities to long-term
deposits received
17,121
—
—
—
See accompanying notes to consolidated financial statements.
F-11
Table of Contents
hanarotelecom incorporated AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003, 2004 AND 2005
1.
GENERAL:
(1) hanarotelecom incorporated
hanarotelecom incorporated ("hanaro") was incorporated on September 26, 1997 pursuant to the laws
of the Republic of Korea ("Korea"). hanaro was formed following its selection by the Ministry of
Information and Communication ("MIC") on June 13, 1997 as the second carrier to provide local
telephony services in Korea. On November 11, 1998, hanaro was listed on the Korea Securities
Dealers Automated Quotation System ("KOSDAQ"). hanaro issued American Depository Receipts ("ADRs")
on April 4, 2000, which are traded on the National Association of Securities Dealers Automated
Quotation System ("NASDAQ").
hanaro commenced providing local call and high-speed data access, internet and multimedia access on
April 1, 1999 and is providing services in 83 cities, including Seoul, Busan, Ulsan and Incheon,
and 53 counties as of December 31, 2005. On December 12, 2002, hanaro received a license to
provide domestic long-distance calls and international calls from the MIC, and commenced providing
the service from July 1, 2004.
hanaro's headquarters is located in Yoido-dong, Seoul. hanaro has 26 domestic branches and also
has invested in several companies such as Korea Thrunet Co., Ltd., Hanaro Realty Development &
Management Co., Ltd., Hanaro Telephone & Internet Information, Inc. and Hanaro Dream Inc. in order
to facilitate and strengthen its services.
As of December 31, 2005, the shareholders of hanaro are as follows:
Number of
Percentage of
shares
ownership (%)
Newbridge Asia HT, L.P.
49,535,799
10.72
AIF II NT, Ltd.
38,456,250
8.32
SSB - AOF NT, Ltd.
24,721,875
5.35
United Classic Investment Limited
20,392,746
4.41
HT Holding V, L.P.
9,418,330
2.04
HT Holdings VI, L.P.
7,325,000
1.59
HT Holdings VII, L.P.
9,156,250
1.98
HT Holdings VIII, L.P.
10,987,500
2.38
HT Holdings IX, L.P.
12,818,750
2.77
SK Telecom
22,090,000
4.78
Daewoo Securities Co., Ltd.
12,000,000
2.60
Dacom Corporation
8,964,561
1.94
Hong Kong & Shanghai Banking Corp.
7,630,778
1.65
Credit Suisse Financial
6,054,513
1.31
LG Telecom
5,397,574
1.17
NTC-SAUDI ARAB MON
4,999,155
1.08
Employee stock ownership association
2,229,232
0.48
Others
209,956,867
45.43
462,135,180
100.00
The major shareholder of hanaro is AIG-Newbridge-TVG Consortium, which has 182,812,500 shares,
39.56% of ownership of the Company.
F-12
Table of Contents
(2) Consolidated Subsidiaries
The consolidated financial statements include the accounts of hanaro and its controlled
subsidiaries (collectively referred to as the ''Company''). Controlled subsidiaries include
majority-owned entities and entities of which hanaro owns more than 30 percent of the total
outstanding voting stock and is the largest shareholder. Significant inter-company accounts and
transactions have been eliminated in the consolidation. The ownership percentages disclosed in the
following table relate to the period that such entities were consolidated.
Year
Ownership
control was
percentage (%)
Subsidiaries
obtained
2004
2005
Primary business
Hanaro Realty Development &
1999
99.99
99.99
Property management of
Management Co., Ltd.
hanarotelecom incorporated
Hanaro Telephone & Internet
2002
99.99
99.99
Customer Q & A and service
Information, Inc.
Hanaro WEB(n)TV
2000
49.00
—
Broadcasting & telecommunication
Media Holdings, Inc.
2004
100.00
—
Investment in broadcasting company
Hanaro Dream, Inc.
2004
57.02
57.02
Distribution industry of internet
digital contents
Korea Thrunet Co., Ltd.
2005
—
96.22
Internet and multimedia access
service
hanaro purchased Korea Thrunet Co., Ltd.'s stocks during 2005 and included it in the consolidated
financial statements. Also, hanaro excluded Hanaro Web(n)TV and Media Holdings, Inc. from the
consolidated financial statements due to disposal as of December 31, 2005.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
hanaro and its domestic subsidiaries maintain their official accounting records in Korean won and
prepare statutory consolidated financial statements in the Korean language (Hangul) in conformity
with the accounting principles generally accepted in the Republic of Korea ("Korean GAAP").
Certain accounting principles applied by the Company and its domestic subsidiaries that conform
with financial accounting standards and accounting principles in the Republic of Korea may not
conform with generally accepted accounting principles in other countries. Accordingly, these
financial statements are intended for use by those who are informed about Korean accounting
principles and practices. The accompanying financial statements have been condensed, restructured
and translated into English with certain expanded descriptions from the Korean language financial
statements.
The accompanying financial statements are stated in Korean Won, the currency of the country in
which hanaro is incorporated and operates. The translation of Korean Won amounts into U.S. dollar
amounts is included solely for the convenience of the readers outside of the Republic of Korea and
has been made at the rate of
W
1,010.00 to US$1.00, the noon buying rate in the City of New York
for cable transfers in Won as certified for customs purposes by the Federal Reserve Bank of New
York on December 31, 2005. Such translations should not be construed as representations that the
Korean Won amounts could be converted at that or any other rate.
The significant accounting policies followed by the Company in preparing the accompanying
consolidated financial statements are summarized as follows:
F-13
Table of Contents
Use of Estimates
The preparation of financial statements in accordance with Korean GAAP requires management to make
estimates and assumptions that affect the amounts reported in the consolidated financial statements
and accompanying notes. The most significant estimates and assumptions relate to revenue
recognition, allowance for doubtful accounts, depreciation, investments in non-listed equity
securities and deferred income taxes. Actual results could differ from those estimates and may
affect amounts reported in future periods. Management believes that the estimates are reasonable.
Revenue Recognition
Revenue related to installation of service and sale of customer premises equipment is recognized
when equipment is delivered and installation is completed. Revenue from monthly recurring service
is recognized in the month the service is provided.
Cash and Cash Equivalents
Cash and cash equivalents are bank deposits and short-term money market instruments that can be
easily converted into cash and whose risk of value fluctuation arising from changes of interest
rates is not material. Only investments with maturities of three months or less from the
acquisition date are included in cash equivalents.
Short-term Financial Instruments
Short-term financial instruments primarily consist of time deposits with original maturities of
less than one year and repurchase agreements that invest in short-term highly liquid securities.
Short-term financial instruments are recorded at cost. Interest income on short-term financial
instruments is accrued as earned.
Allowance for Doubtful Accounts
The allowance for doubtful accounts is provided based on the estimated collectibility of individual
accounts and historical bad debt experience.
Changes in allowance for doubtful accounts of trade receivables, accounts receivable-other,
long-term trade receivables, long-term loans and long-term non-trade receivables for the years
ended December 31, 2003, 2004 and 2005 are as follows (won in millions):
2003
2004
2005
Beginning of year
W
21,170
W
41,089
W
62,806
Provision
25,744
29,933
31,192
Write-offs
(1,569
)
(8,969
)
(27,219
)
Changes in consolidated subsidiaries
(4,256
)
753
64,145
End of year
W
41,089
W
62,806
W
130,924
The Company reclassified the trade receivables from Onse Telecom into long-term trade receivables
due to the court arrangement of debt and accordingly, recorded the difference between the trade
receivables and the discounted present value as allowance for doubtful accounts in 2003.
Also, in 2004, in accordance with the adoption of SKAS No. 13, the Company reclassified the
discount on present value of
W
686 million of the receivables from Onse Telecom incurred during
2003 into allowance for doubtful accounts.
Inventories
Inventories consist primarily of modems and local area network equipment to be leased to customers.
Inventories are stated at the lower of cost or net realizable value, cost being determined by the
average cost method. If the net realizable value of inventories is lower than cost, inventories
are adjusted to net realizable value and the difference between cost and revalued amount is charged
to current operations.
F-14
Table of Contents
Investment Securities Other than those Accounted for Using the Equity Method
(1) Classification of Securities
At acquisition, the Company classifies securities into one of three categories: trading,
held-to-maturity or available-for-sale. Trading securities are those that were acquired
principally to generate profits from short-term fluctuations in prices. Held-to-maturity securities
are those with fixed and determinable payments and fixed maturity that an enterprise has the
positive intent and ability to hold to maturity. Available-for-sale securities are those not
classified as either held-to-maturity or trading securities. Trading securities are classified as
short-term investment securities, whereas available-for-sale securities and held-to-maturity
securities are classified as long-term investment securities, except for those maturity dates or
whose likelihood of being disposed of are within one year from the balance sheet date, which are
classified as short-term investment securities.
(2) Valuation of Securities
Securities are recognized initially at cost, which includes the market value of the consideration
given and incidental expenses. If the market price of the consideration given is not available, the
market prices of the securities purchased are used as the basis of measurement. If neither the
market price of the consideration given nor those of the acquired securities are available, the
acquisition cost is measured at the best estimates of its fair value.
After initial recognition, held-to-maturity securities are valued at amortized cost. The difference
between their acquisition costs and face values is amortized over the remaining term of the
securities by applying the effective interest method and added to or subtracted from the
acquisition costs and interest income of the remaining period. Trading securities are valued at
fair value, with unrealized gains or losses included in current operations. Available-for-sale
securities are also valued at fair value, with unrealized gains or losses included in capital
adjustments, until the securities are sold or if the securities are determined to be impaired and
the lump-sum cumulative amount of capital adjustments are reflected in current operations. However,
available-for-sale securities that are not traded in an active market and whose fair values cannot
be reliably estimated are accounted for at acquisition costs. For those securities that are traded
in an active market (marketable securities), fair values refer to the quoted market prices, which
are measured as the closing price at the balance sheet date. The fair values of non-marketable debt
securities are measured at the discounted future cash flows by using the discount rate that
appropriately reflects the credit rating of the issuing entity assessed by a publicly reliable
independent credit rating agency. If application of such measurement method is not feasible,
estimates of the fair values may be made using a reasonable valuation model or quoted market prices
of similar debt securities issued by entities conducting similar
business in similar industries. Securities are evaluated at each balance sheet date to determine whether there is any objective
evidence of impairment loss. When any such evidence exists, unless there is a clear
counter-evidence that recognition of impairment is unnecessary, the Company estimates the
recoverable amount of the impaired security and recognizes any impairment loss in current
operations. The amount of impairment loss of held-to-maturity security or non-marketable equity
security is measured as the difference between the recoverable amount and the carrying amount.
The recoverable amount of held-to maturity security is the present value of expected future cash
flows discounted at the securities' original effective interest rate. For available-for-sale debt
or equity security stated at fair value, the amount of impairment loss to be recognized in the
current period is determined by subtracting the amount of impairment loss of debt or equity
security already recognized in prior period from the amount of amortized cost in excess of the
recoverable amount for debt security or from the amount of acquisition cost in excess of fair value
for equity security. For non-marketable equity securities accounted for at acquisition costs, the
impairment loss is equal to the difference between the recoverable amount and the carrying amount.
If the realizable value subsequently recovers, in case of a security stated at fair value, the
increase in value is recorded in current operations, up to the amount of the previously recognized
impairment loss, while with securities stated at amortized cost or acquisition cost, the increase
in value is recorded in current operations, so that its recovered value does not exceed what its
amortized cost would be as of the recovery date if there had been no impairment loss.
F-15
Table of Contents
(3) Reclassification of Securities
When transfers of securities between categories are needed because of changes in an entity's
intention and ability to hold those securities, such transfer is accounted for as follows: trading
securities cannot be reclassified into available-for-sale and held-to-maturity securities, and vice
versa, except when certain trading securities lose their marketability. Available-for-sale
securities and held-to-maturity securities can be reclassified into each other after fair value
recognition. When a held-to-maturity security is classified into available-for-sale security, the
difference between fair value and book value is recorded as a capital adjustment. Whereas, in the
case of an available-for-sale security is reclassified into held-to-maturity securities, the
difference is recorded as a capital adjustment and amortized using the effective interest rate
method for the remaining periods.
Investment Securities Using the Equity Method
Investments in equity securities in companies in which the Company is able to exercise significant
influence over the operating and financial policies of the investees are accounted for using the
equity method. The change in the Company's portion of an investee's net equity resulting from a
change in an investee's net equity is reflected in the Company's net income (loss), retained
earnings and capital adjustments, in accordance with the causes of the change, which consist of the
investee's net income (loss), changes in retained earnings and changes in capital surplus and
capital adjustments. Unrealized gain (loss) arising from the transactions of assets between the
Company and equity method investees is eliminated according to the ownership percentage.
Valuation of Assets and Liabilities at Present Value
Long-term receivables and long-term payables are valued at their present value as discounted at an
appropriate discount rate. Discounts are amortized using the effective interest rate method and
recognized as interest expense or interest income over the term of the related accounts.
Property and Equipment
Property and equipment are stated at cost. Expenditures incurred after the acquisition of the
property and equipment that increase the future economic benefits beyond the property's most
recently measured performance are capitalized as addition to property and equipment.
Depreciation is computed using the straight-line method based on the estimated useful lives of the
assets as follows:
Estimated useful lives
Buildings, building facilities and structures
40~50 years
Machinery
3~15 years
Vehicles and other
4~8 years
The Company changed the useful lives of tangible assets, effective from January 1, 2004, to improve
financial soundness and usefulness of accounting information, considering the rapid changes of
technologies in the telecommunication industry, the Company's accumulated business experience and
the average useful lives used by companies in the same industry. Such changes in accounting
estimates increased the Company's depreciation by
W
8 million for the year ended December 31, 2004,
in comparison with the calculation applying the previous useful lives.
The changes in the estimated useful lives are as follows:
Previous useful lives
Revised useful lives
Buildings and structures
50
years
40 years
Machinery (duct line)
8 years
15 years
Machinery (terminal equipment)
8 years
6 years
Vehicles and other
5~8 years
4 years
F-16
Table of Contents
Capitalization of Financing Costs
Interest expense, discount and other financial charges, including certain foreign exchange
translation gain and loss on borrowings associated with the manufacture, purchase, or construction
of property and equipment, incurred prior to the completion of the acquisition, were capitalized
until the year ended December 31, 2002, and are no longer capitalized from January 1, 2003 in
compliance with SKAS No. 7.
Long-Lived Assets
Long-lived assets are subject to review for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. An impairment loss is
recognized when estimated undiscounted future net cash flows expected to result from the use of the
asset and its eventual disposition are less than its carrying amount. If such assets are
considered to be impaired, the impairment to be recognized is measured as the amount by which the
carrying amount of the assets exceeds the fair value of the assets.
Leases
Lease agreements that include a bargain purchase option, result in the transfer of ownership by the
end of the lease term, have a term equal to at least 75% of the estimated economic life of the
leased property or where the present value of the minimum lease payments at the beginning of the
lease term equals or exceeds 90% of the fair value of the leased property are accounted for as
financial or capital leases. All other leases are accounted for as operating leases. Assets and
liabilities related to financial leases are recorded as property and equipment and long-term debt,
respectively, and the related interest is calculated using the effective interest rate method. In
respect to operating leases, the future minimum lease payments are expensed ratably over the lease
term while contingent rentals are expensed as incurred.
Intangibles
Intangibles are stated at cost, net of amortization. Amortization is computed using the
straight-line method, based on the estimated useful lives of the assets as described below.
Estimated Useful Lives
Goodwill
4~5 years
Property rights of industry
5~10 years
Cable line usage rights
15~20 years
Land rights
20 years
Development costs
1 year
Other intangibles
3~5 years
Discounts on Debentures
Discounts on debentures are amortized over the redemption period of the debenture using the
effective interest rate method. Amortization of discounts is recognized as interest expense.
Accrued Severance Indemnities
All employees with more than one year of service are entitled to receive a lump-sum payment upon
termination of their employment with the Company, based on their length of service and rate of pay
at the time of termination. The severance indemnities that would be payable assuming all employees
were to resign amount to
W
36,348 million and
W
36,022 million as of December 31, 2004 and 2005,
respectively.
Before April 1999, the Company and its employees paid 3 percent and 6 percent, respectively, of
monthly pay (as defined) to the National Pension Fund in accordance with the National Pension Law
of Korea. The Company paid half of the employees' 6 percent portion and is paid back at the
termination of service by offsetting the receivable against the severance payments. Such
receivables, with a balance of
W
127 million and
W
82 million as of December 31, 2004 and 2005,
respectively, are presented as a deduction from accrued severance indemnities. Starting April
1999, the Company and its employees each pay 4.5 percent of monthly pay to the National Pension
Fund under the revised National Pension Law of Korea.
F-17
Table of Contents
The Company has entered into a severance insurance plan in accordance with the Labor Standard Law
of Korea promulgated in 2000. This plan restricts severance payments directly to the eligible
employees and directors, and meets the funding requirement for tax deduction purposes. The amount
funded under this severance insurance plan of
W
3,289 million and
W
3,242 million as of December
31, 2004 and 2005, respectively, is presented as a deduction from accrued severance indemnities.
Changes in accrued severance indemnities for the years ended December 31, 2003, 2004 and 2005 are
as follows (Won in millions):
2003
2004
2005
Beginning of year
W
28,027
W
25,649
W
36,348
Severance payments
(15,556
)
(5,090
)
(19,666
)
Provision
15,224
15,116
16,142
Changes in consolidated subsidiaries
(2,046
)
673
3,198
25,649
36,348
36,022
National Pension Fund for employees
(149
)
(127
)
(82
)
Severance insurance deposits
(1,624
)
(3,289
)
(3,242
)
End of year
W
23,876
W
32,932
W
32,698
The Company paid early retirement allowance to
W
4,513 million and
W
22,039 million in addition to
the normal severance payment for the years ended December 31, 2003 and 2005, respectively. The
retirement bonus was recorded as non-operating expense-other.
Accounting for Foreign Currency Transactions and Translation
The Company maintains its accounts in Korean won. Transactions in foreign currencies are recorded
in Korean won based on the prevailing rates of exchange on the transaction date. Monetary accounts
with balances denominated in foreign currencies are recorded and reported in the accompanying
financial statements at the exchange rates prevailing at the balance sheet date and the translation
gains or losses are reflected in current operations. The balances have been translated using the
rate announced by the Korea Exchange Bank, which was
W
1,035.00 and
W
1,004.50 to US$1.00 at
December 31, 2004 and 2005, respectively.
Income Tax Expense
The provision for income tax consists of the corporate income tax and resident surtax currently
payable and the changes in deferred income taxes for the period. The Company recognizes deferred
income taxes arising from temporary differences between amounts reported for financial accounting
and income tax purposes. Deferred income taxes will be offset against those incurred in the
future, if any. Deferred income taxes are recalculated based on the actual tax rate in effect at
each balance sheet date (See Note 19). Deferred tax assets and liabilities are classified as
current or non-current based on the classification of the related assets or liabilities for
financial reporting.
Stock Compensation Expense
The Company values stock options granted in 2004 and 2005 using the fair value method (binomial
option pricing model). Also, the Company records the difference between the present value of the
exercise price and the stock price at the grant date as compensation expense with a corresponding
credit to the capital adjustment account (minimum value method) for the stock options granted in
2000. The computed deferred compensation expenses are allocated over the contracted vesting
period. When the stock options are exercised with the issuance of new shares, the difference
between the exercise price plus the stock option cost recorded in the capital adjustment account
and the par value of the new shares issued is recorded as additional paid-in capital. However, for
the stock options granted in 1999, compensation expense was calculated as the difference between
the stock price at year-end and the exercise price multiplied by the number of stock options (See
Note 17).
F-18
Table of Contents
Net Income (Loss) per Share and Ordinary Income (Loss) per Share
Net income (loss) per share and ordinary income (loss) per share are computed by dividing net
income (loss) and ordinary income (loss) for common stock, by the weighted average number of common
shares outstanding during the period.
Net income (loss) per share and ordinary income (loss) per share for the years ended December 31,
2003, 2004 and 2005 are computed as follows (Won in millions except per shares amounts):
2003
2004
2005
Net income (loss)
W
(161,299
)
W
13,046
W
(209,318
)
Dividend for preferred stock
—
—
—
Net income (loss) for common stock
W
(161,299
)
W
13,046
W
(209,318
)
Extraordinary item
—
—
(19,018
)
Ordinary income (loss) for common stock
W
(161,299
)
W
13,046
W
(190,300
)
The weighted average number of common shares
321,309,739
462,135,180
462,135,180
Basic and diluted net income (loss) per share
W
(502
)
W
28
W
(453
)
Basic and diluted ordinary income (loss) per
share
W
(502
)
W
28
W
(412
)
Net income (loss) per share and ordinary income (loss) per share were not diluted for the years
ended December 31, 2003, 2004 and 2005, respectively.
Adoption of Newly Effective Statements of Korea Accounting Standards
The Korea Accounting Standards Board ("KASB") has published a series of Statements of Korea
Accounting Standards ("SKAS"), which replace the existing financial accounting standards,
established by the Korean Financial and Supervisory Board. The Company prepared its financial
statements as of December 31, 2005 in accordance with Financial Accounting Standards and SKAS in
the Republic of Korea.
The
Company newly adopted SKAS No. 15—"Investment in
Associates", No. 16—"Income Taxes" and No.
17—"Provisions, Contingent Liabilities and Contingent Assets", effective from January 1, 2005, and
certain amounts and accounts of prior year's financial statements are reclassified to conform to
the current year's presentation. This reclassification does not affect the net income and net
assets of the prior period.
3.
CASH AND CASH EQUIVALENTS:
Cash and cash equivalents as of December 31, 2004 and 2005 are as follows (Won in millions):
Interest rate per annum (%)
Amount
2005
2004
2005
Cash on hand
—
W
7
W
5
Current deposits
—
50
—
Passbook accounts
0.1
4,045
6,291
Specified fund trusts
3.1 ~ 5.5
—
5,557
Time deposits
3.64
37,000
1,000
Commercial paper
—
11,586
—
Money Market Funds
3.4 ~ 4.05
96,762
119,321
Money Market Deposit Accounts
1.6 ~ 3.0
3,896
7,698
Repurchase agreements
3.65
5,000
5,046
Certificate of deposits
3.8
10,000
10,000
W
168,346
W
154,918
F-19
Table of Contents
4.
SHORT-TERM AND LONG-TERM FINANCIAL INSTRUMENTS
:
(1) Short-term financial instruments as of December 31, 2004 and 2005 are as follows (Won in
millions):
Interest rate per annum (%)
Amount
2005
2004
2005
Time deposits
3.3 ~ 4.4
W
144,005
W
17,255
Repurchase agreements
3.4 ~ 4.6
29,521
6,095
Commercial paper
—
5,190
—
Certificate of deposits
—
15,000
—
W
193,716
W
23,350
(2) Long-term financial instruments as of December 31, 2004 and 2005 are as follows (Won in
millions):
Interest rate per annum (%)
Amount
2005
2004
2005
Deposits for checking accounts
—
W
8
W
14
Repurchase agreements
3.75
—
504
Time deposits
3.05 ~ 4.6
60
1,104
W
68
W
1,622
5.
RESTRICTED DEPOSITS:
As of December 31, 2004 and 2005, the following deposits are subject to withdrawal restriction as
guarantee for the payment of borrowings, checking accounts and other reasons (Won in millions).
Amount
2004
2005
Short-term financial instruments
W
117,267
W
22,709
Long-term financial instruments
68
1,445
W
117,335
W
24,154
6.
SHORT-TERM INVESTMENT SECURITIES:
Short-term investment securities as of December 31, 2004 and 2005 are as follows (Won in millions):
2004
2005
Acquisition cost
Book value
Acquisition cost
Book value
Held-to-maturity securities:
Collateralized bond obligation
W
1,570
W
1,120
W
1,120
W
—
Government bonds
1
1
—
—
W
1,571
W
1,121
W
1,120
W
—
The Company recorded
W
940 million,
W
450 million and £Ü1,120 million of impairment loss on
short-term investment securities for the years ended December 31, 2003, 2004 and 2005,
respectively.
F-20
Table of Contents
7.
LONG-TERM INVESTMENT SECURITIES:
(1) Long-term investment securities as of December 31, 2004 and 2005 consist of the following
(Won in millions):
2004
2005
Ownership
Ownership
percentage (%)
Amount
percentage (%)
Amount
Available-for-sale securities:
Listed equity securities:
LG Telecom, Ltd.
0.37
W
4,143
—
W
—
Netsecure Technology, Inc.
0.38
18
—
—
C.C.S., Inc.
7.22
1,698
7.22
3,842
Dong Bu Securities Co., Ltd.
—
—
0.67
1,345
5,859
5,187
Non-listed equity securities:
Dreamline Corp.
14.18
16,935
11.54
16,935
Korea Information Assurance, Inc.
0.47
100
0.47
100
CCR Inc.
2.08
484
2.08
185
Dauinternet, Inc.
0.71
28
0.71
18
Korea Digital Cable Media Center
4.75
550
4.21
500
HeyAnita Korea Inc.
—
—
15.58
828
Saeronet Broadcasting Co., Ltd.
—
—
8.18
1,151
Powercomm Corporation
—
—
0.06
1,000
CJ Cablenet Haeundae-Kijjang Corp.
—
—
20.00
1,118
Rent House Co., Ltd.
—
—
20.00
21
Korea.com Communications Co., Ltd.
—
—
53.47
—
TG Edunet Co., Ltd
—
—
27.59
—
Others
2,099
1,280
20,196
23,136
Money Market Funds:
Dong Yang Investment Bank
—
34
Prudential Investment & Securities Co., Ltd.
—
145
—
179
Investments in funds:
Engineering Benevolent Association
0.03
W
14
0.03
W
14
KDBC Hanaro Interventure Fund
31.00
2,598
31.00
2,598
MIC99-7 Venture Investment Association
—
134
Korea Equipment Financial Cooperative
—
67
Information & Communication Financial
Cooperative
32
16
Electric Contractors' Financial Cooperative
53
53
Korea Electric Engineers Association
24
24
Korea Specialty Contractor Financial
Cooperative
20
50
2,741
2,956
28,796
31,458
Held-to-maturity securities:
Government and municipal bond
18
11
G.P.S. Korea Inc.
2
2
20
13
W
28,816
W
31,471
F-21
Table of Contents
(2) Listed equity securities as of December 31, 2004 and 2005 are as follows (won in millions):
2004
2005
Acquisition cost
Fair value
Acquisition cost
Fair value
LG Telecom Co., Ltd.
W
5,396
W
4,143
W
—
W
—
Netsecure Technology, Inc.
1,399
18
—
—
C.C.S., Inc.
4,740
1,698
4,740
3,842
Dong Bu Securities Co.,
Ltd.
—
—
201
1,345
W
11,535
W
5,859
W
4,941
W
5,187
Above listed equity securities are recorded at market price and the difference between acquisition
cost and fair value is accounted for as capital adjustments. However, when the listed equity
securities' market price declined and is not expected to recover, the Company records the
difference between market price and acquisition cost as impairment loss on long-term investment
securities. The Company recorded
W
3,009 million of impairment loss on long-term investment
securities (listed equity security) for the year ended December 31, 2005.
(3) Non-listed equity securities as of December 31, 2004 and 2005 are as follows (won in
millions):
2004
2005
Acquisition
Net asset
Book
Acquisition
Net asset
Book
cost
value
value
cost
value
value
Dreamline Corporation
W
39,530
W
18,837
W
16,935
W
39,530
W
18,165
W
16,935
Korea Information Assurance, Inc.
100
81
100
100
63
100
CCR Inc.
1,780
277
484
1,780
185
185
Dauinternet, Inc.
1,100
20
28
1,100
18
18
Korea Digital Cable Media Center
550
469
550
500
384
500
HeyAnita Korea Inc.
—
—
—
1,568
828
828
Saeronet Broadcasting Co., Ltd.
—
—
—
2,719
1,151
1,151
Powercomm Corporation
—
—
—
1,000
1,000
1,000
CJ Cablenet Haeundae-Kijjang Corp.
—
—
—
1,118
1,118
1,118
Rent House Co., Ltd.
—
—
—
420
21
21
Korea.com Communications Co., Ltd.
—
—
—
35,000
—
—
TG Edunet Co., Ltd
—
—
—
2,400
—
—
Others
8,172
1,351
2,099
13,204
1,150
1,280
W
51,232
W
21,035
W
20,196
W
100,439
W
24,083
W
23,136
Non-listed equity securities of which net asset value declined and is not expected to recover were
adjusted to net asset value or fair value, with the valuation loss on long-term investment
securities charged to current operations.
The Company recorded
W
3,385 million,
W
2,539 million and
W
1,036 million of impairment loss on
long-term investment securities (non-listed equity security) for the years ended December 31, 2003,
2004 and 2005, respectively.
CJ Cablenet Haeundae-Kijjang Corp. is subject to be accounted for using the equity method because
the Company's ownership percentage is 20%, but is excluded from using the equity method because the
Company's influence over the investee's operation is limited as majority shareholder of the
investee holds 80% ownership.
Also, Rent House Co., Ltd. and TG Edunet Co., Ltd. are subject to be accounted for using the equity
method the Company's ownership percentage is over 20%, but are excluded from using the equity
method because the investee's operation is under court's control after bankruptcy.
In addition, Korea.com Communications Co., Ltd. is subject to be accounted for using the equity
method and consolidated subsidiaries, but is excluded from using the equity method and consolidated
subsidiaries because the Company can not actually exercise significant influence over the operating
and financial policies of the investee according to legal management.
Furthermore, ownership percentage of the Company in Korea.com Communications Co., Ltd. is reduced
to 0.96% after the reduction of capital (20:1) subsequent to consolidated balance sheet date.
F-22
Table of Contents
(4) Money market funds as of December 31, 2004 and 2005 are as follows (Won in millions):
2004
2005
Acquisition cost
Book value
Acquisition cost
Book value
Dong Yang Investment Bank
W
—
W
—
W
29
W
34
Prudential Investment &
Securities Co., Ltd.
—
—
134
145
W
—
W
—
W
163
W
179
Above money market funds are recorded at market price and the difference between acquisition cost
and fair value is accounted for as capital adjustments.
(5) Debt securities as of December 31, 2004 and 2005 are as follows (Won in millions):
2004
2005
Acquisition cost
Book value
Acquisition cost
Book value
Government and municipal bonds:
W
18
W
18
W
11
W
11
Corporate bonds:
G.P.S. Korea Inc.
2
2
2
2
W
20
W
20
W
13
W
13
8.
INVESTMENT SECURITIES USING THE EQUITY METHOD:
(1) The Company reclassified investment securities of Dreamline Corporation into long-term
investment securities from investment securities using the equity method due to the decrease of
ownership percentage to less than 20% as of December 31, 2004.
(2) Loss on valuation using the equity method for the year ended December 31, 2003 is as follows
(won in millions):
Loss on valuation
Changes in
Net asset
using the equity
consolidated
Capital
Book
2003
Acquisition cost
Value
Beginning of period
method
subsidiaries
adjustment
Value
Dreamline
Corporation
W
39,530
W
24,894
W
—
W
(23,142
)
W
41,272
W
(8,565
)
W
9,565
9.
LOANS TO EMPLOYEES:
Short-term and long-term loans to employees as of December 31, 2004 and 2005 are as follows (Won in
millions):
2004
2005
Interest per
annum (%)
Short-term
Long-term
Short-term
Long-term
Loans to employees for stock purchase
—
W
4,486
W
8,634
W
8,087
W
1,742
Loans to employees for housing
2
1,524
8,450
1,409
7,210
Other
—
128
67
135
42
6,138
17,151
9,631
8,994
Less: discount on present value
(149
)
(2,495
)
(366
)
(1,361
)
W
5,989
W
14,656
W
9,265
W
7,633
F-23
Table of Contents
10.
PROPERTY AND EQUIPMENT:
Changes in property and equipment for the years ended December 31, 2004 and 2005 are as follows
(Won in millions):
2004:
Changes in
Beginning of
consolidated
year
Increase
Decrease
subsidiaries
End of year
Land
W
157,962
W
7,584
W
—
W
—
W
165,546
Buildings
304,749
7,999
177
—
312,571
Structures
246
—
—
—
246
Machinery
3,293,862
259,718
52,121
1,973
3,503,432
Vehicles
431
47
38
—
440
Other
47,009
8,107
9,831
1,150
46,435
Construction in progress
23,848
69,551
70,698
—
22,701
Machinery in transit
61
394
194
—
261
3,828,168
353,400
133,059
3,123
4,051,632
Less: Accumulated
depreciation
Buildings
23,069
8,544
15
—
31,598
Structures
38
13
—
—
51
Machinery
1,228,566
408,119
24,102
273
1,612,856
Vehicles
198
202
38
—
362
Other
25,376
16,384
8,314
474
33,920
1,277,247
433,262
32,469
747
1,678,787
W
2,550,921
W
2,372,845
2005:
Changes in
Beginning of
consolidated
year
Increase
Decrease
subsidiaries
End of year
Land
W
165,546
W
1,234
W
—
W
11,386
W
178,166
Buildings
312,571
4,847
—
15,894
333,312
Structures
246
—
—
(54
)
192
Machinery
3,503,432
323,020
409,052
615,752
4,033,152
Vehicles
440
—
273
(134
)
33
Other
46,435
5,983
19,919
6,990
39,489
Construction in progress
22,701
127,755
137,920
4,522
17,058
Machinery in transit
261
89
350
—
—
4,051,632
462,928
567,514
654,356
4,601,402
Less: Accumulated
depreciation
Buildings
31,598
8,890
—
2,004
42,492
Structures
51
5
—
(31
)
25
Machinery
1,612,856
469,988
339,016
449,162
2,192,990
Vehicles
362
—
273
(56
)
33
Other
33,920
4,778
17,362
6,642
27,978
1,678,787
483,661
356,651
457,721
2,263,518
W
2,372,845
W
2,337,884
Depreciable assets are insured against fire and other casualty losses up to
W
2,301,912 million and
W
2,018,302 million as of December 31, 2004 and 2005, respectively.
The market value of the Company's land based on the official price of land (published by the
Ministry of Construction and Traffic) is
W
180,809 million and
W
233,886 million as of December 31,
2004 and 2005, respectively.
The Company recorded
W
61,333 million,
W
20,726 million and
W
60,586 million of loss on disuse of
property and equipment for the years ended December 31, 2003, 2004 and 2005, respectively, due to
discontinuance of service, decrease of customer demands and deteriorations of certain machinery.
F-24
Table of Contents
11.
LEASES
:
(1)
The Company has operating lease agreements for the rights to use automobiles with Avis Rent A
Car Co. The payment schedule for the operating leases is as follows (Won in millions):
Year
Amount
2006
W
623
2007
186
2008
23
W
832
(2)
The Company also has capital lease agreements with Korea HP Financial Service Co., LG Card
Services Corp., and Cisco Systems Capital Korea Ltd. for certain machinery and equipment. As
of December 31, 2004 and 2005, the acquisition cost of machinery and equipment under capital
leases was
W
175,336 million and
W
108,719 million, respectively, and depreciation expense
related to these capital leases for the years ended December 31, 2003, 2004 and 2005 amounts
to
W
20,071 million,
W
19,719 million and
W
13,590 million, respectively.
The Company early repaid a portion of capital leases and recorded
W
58 million of loss on early
redemption of obligations under capital leases for the year ended December 31, 2005.
The future annual payments under these capital lease agreements as of December 31, 2005 are as
follows (Won in millions):
Amount
Year
Principal
Interest
Total
2006
W
26,719
W
1,447
W
28,166
2007
12,271
323
12,594
2008
433
4
437
39,423
W
1,774
W
41,197
Less: Current portion
(26,719
)
W
12,704
In relation to these lease agreements, the Company has provided one blank promissory note as
collateral to LG Card Services Corp. (See Note 21).
12.
INTANGIBLES:
(1)
Intangibles as of December 31, 2004 and 2005 are as follows (Won in millions):
2004:
Acquisition cost
Amortization
Impairment
Book value
Goodwill
W
23,619
W
17,844
W
—
W
5,775
Property rights of industry
172
125
—
47
Cable line usage rights
55,967
8,219
—
47,748
Land rights
78
16
—
62
Development costs
36,775
35,309
—
1,466
Other intangibles
2,184
931
86
1,167
W
118,795
W
62,444
W
86
W
56,265
2005:
Acquisition cost
Amortization
Impairment
Book value
Goodwill
W
136,704
W
14,851
W
79,168
W
42,685
Property rights of industry
161
142
—
19
Cable line usage rights
75,255
14,850
—
60,405
Land rights
78
20
—
58
Development costs
40,079
38,402
—
1,677
Other intangibles
6,101
1,546
559
3,996
W
258,378
W
69,811
W
79,727
W
108,840
F-25
Table of Contents
(2)
Changes in intangibles for the years ended December 31, 2004 and 2005 are as follows (Won in
millions):
2004:
Changes in
Beginning
consolidated
of year
Acquisition
Amortization
subsidiaries
End of year
Goodwill
W
3,287
W
6,343
W
3,855
W
—
W
5,775
Property rights of industry
15
1
22
53
47
Cable line usage rights
45,397
4,969
2,609
(9
)
47,748
Land rights
66
—
4
—
62
Development costs
2,716
1,375
2,625
—
1,466
Other intangibles
—
347
323
1,143
1,167
W
51,481
W
13,035
W
9,438
W
1,187
W
56,265
2005:
Changes in
Beginning
consolidated
of year
Acquisition
Amortization
subsidiaries
End of year
Goodwill
W
5,775
W
128,233
W
91,323
W
—
W
42,685
Property rights of industry
47
2
26
(4
)
19
Cable line usage rights
47,748
3,845
3,526
12,338
60,405
Land rights
62
—
4
—
58
Development costs
1,466
3,304
3,093
—
1,677
Other intangibles
1,167
3,918
1,089
—
3,996
W
56,265
W
139,302
W
99,061
W
12,334
W
108,840
(3)
The Company recorded
W
86 million and
W
79,641 million of impairment on intangibles for the
years ended December 31, 2004 and 2005, respectively.
(4)
W
4,891 million,
W
3,960 million and
W
4,403 million of ordinary research and development
costs were charged to expense as incurred for the years ended December 31, 2003, 2004 and
2005, respectively.
13.
LONG-TERM DEBT AND DEBENTURES:
(1)
Long-term debt in local currency as of December 31, 2004 and 2005 is as follows (Won in
millions):
Interest rate per annum (%)
Amount
2005
2004
2005
Information promotion fund
—
W
66,651
W
—
General loans
—
40,000
—
Syndication loans
6.36
102,304
79,847
208,955
79,847
Less: Current portion
(66,756
)
—
Discount on present value
(2,691
)
(3,362
)
W
139,508
W
76,485
On April 18, 2002, the Company transferred the beneficiary certificates of
W
207,000
million for the trust amount of
W
226,800 million issued by Kookmin Bank to Hana Dream
Limited Co. ("Hanadream") in exchange for the right to receive certain of the Company's
future trade receivables, which are expected to be incurred from April 2002 to April 2004.
Hanadream issued Asset Backed Loans ("ABL") amounting to
W
207,000 million on April 25,
2002, of which the subordinate loan of
W
7,000 million was loaned by the Company and
W
200,000 million was loaned by the banks. The proceeds of
W
200,000 million were remitted
to the Company. In relation to the issuance of ABL, the Company recognizes the difference
between the trade receivables and the reduced long-term debt as interest expense. The ABL
repayment was completed as of December 31, 2004 and
W
398 million was recorded as interest
expense for the year ended December 31, 2004.
F-26
Table of Contents
(2)
Long-term debt in foreign currency as of December 31, 2004 and 2005 is as follows (Won in
millions, dollar in thousands):
Interest rate
per annum (%)
U.S. dollars
Won equivalent
2005
2004
2005
2004
2005
Syndication loans
6.18
$
258,568
$
201,809
W
267,618
W
202,718
Less: Current
portion
—
(30,271
)
—
(30,408
)
Discount
on
present
value
(7,703
)
(3,798
)
(7,972
)
(3,816
)
$
250,865
$
167,740
W
259,646
W
168,494
The Company early repaid a portion of long-term debt and recorded
W
2,235 million of loss on
early redemption of long-term debt for the year ended December 31, 2005.
(3) Debentures as of December 31, 2004 and 2005 are as follows (Won in millions):
Amount
2004
2005
Interest rate per annum (%)
Due
Won
U.S. dollars
Won equivalent
19-2
nd
—
2002~2005
20,000
$
—
—
20
th
—
2002~2005
100,000
—
—
21
st
—
2002~2005
170,000
—
—
23
rd
6.00
2003~2006
190,000
—
190,000
24
th
—
2003~2005
16,000
—
—
Foreign currency
7.00
2005~2012
—
500,000
502,250
496,000
500,000
692,250
Less: Current portion
(306,000
)
—
(190,000
)
Discount on
present value
(482
)
(8,880
)
(9,044
)
W
189,518
$
491,120
W
493,206
According to the covenants, debentures of 23
rd
require the Company to keep the debt
ratio lower than 300 percent and the Company should not dispose of its property and equipment
more than the
W
1,000 billion in each fiscal year. The Company complied with the covenants'
requirements as of December 31, 2005.
As of December 31, 2005, for the warrants on the bonds with stock warrants ("13
th
debenture"), US$ 62,000 thousand (15,322,680 shares) has been exercised and US$ 38,000 thousand
(9,391,320 shares) remains unexercised and exercisable until February 6, 2006.
The warrants on the bonds with stock warrants ("18
th
debenture") is US$ 15,000
thousand (3,963,600 shares) and are exercisable until January 26, 2007. The exercise price per
one share is
W
5,000 at an exchange rate of
W
1,321.20 to US$1.00.
The Company early repaid a portion of debentures and recorded
W
308 million and
W
165 million of
loss on early redemption of debentures for the years ended December 31, 2003 and 2005. Also,
The Company recorded
W
870 million of gain on early redemption of debentures for the year ended
December 31, 2003.
F-27
Table of Contents
(4)
The repayment schedule of debentures and long-term debt as of December 31, 2005 is as follows
(Won in millions and dollar in thousands):
Debentures in
Long-term debt in
Debentures
foreign currency
Long-term
foreign currency
in local
Won
debt in local
Won
Year
currency
U.S. Dollar
equivalent
currency
U.S. Dollar
equivalent
Total
2006
W
190,000
$
—
W
—
W
—
$
30,271
W
30,408
W
220,408
2007
—
—
—
19,163
80,724
81,087
100,250
2008
—
—
—
22,357
90,814
91,223
113,580
2009
—
—
—
25,551
—
—
25,551
2010
—
—
—
12,776
—
—
12,776
2012
—
500,000
502,250
—
—
—
502,250
W
190,000
$
500,000
W
502,250
W
79,847
$
201,809
W
202,718
W
974,815
(5)
On April 21, 2005, the Company entered into a syndicated loan agreement with Development Bank
of Singapore, JP Morgan Chase, Deutsche Bank, Korea Development Bank and other financial
institutions. The loan agreement approximates
W
720 billion (Won currency loan of
W
310,048
million and US$ currency loan of US$ 409,952 thousand), which includes a term loan of
W
660
billion with a maturity of five years and a revolving loan of
W
60 billion. The outstanding
balance of this syndicated loan as of December 31, 2005 is
W
282,564 million (long-term debt
in local currency of
W
79,847 million and long-term debt in foreign currency of
W
202,718
million).
(6)
In relation to the above syndicated loan up to
W
720 billion, the Company's buildings are
pledged as collateral up to
W
542,799 million; machinery of which book value is
W
1,702,960
million as of September 30, 2004 are provided as assignable mortgage and some intellectual
property rights are pledged as collateral.
14.
ASSET BACKED SECURITIES PAYABLE:
In October 2001, the Company transferred the beneficiary certificates of
W
309,000 million for the
trust amount of
W
341,000 million issued by a trustee bank to Hanafos Securitization Speciality
Co., Ltd. ("Hanafos") in exchange for the right to receive certain of the Company's future trade
receivables, which are expected to be incurred from October 2001 to April 2004. Hanafos then
issued Asset Backed Securities ("ABS") amounting to
W
309,000 million on October 31, 2001 and the
ABS repayment was completed as of December 31, 2004 and
W
9,028 million and
W
490 million were
recorded as asset backed securities payable expense for the years ended December 31, 2003 and 2004,
respectively.
15.
DERIVATIVES:
(1) Swap Contract
With reference to the Company's issuance of the syndication loan in foreign currency, the Company
entered into swap contracts (fixed interest rate) with Korea Development Bank (KDB) to hedge the
risk of floating interest rates. In relation to the valuation of these swap contracts, the Company
recorded
W
17,623 million and
W
1,859 million of valuation loss as capital adjustments and
liabilities as of December 31, 2004 and 2005, respectively. The outstanding swap contracts as of
December 31, 2005 are as follows (Won in millions and dollar in thousands):
Valuation loss
Financial
on interest swap
institution
Contract period
Floating rate (%)
Fixed rate (%)
Contract amount
2004
2005
IBK
2002.5~2005.5
Government bond rate+1.95
9.90
W
100,000
W
1,496
W
—
KDB
2003.12~2008.11
LIBOR+3.25
7.72
$
63,065
4,556
691
KDB etc
2004.2~2008.11
LIBOR+3.25
7.60
$
138,744
9,325
1,168
KDB etc
2004.9~2008.11
LIBOR+3.25
6.70
$
56,759
2,246
—
W
17,623
W
1,859
F-28
Table of Contents
(2) Forward Exchange Contract
The Company entered into foreign currency forward contracts, relating to debentures and syndicated
loan in foreign currency, with Development Bank of Singapore (DBS) and Korea Development Bank (KDB)
to hedge the exposure to changes in the foreign currency exchange rate. The Company recorded
W
33,975 and
W
19,842 million of loss on forward exchange valuation for the years ended December
31, 2004 and 2005 and
W
33,802 million and
W
47,420 million of forward exchange contracts (current
liabilities) as of December 31, 2004 and 2005, respectively (Dollar in thousands).
Contract period
Fixed exchange rate
Contract amount
2003.12~2008.11
1,190.00
$
63,065
2004.2~2008.11
1,166.20
138,744
2005.2~2012.2
1,026.5~1,035.0
500,000
$
701,809
Also, the Company recorded
W
343 million and
W
242 million of gain on transaction of forward
exchange contract for the years ended December 31, 2003 and 2004, respectively, and
W
173 million
of loss on transaction of forward exchange contract for the year ended December 31, 2004.
16.
SHAREHOLDERS' EQUITY:
The Company has authorized 700,000,000 shares of
W
5,000 par value, of which 462,135,180 shares
have been issued as of December 31, 2005.
17.
STOCK OPTION PLAN:
The Company entered into stock option agreements with the Chief Executive Officer, senior managers
and employees of the Company. The details of the stock options granted as of December 31, 2005 are
as follows (Won in millions):
Number of
Exercise
Grant company
Grant date
shares
price/share
Methods
Exercise period
hanarotelecom
1999. 3. 1
50,000
W
5,630
New stock issue
2002.3.1~2007.2.28
incorporated
1999.10. 1
120,000
19,910
New stock issue
2002.10.1~2007.9.30
2000. 3.17
1,413,591
17,750
New stock issue
2003.3.18~2008.3.17
2004.12.16
19,772,890
5,000
New stock issue or
cash payment
2006.12.17~2011.12.16
2005.3.25
610,000
5,000
New stock issue or
cash payment
2007.3.26~2012.3.25
Hanaro Dream, Inc.
2003.1.16
30,000
8,000
New stock issue
2005.1.16~2007.1.15
The Company values stock options granted in 2004 and 2005 using the fair value method (binomial
option-pricing model) and in relation to the stock options granted in 2000, the Company values
stock options granted based on the minimum value method (See Note 2). Total compensation expense
of
W
16,872 million was allocated over the vesting period, and the compensation expense charged to
operations for the years ended December 31, 2003, 2004 and 2005 was
W
1,375 million,
W
1,278
million and
W
4,238 million, respectively and
W
7,227 million and
W
11,465 million was recorded as
capital adjustments as of December 31, 2004 and 2005, respectively. Also, in relation to the stock
options granted in 1999, the Company did not recognize compensation expense, which was calculated
as the difference between the stock price at year-end and the exercise price multiplied by the
number of stock options, due to downward movement of the stock price.
F-29
Table of Contents
The schedule of compensation expense for the stock options as of December 31, 2005 is as follows
(Won in millions):
Year
Amount
Carried forward from prior period
W
7,227
2005.1 ~ 2005.12
4,238
2006.1 ~ 2006.12
3,774
2007.1 ~ 2007.12
1,593
2008.1 ~ 2008.12
35
2009.1 ~ 2009.12
5
W
16,872
The principal assumptions in relation to estimation of the stock compensation expense are as
follows:
Granted in 2000
Granted in 2004
Granted in 2005
Risk-free interest rate (%)
9.0
3.35 ~ 3.43
4.11 ~ 4.38
Expected lives (years)
3 ~ 7
2 ~ 3
2 ~ 4
Expected forfeitures per year (%)
3.0
2.09
2.09
Volatility (%)
—
53.8 ~ 85.7
34.3 ~ 50.4
Weighted-average exercise price
(won)
W
17,750
W
5,000
W
5,000
Weighted-average fair value (won)
W
—
W
457
W
385
Had the compensation cost for the Company's stock option plans, which were granted in 2000, been
determined based on the fair value method at the grant dates for awards, the Company's ordinary
income (loss), net income (loss), ordinary income (loss) per share and net income (loss) per share
would have been reduced (increased) as follows (Won in millions, except per share amount):
2003
2004
2005
Ordinary income (loss)
W
(162,657
)
W
12,695
W
(192,489
)
Net income (loss)
W
(163,044
)
W
11,893
W
(210,020
)
Ordinary income (loss) per share
W
(506
)
W
27
W
(417
)
Net income (loss) per share
W
(507
)
W
26
W
(455
)
The fair value of the option grant is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions used for grants in 2000:
dividend yield of nil, expected volatility of 93.8 percent, risk-free interest rate of 9.0 percent,
expected exercise lives of 3 to 7 years and expected forfeitures per year of 3%. Total
compensation cost based on the fair value method was calculated as
W
18,389 million.
F-30
Table of Contents
18.
OPERATING EXPENSES:
Significant accounts of operating expenses for the years ended December 31, 2003, 2004 and 2005 are
as follows (won in millions):
2003
2004
2005
Salaries and wages
W
92,370
W
103,030
W
122,839
Provision for severance indemnities
13,444
14,095
14,918
Welfare
19,380
24,994
25,971
Rent
14,746
6,075
9,339
Taxes and dues
8,272
7,449
8,245
Depreciation
428,528
442,312
498,087
Advertising
27,457
39,514
30,110
Ordinary research and development cost
4,891
3,960
4,403
Utilities
19,487
22,023
26,800
Telecommunication equipment lease expenses
165,716
140,820
164,439
Bad debt
25,744
29,933
19,065
Maintenance
42,583
51,451
59,255
Selling expenses
6,408
6,791
10,821
Sales commissions
195,997
178,380
249,740
Interconnection charges
131,114
141,964
164,677
Commissions
70,859
68,460
84,618
Outsourcing services
20,519
24,722
30,816
Other
25,277
29,666
26,680
W
1,312,792
W
1,335,639
W
1,550,823
19.
INCOME TAX EXPENSE AND DEFERRED INCOME TAXES:
Income Tax Expense
The statutory corporate income tax rate (including resident surtax) applicable to the Company is
approximately 29.7%, 29.7% and 27.5% in 2003, 2004 and 2005, respectively. Income tax is
calculated as follows (won in millions):
2003
2004
2005
Income taxes currently payable
W
341
W
806
W
245
Changes in temporary differences
(39
)
(311
)
189
Income tax expense
W
302
W
495
W
434
Deferred Income Taxes
Deferred income taxes reflect the tax effects on prior years' tax losses, tax credits, and
temporary differences between the carrying amount of assets and liabilities for financial
accounting purposes and the amounts used for income tax purposes.
F-31
Table of Contents
Accumulated temporary differences and deferred taxes as of December 31, 2004 and 2005 are as
follows (Won in millions):
Amount
2004
2005
Accrued severance indemnities
W
22,154
W
26,402
Bad debts
59,500
96,789
Present value discount
2,918
2,387
Impairment loss on long-term investment securities
39,489
96,183
Accrued expenses
—
22,690
Loss on disuse of property and equipment
13,840
41,800
Loss on valuation of forward exchange contract
33,975
19,842
Depreciation
1
48,771
Impairment loss on intangibles
—
1,109
Unearned income
(2,067
)
(758
)
Valuation gain on available-for-sale securities, net
—
(3,184
)
Present value discount
(10,663
)
(11,022
)
Loss on foreign currency translation
—
(5,887
)
Severance insurance deposits and other
(4,665
)
(2,710
)
154,482
332,412
Loss carryforward
703,695
1,289,173
Less: Temporary differences excluded
(855,970
)
(1,620,949
)
2,207
636
Tax rate (%)
27.5
%
27.5
%
Deferred income tax assets, net
W
607
W
175
The Company(excluding subsidiary) did not recognize deferred income tax assets for temporary
differences due to the uncertainty of future realization of the deferred tax benefits of
W
855,970 million and
W
1,620,949 million as of December 31, 2004 and 2005, respectively.
20.
RELATED PARTY TRANSACTIONS
:
(1)
Significant transactions and outstanding balances with subsidiaries for the years ended and
as of December 31, 2004 and 2005 are as follows (Won in millions):
2004
Receivables
Payables
Key-money
Accounts
Trade
Accrued
Revenue
Expenses
deposits
Receivables
payables
expenses
Hanaro Realty Development &
Management Co., Ltd.
W
183
W
19,181
W
1,409
W
142
W
433
W
366
Hanaro Telephone & Internet
Information, Inc.
13
34,457
—
—
188
3,047
Hanaro Web(n)TV
155
3,980
98
129
176
—
Hanaro Telecom America, Inc.
—
512
—
—
—
—
HanaroDream Inc.
3,300
14,438
—
636
2,360
1,300
W
3,651
W
72,568
W
1,507
W
907
W
3,157
W
4,713
F-32
Table of Contents
2005
Receivables
Payables
Key-money
Accounts
Trade
Accrued
Revenue
Expenses
deposits
Receivables
payables
expenses
Hanaro Realty
Development &
Management Co., Ltd.
W
165
W
20,568
W
509
W
142
W
339
W
398
Hanaro Telephone &
Internet Information,
Inc.
18
35,194
—
—
—
2,939
Korea Thrunet Co., Ltd.
13,352
4,126
—
6,837
1,339
626
HanaroDream Inc.
5,361
27,507
—
624
821
1,448
W
18,896
W
87,395
W
509
W
7,603
W
2,499
W
5,411
(2)
Transactions with shareholders for the years ended December 31, 2004 and 2005 are as follows
(won in millions):
Revenues:
Transaction
2004
2005
Samsung
Service fee
W
45
W
—
Dacom Corporation
"
18,472
15,656
SK Telecom
"
12,844
20,581
LG
"
3,058
4,090
W
34,419
W
40,327
Purchases:
Transaction
2004
2005
Samsung
Purchase of machinery and equipment, other
W
10,789
W
—
Dacom Corporation
Interconnection charges, other
25,896
15,780
SK Telecom
Interconnection charges, other
42,367
45,530
LG
Purchase of machinery and equipment, other
24,853
26,346
W
103,905
W
87,656
Balances with shareholders as of December 31, 2004 and 2005 are as follows (won in millions):
Assets
Liabilities
2004
2005
2004
2005
Samsung
W
—
W
—
W
7,784
W
—
Dacom Corporation
783
530
1,015
447
SK Telecom
2,457
4,237
8,186
7,496
LG
288
666
12,064
7,342
W
3,528
W
5,433
W
29,049
W
15,285
21.
COMMITMENTS AND CONTINGENCIES
:
(1)
The Company has been provided US$ 100 thousand, as a maximum, of payment guarantees by the
Korea Exchange Bank in connection with the international telephone service arrangement
contract with SingTel.
(2)
The Company has been provided US$ 1,000 thousand of payment guarantees by the National
Agriculture Cooperative Federation in connection with the issuance of letters of credit.
(3)
The Company has provided one blank promissory note as collateral to LG Card Services Corp. in
connection with its lease agreements (See Note 11).
F-33
Table of Contents
(4)
The Company has entered into the network supply agreements for the right to use various
underground facilities to house its fiber-optic cable network, leased lines, telecommunication
equipments with Seoul Metropolitan Subway Corporation, Seoul Metropolitan Rapid Transit Corp.,
Powercomm Corp., Dacom Corp., Korea Electric Power Corporation, Dreamline Corp. and others,
and the related rental expenditure is recorded as telecommunication equipment lease expenses.
(5)
The Company has to comply with the covenants' requirements in relation to its debentures (See
Note 13).
22.
SUPPLEMENTARY INFORMATION FOR COMPUTATION OF VALUE ADDED:
The accounts and amounts needed for calculation of value added for the years ended December 31,
2003, 2004 and 2005 are as follows (Won in millions):
2003
2004
2005
Ordinary income (loss)
W
(160,912
)
W
13,849
W
(191,787
)
Salaries and wages
92,370
103,030
122,839
Provisions for severance indemnities
13,444
14,095
14,918
Employee benefits
19,380
24,994
25,971
Interest, net
120,865
82,386
82,177
Rent
14,746
6,075
9,339
Taxes and dues
8,272
7,449
8,245
Depreciation
428,528
442,312
498,087
W
536,693
W
694,190
W
569,789
23.
LITIGATIONS:
As of December 31, 2005, the Company is a defendant in 12 lawsuits claiming damages for payments
amounting to
W
3,131 million and is a plaintiff in 5 lawsuits claiming for payments amounting to
W
24,026 million. The final outcome of the above lawsuits cannot presently be determined. However,
management believes that the ultimate disposition of those litigations will not have a materially
adverse impact on the operations or financial position of the Company.
24.
SEGMENT INFORMATION:
The Company's reportable segments are strategic business units that offer different products and
services. The segments are managed separately based on the difference in products and services,
technology and marketing strategies. The Company has three reportable operating segments; voice
services, lease line and broadband services. Voice services include all services provided to fixed
line customers, including local services. Lease line services consist of the leasing of dedicated
fiber optic lines over which customers transmit voice and data. Broadband services include
high-speed data transmission services over Asymmetrical Digital Subscriber Line (ADSL), hybrid
fiber coaxial (HFC) cable lines and internet access services. The operations of all other
operating segments, which fall below the reporting thresholds, are included in the other segment
below and include entities providing real estate management services and customer services. The
accounting policies of the segments are the same as those described in Note 2.
Segment informations for the years ended December 31, 2003, 2004 and 2005 are as follows (won in
millions):
2003
Voice
Leased Line
Broadband
Others
Total
Revenue
W
248,964
W
37,992
W
982,693
W
113,837
W
1,383,486
Operating income (loss)
(8,577
)
4,986
118,937
(44,652
)
70,694
Tangible and intangible assets
558,446
16,652
1,743,778
283,526
2,602,402
Capital expenditures and
advanced payments for
property and equipment
56,581
6,064
245,711
42,603
350,959
Depreciation and amortization
60,298
5,657
315,208
47,365
428,528
F-34
Table of Contents
2004
Voice
Leased Line
Broadband
Others
Total
Revenue
W
291,186
W
39,717
W
985,428
W
133,238
W
1,449,569
Operating income (loss)
(23,552
)
2,775
150,978
(16,271
)
113,930
Tangible and intangible assets
452,215
66,963
1,627,321
282,611
2,429,110
Capital expenditures and
advanced payments for
property and equipment
48,392
10,042
208,122
28,113
294,669
Depreciation and amortization
49,710
8,889
323,676
60,037
442,312
2005
Voice
Leased Line
Broadband
Others
Total
Revenue
W
375,253
W
44,255
W
1,074,387
W
95,450
W
1,589,345
Operating income (loss)
(76,581
)
(2,376
)
125,147
(7,668
)
38,522
Tangible and intangible assets
581,981
65,482
1,638,395
160,866
2,446,724
Capital expenditures and
advanced payments for
property and equipment
194,393
3,416
135,976
7,711
341,496
Depreciation and amortization
96,696
12,371
347,410
41,610
498,087
Capital expenditures and advanced payments for property and equipment include increase of property
and equipment by capital lease obligation, which is
W
98,230 million and
W
37,731 million for the
years ended December 31, 2003 and 2004, respectively.
25.
EXTRAORDINARY ITEMS
:
At the board of directors' meeting held on September 14, 2005, hanaro resolved to merge with Korea
Thrunet Co., Ltd. on January 1, 2006. Accordingly, the network unification of hanaro and Korea
Thrunet Co., Ltd. is in progress and accounted for the expenses occurred in relation to this
unification as extraordinary item, which amount to
W
14,119 million for the year ended December 31,
2005. Also, impairment loss on property and equipment is accounted as extraordinary item, which
amount to
W
4,899 million for the year ended December 31, 2005.
26.
MERGER
Effective January 1, 2006, Korea Thrunet Co., Ltd., the Company's affiliate, was merged into the
Company. Details of the merger are as follows:
(1) Purpose of the merger
The Company merged Korea Thrunet Co., Ltd., which is engaged in broadband internet access services,
to maximize its business value by strengthening its competitiveness, taking advantage of the
synergy effect and concentrating its business resources.
(2) General information of the merger
hanarotelecom
Korea Thrunet
Date of establishment
September          26, 1997
July 30, 1996
Chief executive officer
Soon-Yub Kwon
Soon-Yub Kwon
Location
Yoido-dong, Youngdeungpo,
Yoido-dong, Youngdeungpo,
Seoul
Seoul
Type of the company
Public company (listed in
Non-listed company
KOSDAQ)
Number of outstanding
shares
462,135,180 shares
103,134,426 shares
Capital stock
W
2,310,676 million
W
257,836 million
Closing date
December 31
December 31
Number of investment
shares
—
99,240,000 shares
Ownership percentage
—
96.22%
Status
Surviving company
Extinct company
F-35
Table of Contents
(3) The method of the merger
The Company merged with Korea Thrunet Co., Ltd. through a more convenient method ('small business
merger'), allowed by the Commercial law in the Republic of Korea.
(4) Exchange ratio of Korea Thrunet Co., Ltd.'s stock
The stock exchange ratio of the Company and Korea Thrunet Co., Ltd. in the merger was determined by
ratio of the asset value of the Company and appraisal value of Korea Thrunet Co., Ltd. based on the
tax code.
hanarotelecom
Korea Thrunet
Asset value (appraisal value)
W
3,826
W
1,366
Exchange rate of stock
1
0.3570308
Face value of the stock
W
5,000
W
2,500
(5) The schedule of the merger
(1)
Contract date of company valuation: September 5, 2005
(2)
Resolution date of board of directors' meeting: September 14, 2005
(3)
Date of merger contract: September 22, 2005
(4)
Submission date of merger application: September 14, 2005
(5)
Confirm date of shareholders for general meeting of shareholders for approving the merger: September 7, 2005
(6)
Shareholders meeting date for approving the merger: November 7, 2005
(7)
Effective date of the merger: January 1, 2006
(8)
Registration date of merger: January 9, 2006
(9)
Listing date of newly issued shares: January 18, 2006
(6) Newly issued stocks and grant for the merger are as follows (Won in millions):
New stock
Grant
New stock (shares)
1,217,832
—
Increase of common stock
W
6,089
—
(7) Accounting method of the merger
The Company accounted for Korea Thrunet Co., Ltd.'s net asset value as its fair value, according to
"Accounting Standards for Consolidated Financial Statements".
Details of goodwill are as follows (Won in millions):
Amount
Fair value of net assets
W
126,666
Cost of purchasing
249,221
Goodwill
W
122,555
The Company has acquired 99,240,000 shares of Korea Thrunet Co., Ltd.'s common stock with the
ownership percentage of 96.22% on June 3, 2005. However, the Company's control over Korea
Thrunet Co., Ltd. was obtained on June 23, 2005 with the formal declaration of the end of
corporate reorganization proceedings on that date and valued Korea Thrunet Co., Ltd.'s net asset
value as of June 30, 2005, which is the designated effective date. Management does not believe
the net income effect from June 23, 2005 through June 30, 2005 is material.
The purchase price of KRW 249, 221 million was allocated as follows (Won in millions):
Amount
Current assets
W
167,030
Tangibles
190,479
Goodwill
122,555
Other assets
28,780
Total assets acquired
W
508,844
Total liabilities assumed
(259,623
)
Net assets acquired
W
249,221
F-36
Table of Contents
All goodwill acquired are allocated to broadband services as the main business of Thrunet was
providing of broadband service.
(8) Summarized financial statements of hanarotelecom and Korea Thrunet
Summarized financial statements of hanarotelecom and Korea Thrunet Co., Ltd. for the years ended
and as of December 31, 2004 and 2005 are as follows (Won in millions):
Summarized balance sheets
(As of December 31, 2004)
hanarotelecom
Korea Thrunet
Current assets:
Quick assets
W
609,293
W
149,348
Inventories
1,841
—
611,134
149,348
Non-current assets:
Investments
144,348
17,389
Tangible assets
2,362,686
233,596
Intangible assets
54,266
14,383
2,561,300
265,368
Total assets
W
3,172,434
W
414,716
Current liabilities
W
737,081
W
94,525
Long-term liabilities
687,140
401,492
Total liabilities
1,424,221
496,017
Capital stock
2,310,676
19,507
Paid-in capital in excess of par value
344,642
388,578
Accumulated deficit
(891,264
)
(489,472
)
Capital adjustments
(15,841
)
86
Total shareholders' equity
1,748,213
(81,301
)
Total liabilities & shareholders' equity
W
3,172,434
W
414,716
Summarized balance sheets
(As of December 31, 2005)
hanarotelecom
Korea Thrunet
Current assets:
Quick assets
W
343,654
W
102,292
Inventories
116
—
343,770
102,292
Non-current assets:
Investments
384,881
12,849
Tangible assets
2,188,805
141,807
Intangible assets
62,645
12,493
2,636,331
167,149
Total assets
W
2,980,101
W
269,441
Current liabilities
W
595,691
W
47,734
Long-term liabilities
816,823
145,354
Total liabilities
1,412,514
193,088
Capital stock
2,310,676
257,836
Paid-in capital in excess of par value
344,642
397,146
Accumulated deficit
(1,100,104
)
(579,325
)
Capital adjustments
12,373
696
Total shareholders' equity
1,567,587
76,353
Total liabilities & shareholders' equity
W
2,980,101
W
269,441
F-37
Table of Contents
Summarized statements of operations
(For the year ended December 31, 2004)
hanarotelecom
Korea Thrunet
Operating revenue
W
1,436,485
W
349,772
Operating expenses
1,322,464
346,927
Operating income
114,021
2,845
Non-operating income
61,903
30,724
Non-operating expenses
(165,431
)
(107,642
)
Ordinary income (loss)
10,493
(74,073
)
Extraordinary items
—
153,403
Income before income tax
10,493
79,330
Income tax expense
—
—
Net income
W
10,493
W
79,330
Summarized statements of operations
(For the year ended December 31, 2005)
hanarotelecom
Korea Thrunet
Operating revenue
W
1,444,411
W
298,411
Operating expenses
1,391,183
315,305
Operating income (loss)
53,228
(16,894
)
Non-operating income
92,457
22,146
Non-operating expenses
(348,377
)
(82,235
)
Ordinary loss
(202,692
)
(76,983
)
Extraordinary items
(6,148
)
(12,870
)
Loss before income tax
(208,840
)
(89,853
)
Income tax expense
—
—
Net loss
W
(208,840
)
W
(89,853
)
27.
EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE
:
(1)
At the board of directors' meeting on January 31, 2006, the Company resolved to acquire the
Celrun TV's stocks for
W
5,500 million (780,000 shares, 65% of ownership), and acquired in
March.
(2)
At the board of directors' meeting on February 8, 2006, the Company resolved to issue
26
th
local debentures of
W
100,000 million for the refinancing of current debt,
and issued in February.
(3)
At the board of directors' meeting on February 22, 2006, the Company declared equal (2:1)
capital reduction to improve financial structure with the effective date on May 2, 2006.
(4)
At the board of directors' meeting on February 22, 2006, the Company resolved to have its
stocks in United States of America delisted as the average daily trading volume of its stocks
in NASDAQ has became so low.
F-38
Table of Contents
28.
RECONCILIATION TO ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES:
Accounting practices used by the Company in preparing the accompanying financial statements conform
with accounting principles generally accepted in the Republic of Korea ("Korean GAAP"), but do not
conform with accounting principles generally accepted in the United States of America ("U.S.
GAAP"). The significant differences applicable to the Company are described below. Other
differences do not have a significant effect on either net income (loss) or shareholders' equity.
(1) Consolidation of Special-Purpose Entities ("SPE")
Under Korean GAAP, Hanafos and Hanadream, the SPEs described in Notes 13(1) and 14, are excluded
from the consolidation as hanaro does not have control over the SPEs' management and operations.
Under U.S. GAAP, the operations of Hanafos and Hanadream are included in the consolidation of the
Company in accordance with Statement of Financial Accounting Statements ("SFAS") No.140-
"Accounting for Transfer and Servicing of Financial Assets and Extinguishments of Liabilities"
since the asset transfers were not qualified as a true sale.
Hanafos and Hanadream were liquidated during 2004 and summarized financial information of Hanafos
and Hanadream as of and for the year ended December 31, 2003 is as follows (won in millions):
Current assets
W
42,314
Non-current assets
58,201
Total assets
W
100,515
Current liabilities
W
86,104
Non-current liabilities
17,417
Total liabilities
W
103,521
Net assets
W
(3,006
)
Operating revenue
W
15,742
Operating income
(2,566
)
Net loss
(1,697
)
(2) Licensing Cost
In August 1997, the Company's shareholders (members of the Consortium Agreement) collectively paid
W
45,000 million to the Ministry of Information and Communication ("MIC") representing a one-time
charge to obtain a perpetual license to provide fixed-link local telephone service on a nationwide
basis in Korea. Under Korean GAAP, such fees paid by the major shareholders on behalf of the
Company are not required to be recorded. Under U.S. GAAP, such transaction is a capital
contribution by the shareholders. Under U.S. GAAP, the license was capitalized as an intangible
asset and amortized over its estimated economic useful life of 20 years. In connection with the
adoption of SFAS No. 142 [See Note 28(6)], licensing cost is deemed to have an indefinite life. A
deferred tax liability calculated using the Company's statutory income tax rate of 27.5% has also
been recorded, as the license asset has no tax basis to the Company.
The Company understands that an entity's estimate of the useful life of an intangible asset shall
be based on an analysis of all pertinent factors, in particular: (a) the expected use of the asset
by the entity, (b) the intangible asset may relate, (c) any legal, regulatory, or contractual
provisions that may limit the useful life, (d) any legal, regulatory, or contractual provisions
that enable renewal or extension of the asset's legal or contractual life without substantial
cost, (e) level of maintenance expenditures required to obtain the expected future cash flows from
the asset.
F-39
Table of Contents
Under the Korean Telecommunications Business Law, the telecommunications services that Network
Service Providers, which are facilities-based telecommunications service providers, may provide
are restricted to those for which they have received a license from the Ministry of Information
and Communication ("MIC").
In October 1997, the Company received a perpetual license to provide fixed-link local telephone
service on a nationwide basis in Korea. Such license does not need to be renewed. The formal
document from the Minister of the MIC that granted the license to the Company sets forth the
conditions under which the license would be revoked, which consist of the following: (a) failure
to make payment of information promotion fund, (b) supplement of personnel from small business
entities. The Company has no reason to believe that any of these conditions would be applicable
to the Company.
(3) Interest Capitalization
As explained in Note 2, under Korean GAAP, starting from January 1, 2003, interest expense is no
longer capitalized. However, under U. S. GAAP, the Company's policy is to capitalize interest in
the amount that would have theoretically been avoided had expenditures not been made for assets
which require a period of time to get them ready for their intended uses.
(4) Investment Securities
Information included in short-term and long-term investment securities as of December 31, 2004 and
2005 is as follows:
Korean won
Unrealized gains
Unrealized losses
Impaired losses
Acquisition
Over 12
Under 12
Over 12
Under 12
Over 12
Under 12
Fair
cost
months
months
months
months
months
months
value
(In millions)
2004:
(1) Short-term investment securities
Debt securities
W
1,571
W
—
W
—
W
—
W
—
W
—
W
450
W
1,121
1,571
—
—
—
—
—
450
1,121
(2) Long-term investment securities
Available-for-sale securities
Listed
11,535
—
82
5,758
—
—
—
5,859
Non-listed
51,232
—
—
—
—
28,497
2,539
20,196
Other
2,741
—
—
—
—
—
—
2,741
65,508
—
82
5,758
—
28,497
2,539
28,796
Debt securities
20
—
—
—
—
—
—
20
65,528
—
82
5,758
—
28,497
2,539
28,816
W
67,099
W
—
W
82
W
5,758
W
—
W
28,497
W
2,989
W
29,937
Korean won
Unrealized gains
Unrealized losses
Impaired losses
Acquisition
Over 12
Under 12
Over 12
Under 12
Over 12
Under 12
Fair
cost
months
months
months
months
months
months
value
(In millions)
2005:
(1) Short-term investment securities
Debt securities
W
1,120
W
—
W
—
W
—
W
—
W
—
W
1,120
W
—
1,120
—
—
—
—
—
1,120
—
(2) Long-term investment securities
Available-for-sale securities
Listed
4,941
164
82
—
—
—
—
5,187
Non-listed
100,439
—
—
—
—
76,267
1,036
23,136
MMF
163
—
16
—
—
—
—
179
Other
2,956
—
—
—
—
—
—
2,956
108,499
164
98
—
—
76,267
1,036
31,458
Debt securities
13
—
—
—
—
—
—
13
108,512
164
98
—
—
76,267
1,036
31,471
W
109,632
W
164
W
98
W
—
W
—
W
76,267
W
2,156
W
31,471
Under U.S. GAAP, if the decline in fair value is judged to be other than
temporary, the cost basis of the individual securities is written down to fair value as a new cost basis and the amount of the
write-down is included in current earnings. Other than temporary impairment is determined based on evidence-based judgment about
a recovery of fair value up to (or beyond) the cost of investment by considering the severity and duration of the impairment
in relation to forecasted recovery of fair value.  Under Korean GAAP, if the collectible value from the securities is less
than acquisition costs with objective evidence of impairment such as bankruptcy of investees, an impairment loss is
recognized. In addition, the duration of the impairment in relation to the forecasted recovery of fair value is not considered
for Korean GAAP purposes.  Due to such differences, for U.S. GAAP purpose, losses on impairment of investment securities for
the year ended December 31, 2005 increased by KRW 3,009 million, when compared to that under Korean GAAP.
F-40
Table of Contents
(5) Development Costs
Development costs are deferred under Korean GAAP. Under U.S.GAAP, development costs are charged
to expenses when incurred and are classified as operating expenses.
(6) Goodwill and Other Intangibles
Under Korean GAAP, all intangibles including goodwill are amortized over their estimated useful
lives and an impairment loss is recognized when their carrying amount exceeds their fair value.
Under U.S. GAAP, following the introduction of SFAS No. 142- "Goodwill and Intangible Assets",
intangible assets with finite lives continue to be amortized over their useful economic lives.
Goodwill and intangible assets with indefinite lives are not amortized, but tested for
impairment, at least annually, in accordance with SFAS No.142.
The Company's intangible assets with finite lives and intangible assets with indefinite lives
including goodwill explained in Note 12 as of December 31, 2004 and 2005 are as follows:
Intangible assets with finite lives
Property rights of industry
Cable line usage rights
Land right
Other
Intangible assets with indefinite lives
Goodwill
Licensing cost [see Note 28(2)]
Under Korean GAAP, goodwill, which represents the excess of the acquisition cost over the fair
value of net identifiable assets acquired, is amortized on a straight line basis over its
estimated useful life, up to 40 years, and an impairment loss is recognized immediately when it
is no longer probable that goodwill will be recovered from expected future economic benefits or
its carrying amount exceeds its fair value. All intangibles are amortized over their estimated
useful lives and an impairment loss is recognized when their carrying amount exceeds their fair
value.
Under US GAAP, in accordance with SFAS No. 142, intangible assets with finite lives continue to
be amortized over their useful economic lives. Goodwill and intangible assets with indefinite
lives are not amortized, but tested for impairment at least once a year.
In compliance with SFAS No. 142, the Company has adopted a two-step test for goodwill
impairment. In the first step of the test, which identifies potential impairment, the Company
compares the fair value of a reporting unit with its carrying amount. If the carrying amount
exceeds the fair value, the Company performs the second step of the test, which measures the
amount of impairment loss, by comparing the impaired fair value of reporting unit goodwill with
the carrying amount. If the carrying amount exceeds the implied fair value of that goodwill,
the Company recognizes an impairment loss in an amount equal to that excess. The Company
determines the implied fair value of goodwill in the same manner as it determines the amount of
goodwill recognized in a business combination, by determining the excess of the fair value of a
reporting unit over the amounts assigned to its assets and liabilities.
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Table of Contents
(7) Bonds with Stock Warrants
Under Korean GAAP, for the detachable warrants on bonds issued before December 31, 2002, all the
proceeds from the issuance of bonds with stock warrants are accounted for as debt securities,
regardless of whether the warrants are detachable or non-detachable. However, the proceeds
from issuance of debt securities with detachable warrants from January 1, 2003 are allocated
between the warrants and the debt securities based on their relative fair values at time of
issuance. For debt securities with non-detachable warrants, the warrants are recorded as the
difference between the issuance amount of debt securities with non-detachable warrants and the
reference amount of debt securities without warrants in similar market.
Under U.S.GAAP, the proceeds from the issuance of bonds with detachable stock warrants are
allocated between the debt securities and the warrants based on their relative fair values at
the time of issuance. The portion allocated to warrants is accounted for as paid-in capital.
(8) Stock Compensation Expense
A summary of status of hanaro and Hanaro Dream, Inc.'s stock option plans as of December 31, 2003,
2004 and 2005, and the changes during the years ended on those dates are presented below.
hanaro:
2003
2004
2005
Weighted-
Weighted-
Weighted-
Shares
average
Shares
average
Shares
average
exercise price
exercise price
exercise price
Outstanding at beginning
of year
1,810,642
W
17,558
1,721,153
W
17,549
21,494,043
W
6,005
Granted
—
—
19,772,890
5,000
610,000
5,000
Cancelled
(89,489
)
17,750
—
—
(137,562
)
17,750
Outstanding at end of year
1,721,153
17,549
21,494,043
6,005
21,966,481
5,903
Options exercisable at
year-end
1,721,153
1,721,153
1,583,591
Weighted-average fair
value of options
granted during
the year
—
457
385
Hanaro Dream, Inc.:
2003
2004
2005
Weighted-
Weighted-
Weighted-
Shares
average
Shares
average
Shares
average
exercise price
exercise price
exercise price
Outstanding at beginning
of year
—
W
—
80,000
W
8,000
30,000
W
8,000
Granted
80,000
8,000
—
—
—
—
Cancelled
—
—
(50,000
)
8,000
—
—
Outstanding at end of year
80,000
8,000
30,000
8,000
30,000
8,000
Options exercisable at
year-end
—
—
30,000
Weighted-average fair
value of options
granted during
the year
1,108
—
—
The following table summarizes information about hanaro and Hanaro Dream, Inc.'s stock
options as of December 31, 2005.
hanaro:
Weighted-average
Ranges of exercise
Number of
remaining contractual
Weighted-average
price
options outstanding
life (years)
exercise price
W
5,000
20,382,890
1.4
W
5,000
W
5,630
50,000
0.0
5,630
W
17,750 to
W
19,910
1,533,591
0.0
17,905
W
5,000 to
W
19,910
21,966,481
1.3
5,903
Hanaro Dream, Inc.:
Weighted-average
Ranges of exercise
Number of
remaining contractual
Weighted-average
price
options outstanding
life (years)
exercise price
W
8,000
30,000
0.0
W
8,000
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Table of Contents
(9) Interest Rate Swap
The Company has entered into interest rate swap contracts in order to hedge the exposure to
variability in cash flows from a forecasted transaction of floating rate notes. Under Korean
GAAP, the Company records the valuation loss as capital adjustment.
Under U.S. GAAP, SFAS No. 133-"Accounting for Derivatives instruments and Hedging Activities",
for a derivative designated as hedging the exposure to variability in expected future cash
flows that is attributable to a particular risk, the effective portion is reported in other
comprehensive income and the ineffective portion is reported in earnings.
(10) Loans to Employees
Under Korean GAAP, loans to employees for purposes of purchasing the Company's common stock are
recorded as assets. Under U.S.GAAP, such transactions are recorded as a reduction in
shareholders' equity.
(11) Advanced Payments
Under Korean GAAP, advanced payments, which relate to purchases of property and equipment, are
included in current assets. Under U.S.GAAP, such advanced payments are included in non-current
assets.
(12) Revenue Recognition
Under Korean GAAP, activation fees and service installation service fees are recorded as revenues
when billed and the related direct incremental acquisition cost are expensed as incurred.
Under U.S.GAAP, such amount should be deferred and recognized over the period of customer
relationship.
(13) Minority Interests in Consolidated Subsidiaries
Under Korean GAAP, minority interests in consolidated subsidiaries is presented as a component of
shareholders'
equity in the consolidated balance sheets. Under U.S. GAAP, minority interests in consolidated
subsidiaries are not included in shareholders' equity; rather, it is presented between liability
and shareholders' equity in the consolidated balance sheets.
F-43
Table of Contents
(14) Comprehensive Income
Under Korean GAAP, there is no requirement to present comprehensive income. Under U.S.GAAP,
effective for fiscal years beginning after December 15, 1997, comprehensive income and its
components must be presented in the financial statements. Comprehensive income includes all
changes in shareholders' equity during a period except those resulting from investment by, or
distribution to, owners, including certain items not included in the current year's results of
operations.
Comprehensive income (loss) for the years ended December 31, 2003, 2004 and 2005 is summarized as
follows:
Korean Won
2003
2004
2005
(In millions)
Net income (loss) in accordance with U.S.GAAP
W
(161,598
)
W
14,849
W
(203,212
)
Other comprehensive income (loss), net of tax :
Unrealized gains (losses) on investments
(1,062
)
2,087
14,591
Less : reclassification adjustment
(1,321
)
(1,038
)
(5,643
)
Net unrealized gains (losses) on investments
(2,383
)
1,049
8,948
Foreign-based operations translation credit (debit)
2
44
—
Less : reclassification adjustment
—
(22
)
—
Net foreign-based operations translation credit (debit)
2
22
—
Net interest rate swap
(7,425
)
(4,565
)
15,763
Comprehensive income (loss) in accordance with U.S.GAAP
W
(171,404
)
W
11,355
W
(178,501
)
(15) Statements of Cash Flows
Statements of cash flows for the year ended December 31, 2003 under Korean GAAP do not include cash
flows of Hanafos and Hanadream, which are included in the consolidation under U.S. GAAP.
Under Korean GAAP, cash flows from refundable deposits are reported as investing activities, which
are reported as operating activities under U.S. GAAP. Summarized cash flows data by operating,
investing and financing activities in accordance with U.S.GAAP for the years ended December 31,
2003, 2004 and 2005 are set out below.
Korean Won
2003
2004
2005
(In millions)
Net cash provided by (used in):
Operating activities
W
306,198
W
444,230
W
496,833
Investing activities
(269,837
)
(183,523
)
(582,395
)
Financing activities
(118,106
)
(294,922
)
(48,366
)
Decrease due to changes in consolidated
subsidiaries
—
(39,277
)
120,500
Decrease in cash and cash equivalents
(81,745
)
(73,492
)
(13,428
)
Cash and cash equivalents, beginning of year
323,583
241,838
168,346
Cash and cash equivalents, end of year
W
241,838
W
168,346
W
154,918
(16) Recently Issued Accounting Pronouncements
In October 2005, the Financial Accounting Standards Board ("FASB'') issued FASB Staff
Position("FSP'') 13-1, "Accounting for Rental Costs Incurred during a Construction Period''
("FSP 13-1''). FSP13-1 requires rental costs associated with ground or building operating leases
that are incurred during a construction period be recognized as rental expense and included in
income from continuing operations. FSP13-1 is effective for fiscal periods beginning after
December 15, 2005. The provisions of FSP 13-1 are not expected to have a material impact on the
Company's consolidated financial statements.
F-44
Table of Contents
In December 2004, the FASB issued SFAS No. 123 (Revised 2004), "Share-Based Payment" ("SFAS 123R").
SFAS 123R replaces SFAS No.123, "Accounting for Stock-Based Compensation" and supersedes APB
Opinion No.25, "Accounting for Stock Issued to Employees." SFAS 123R requires all share-based
payments to employees to be recognized in the financial statements based on their fair value. The
Company will adopt SFAS 123R effective January 1, 2006 using the modified prospective method of
transition. This method requires SFAS 123R to be applied to new awards and awards modified,
repurchased or cancelled after the effective date. Additionally, compensation expense attributable
to any unvested awards outstanding at the date of adoption must be recognized over the remaining
requisite service period. As the Company previously adopted the fair value recognition provisions
of SFAS No.123, the Company does not expect the adoption of SFAS 123R to have a significant impact
on the Company's financial position, operating results or cash flows.
In December 2004, the FASB issued SFAS No.153, "Exchange of Nonmonetary Assets, an amendment of APB
Opinion No.29, Accounting for Nonmonetary Transaction." SFAS No.153 amends the APB Opinion No.29
exception to fair value measurement for nonmonetary exchanges to apply only to those exchanges
which lack commercial substance, as defined in the standard. SFAS No. 153 is effective for
nonmonetary asset exchanges that the Company enters into on or after July 1, 2005. The adoption of
this standard is not expected to have a material impact on the Company's financial position,
operating results or cash flows.
In July 2004, the EITF issue No. 02-14, "Whether an Investor Should Apply the Equity Method of
Accounting to Investments Other Than Common Stock if the Investor Has the Ability to Exercise
Significant Influence over the Operating and Financial Policies of the Investee." EITF Issue
No.02-14 was effective for reporting periods beginning after September 15, 2004 and requires the
use of the equity method of accounting for investments that are in-substance common stock when the
investor has the ability to exercise significant influence over the investee. The adoption of this
guidance is not expected to have a material impact on the Company's financial position, operating
results or cash flows.
In March 2004, the EITF supplement EITF Issue No.03-1, "The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments." EITF Issue No.03-1 provides guidance for
evaluating whether an investment is other-than-temporarily impaired and requires disclosures about
unrealized losses on available for sale debt and equity securities. In September 2004, the FASB
issued FASB Staff Position ("FSP") EITF Issue 03-1-1, "Effective Date of Paragraphs 10-20 of EITF
Issue 03-1," which deferred the effective date of the recognition and measurement provisions of the
consensus until further guidance is issued. The impact on future earnings, if any, of the
recognition and measurement provisions of EITF Issue No.03-1 will not be known until the FASB
issues its guidance.
(17) Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of each class of
financial instruments.
(i)
Cash and cash equivalents, short-term investment securities, short-term borrowings:
The carrying amount approximates fair value because of the nature or short maturity of those
instruments.
(ii)
Other investments:
The fair value of market-traded investments is estimated based on the
quoted market prices for those or similar investments. For other investments
for which there are no quoted market prices, net asset value proportionate to
the Company's ownership percentage is used as estimated fare value. However, a
reasonable estimate of fair value could not be made without incurring excessive
costs. Additional information pertinent to the fair value of unquoted
investments is provided below.
(iii)
Long-term debt, debentures and long-term obligation under capital lease:
The fair values of long-term debt and debentures are estimated based on the
quoted market prices for the same or similar issues or on the current rates
offered for the debt of the same remaining maturities.
F-45
Table of Contents
The estimated fair values of the Company's financial instruments as of December 31 are summarized
as follows:
Korean Won
2004
2005
Carrying amount
Fair value
Carrying amount
Fair value
(In millions)
Cash and cash equivalents and short-term
investment securities
W
169,467
W
169,467
W
154,918
W
154,918
Short-term financial instruments
193,716
193,716
23,350
23,350
Long-term financial instruments
68
68
1,622
1,622
Long-term investment securities
28,816
29,655
31,471
32,418
Long-term debt, including current portion
465,910
466,922
271,061
271,061
Debentures, including current portion
488,975
502,972
683,206
684,496
Long-term obligations under capital
lease, including current portion
79,854
79,285
39,423
38,110
Interest rate swap
17,623
17,623
1,859
1,859
(18) Classification of income and expenses as operating income
A reconciliation of the operating income or loss accounts under Korean GAAP to the approximate
amounts determined under US GAAP pursuant to FASB Concepts Statement No.6 and S-X Reg. 210.5-03 for
the years ended December 31, 2003, 2004 and 2005 is as follows:
Translation into
Korean Won
U.S. Dollars(Note 2)
2003
2004
2005
2005
(In millions)
(In thousands)
Operating income based on
Korean GAAP
W
70,694
W
113,930
W
38,522
$
38,141
U.S. GAAP adjustments:
Gain on disposal
of property and
equipment
1,102
885
3,962
3,923
Donations
(800
)
(306
)
(312
)
(309
)
Loss on disposal
of property and
equipment
(1,326
)
(1,246
)
(2,154
)
(2,133
)
Loss on disuse of
property and
equipment
(61,333
)
(20,726
)
(60,586
)
(59,986
)
Other adjustments
3,444
416
11,326
11,214
Operating income(loss)
based on U.S. GAAP
W
11,781
W
92,953
W
(9,242
)
$
(9,150
)
Other adjustments represent other US GAAP reconciliation items affecting operating income, which
include development costs, revenue recognition, error corrections and amortization of goodwill.
(19) Extraordinary item
Certain items of income and expense considered as extraordinary items under Korean GAAP would be
considered non extraordinary items under U.S. GAAP. However, this reclassification would have no
impact on consolidated equity, net income (loss).
F-46
Table of Contents
(20) Effect on Net Income(Loss) and Shareholders' Equity
The approximate effects of the significant adjustments to net loss and shareholders' equity, that
are required if U.S.GAAP were applied instead of Korean GAAP, are summarized as follows:
Translation into
Korean Won
U.S. Dollars (Note 2)
2003
2004
2005
2005
(In millions, except per share amount)
(In thousands, except
per share amount)
Net income (loss) under Korean GAAP
W
(161,299
)
W
13,046
W
(209,318
)
$
(207,246
)
Adjustments:
Development costs
(1,717
)
1,250
(211
)
(209
)
Interest capitalization
3,168
1,387
1,541
1,526
Revenue recognition
346
282
—
—
Bonds with stock warrants
(7,066
)
—
—
—
Consolidation of SPE
155
—
—
—
Amortization of goodwill
425
738
1,767
1,750
Error corrections
4,390
(1,854
)
—
—
Losses on impairment of investment securities
—
—
3,009
2,979
Deferred tax effect of current
year's U.S. GAAP adjustments
89
(2,545
)
(852
)
(844
)
Valuation allowance against
deferred tax assets created by
U.S. GAAP adjustments
(89
)
2,545
852
844
(299
)
1,803
6,106
6,046
Net loss under U.S. GAAP
W
(161,598
)
W
14,849
W
(203,212
)
$
(201,200
)
Basic and diluted net income (loss) per
share under U.S. GAAP (in Korean
won and U.S. dollars)
W
(1,006
)
W
64
W
(879
)
$
(0.871
)
Basic and diluted ordinary income
(loss) per share under U.S. GAAP (in
Korean won and U.S. dollars)
W
(1,006
)
W
64
W
(879
)
$
(0.871
)
Shareholders' equity under Korean GAAP
W
1,730,720
W
1,751,606
W
1,573,080
$
1,557,505
Adjustments:
Licensing cost paid by shareholders
W
35,250
W
35,250
W
35,250
$
34,900
Development costs
(2,716
)
(1,465
)
(1,676
)
(1,659
)
Interest capitalization
3,168
4,555
6,096
6,036
Loans to employees
(12,574
)
(12,067
)
(9,386
)
(9,293
)
Consolidation of SPE
2,314
—
—
—
Revenue recognition
(282
)
—
—
—
Goodwill
850
1,589
3,356
3,323
Error corrections
922
(932
)
—
—
Deferred tax effect of U.S. GAAP
adjustments
(11,728
)
(10,724
)
(11,832
)
(11,715
)
Valuation allowance against
deferred tax assets created by
U.S. GAAP adjustments
11,728
10,724
11,832
11,715
Changes in minority interest
applying U.S. GAAP
(598
)
(3,215
)
(4,920
)
(4,871
)
Minority interests under U.S. GAAP
(19
)
—
—
—
26,315
23,715
28,720
28,436
Shareholders' equity under U.S. GAAP
W
1,757,035
W
1,775,321
W
1,601,800
$
1,585,941
Basic and diluted net (ordinary) income (loss) per share under U.S. GAAP for the years ended
December 31, 2003, 2004 and 2005, respectively, was calculated reflecting the effect from the
reverse stock split occurred on May 3, 2006.
F-47
Table of Contents
(21) Reconciliation of the Balance Sheet Accounts
The reconciliation of the significant balance sheet accounts under Korean GAAP except for the
shareholders' equity items shown above, to the approximate amounts determined under U.S.GAAP as of
December 31 is as follows:
Translation into
Korean Won
U.S. Dollars (Note 2)
2004
2005
2005
(In millions)
(In thousands)
Current assets
Current assets under Korean GAAP
W
624,797
W
446,374
$
441,954
U.S. GAAP adjustments:
Short-term loans
(4,373
)
(7,757
)
(7,680
)
Prepaid expenses
3,585
2,424
2,400
Deferred income tax assets
170
244
242
Current assets under U.S. GAAP
624,179
441,285
436,916
Non-current assets
Non-current assets under Korean GAAP
2,560,315
2,587,886
2,562,264
U.S. GAAP adjustments:
Long-term loans
(7,694
)
(1,629
)
(1,613
)
Long-term prepaid expenses
4,210
3,488
3,453
Intangibles
35,374
36,930
36,564
Interest capitalization
4,555
6,096
6,036
Deferred income tax assets
11,213
12,049
11,930
Non-current assets under U.S. GAAP
2,607,973
2,644,820
2,618,634
Total assets based on U.S. GAAP
W
3,232,152
W
3,086,105
$
3,055,550
Current liabilities
Current liabilities under Korean GAAP
W
742,510
W
638,176
$
631,858
U.S. GAAP adjustments:
Unearned income
3,585
2,424
2,400
Error corrections
932
—
—
Deferred income tax liabilities
170
244
242
Current liabilities under U.S. GAAP
747,197
640,844
634,500
Long-term liabilities
Long-term liabilities under Korean GAAP
690,996
823,004
814,855
U.S. GAAP adjustments:
Unearned income
4,210
3,488
3,453
Deferred income tax liabilities
11,213
12,049
11,930
Long-term liabilities under U.S. GAAP
706,419
838,541
830,238
Total liabilities based on U.S. GAAP
W
1,453,616
W
1,479,385
$
1,464,738
Minority interests based on U.S. GAAP
W
3,215
W
4,920
$
4,871
F-48
Table of Contents
(22) Tax Effects of Temporary Differences
The tax effects of temporary differences that resulted in significant portions of the deferred tax
assets and liabilities at December 31, computed under U.S.GAAP, and the description of the
financial statement items that created these differences are as follows:
Korean Won
2004
2005
Current
Non-current
Current
Non-current
(In millions)
Deferred tax assets:
Development costs
W
403
W
—
W
461
W
—
Error correction
256
—
—
—
Total deferred income tax assets
659
—
461
—
Valuation allowance
(489
)
11,213
(217
)
12,049
Net deferred income tax assets
170
11,213
244
12,049
Deferred tax liabilities:
License fee
—
(9,694
)
—
(9,694
)
Interest capitalization
(170
)
(1,082
)
(244
)
(1,432
)
Goodwill
—
(437
)
—
(923
)
Total deferred income tax liabilities
(170
)
(11,213
)
(244
)
(12,049
)
Net deferred income tax assets
W
—
W
—
W
—
W
—
At December 31, 2004 and 2005, the Company has available loss carryforwards of
W
1,289,173 million
and
W
703,781 million, respectively, which may be applied against future taxable income through
2009 and 2010, respectively.
The income tax expenses under U.S.GAAP for the years ended December 31, 2003, 2004 and 2005 are as
follows:
Korean Won
2003
2004
2005
(In millions)
Income tax currently
payable
W
354
W
806
W
245
Deferred income taxes
(52
)
(311
)
189
Income tax expense
W
302
W
495
W
434
The deferred income tax consequences of temporary differences in reporting items for financial
statement and income tax purposes are recognized, if appropriate. Realization of the future tax
benefits related to the deferred income tax assets is dependent on several factors, including the
Company's ability to generate taxable income within the period during which the temporary
differences reverse, the outlook for the Korean economic environment and the overall industry
outlook. Management has considered these factors in reaching its conclusion as to the valuation
allowance for financial reporting purposes. Such valuation allowance is reviewed periodically.
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Table of Contents
The difference between the actual income tax expense and the tax benefit computed by applying the
statutory Korean corporate income tax rates to income before income tax for 2003, 2004 and 2005 is
attributable to the following:
Korean Won
2003
2004
2005
(In millions)
Income tax benefit at statutory Korean
corporate income tax rate of 29.7%, 29.7% and
27.5% in 2003, 2004 and 2005, respectively
W
(49,184
)
W
5,199
W
(57,120
)
Non-deductible meals and entertainment and other
1,143
576
42,241
Change in valuation allowance
47,692
(4,928
)
15,325
Other
651
(352
)
(12
)
Actual income tax expense
W
302
W
495
W
434
F-50
Table of Contents
EXHIBIT INDEX
Exhibits
Description
1.1.
Articles of Incorporation, as amended on March 24, 2006 (English translation)
4.1.
Memorandum of Understanding with between Celrun Inc. and Kim Young-min, hanarotelecom Inc.
and CelrunTV Inc., dated February 6, 2006 (English translation)
4.2.
Business Cooperation Agreement among hanarotelecom, inc., Celrun Co., Ltd. and CelrunTV,
dated March 6, 2006 (English translation)
8.1.
List of hanarotelecom's significant subsidiaries (See "Item 4.C. Organizational Structure.")
11.1
Code of Ethics (English translation)
12.1.
Section 302 Certification of Chief Executive Officer pursuant to Rule 13a-14(a)
12.2.
Section 302 Certification of Chief Financial Officer pursuant to Rule 13a-14(a)
13.1.
Section 906 Certifications required by Rule 13a-14(b) and 18 U.S.C. Section 1350