TAIHAN ELECTRIC WIRE CO., LTD. AND SUBSIDIARIES ...
Transcript of TAIHAN ELECTRIC WIRE CO., LTD. AND SUBSIDIARIES ...
TAIHAN ELECTRIC WIRE CO., LTD. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2008 AND INDEPENDENT AUDITORS’ REPORT
Independent Auditors’ Report
English Translation of a Report Originally Issued in Korean
To the Shareholders and Board of Directors of
Taihan Electric Wire Co., Ltd.
We have audited the accompanying consolidated balance sheet of Taihan Electric Wire Co., Ltd. (the
“Company”) and its subsidiaries as of December 31, 2008 and the related consolidated statement of income,
changes in shareholders' equity and cash flows for the year ended December 31, 2008, 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 audit. We did not audit the financial
statements of certain subsidiaries including Namkwang Engineering & Construction Co., Ltd. whose financial
statements reflect 57.01% of the Company’s consolidated total assets (before eliminating inter-company
transactions) as of December 31, 2008 and 54.90% of the Company’s consolidated total sales (before
eliminating inter-company transactions) for the year then ended. Those statements were audited by other
auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included
for those consolidated subsidiaries, is based solely on the reports of the other auditors. The consolidated
financial statements of the Company as of December 31, 2007, which are presented for comparative purposes,
were audited by Samil PricewaterhouseCoopers, whose report dated April 29, 2008, expressed an unqualified
opinion on those statements.
We conducted our audit in accordance with auditing standards generally accepted in the Republic of Korea.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit and the reports of other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audit and the reports of other auditors, the 2008 financial statements referred to
above, present fairly, in all material respects, the financial position of the Company and its subsidiaries as of
December 31, 2008, and the results of their operations, the changes in their shareholders’ equity and cash flows
for the year then ended, in conformity with accounting principles generally accepted in the Republic of Korea.
Without qualifying our opinion, we draw attention to the following:
(1) Asset revaluation
As explained in Notes 2 and 8 to the consolidated financial statements, the Company and its certain subsidiaries
adopted the amendment to the Statement of Korea Accounting Standards (“SKAS”) No. 5 “Property, Plant and
Equipment”, which permits certain items of its lands and buildings to be revalued after acquisition date,
applying the revaluation models permitted under SKAS No. 5. As a result of this adoption, the book value of
the lands & buildings as of December 31, 2008 increased by ₩138,612 million, the Company accounted for the
amount of gain on revaluation as “Gain on revaluation of property, plant and equipment” in accumulated other
comprehensive income (₩108,608 million) and the amount of loss on revaluation as “Loss on revaluation of
property, plants and equipment” in non-operating expenses (₩491 million).
(2) Hedging with non-derivatives
As explained in Notes 2 and 24 to the consolidated financial statements, according to the Interpretation for
SKAS No. 53-70 “Accounting for Derivatives” (newly amended on December 30, 2008), the Company
designated the foreign currency denominated borrowings as a hedging instrument to the exposure of fluctuating
expected future cash flows produced by a foreign currency risk and accordingly, the effective portion of the gain
or loss on the derivatives instruments, which incurred from July 1, 2008 to December 31, 2008, was recorded as
loss on valuation of derivatives included in accumulated other comprehensive loss. In addition, such adoption
of the above Interpretation for SKAS increased net income for the year ended December 31, 2008 by ₩21,934
million.
(3) Changes in the scope of consolidated subsidiaries
As explained in Note 1 to the consolidated financial statements, the Company had substantial control over
Namkwang Engineering & Construction Co., Ltd., Aldex Co., Ltd., Onse Telecom Co., Ltd., Aldex Canada
Enterprises Ltd. and SJD Co., Ltd.; therefore, they were added to the scope of consolidated subsidiaries. In
addition, Muju Enterprises City Co., Ltd. and Taihan Global Canada Investments Ltd. were added to the scope
of consolidated subsidiaries since its total assets were more than the required level of ₩7,000 million for
consolidation with substantial control as of the prior year end, while Taihan Bulk Terminal Co., Ltd. was
excluded from the scope of consolidated subsidiaries due to the disposal of its shares.
Accounting principles and auditing standards and their application in practice vary among countries. The
accompanying financial statements are not intended to present the financial position, results of operations,
changes in shareholders’ equity and cash flows in conformity with accounting principles and practices generally
accepted in countries and jurisdictions other than the Republic of Korea. In addition, the procedures and
practices used in the Republic of Korea to audit such financial statements may differ from those generally
accepted and applied in other countries. Accordingly, this report and the accompanying financial statements
are for use by those who are informed about Korean accounting procedures or auditing standards and their
application in practice.
March 27, 2009
Notice to Readers
This report is effective as of March 27, 2009, the auditors’ report date. Certain subsequent events or
circumstances may have occurred between the auditors’ report date and the time the auditors’ report is read.
Such events or circumstances could significantly affect the accompanying financial statements and may
result in modifications to the auditors’ report.
TAIHAN ELECTRIC WIRE CO., LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2008 AND 2007
Korean Won
2008 2007
(In millions)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 14) ₩ 225,097 ₩ 467,191
Short-term financial instruments (Notes 3 and 14) 711,396 195,619
Short-term marketable securities (Note 6) 79 1,714
Available-for-sale securities (Notes 6 and 14) 23,014 9,828
Held-to-maturity securities (Note 6) 648 807
Trade accounts and notes receivable, net of allowance
for doubtful accounts of ₩137,599 million in 2008
and ₩11,765 million in 2007 (Notes 14, 22 and 24) 498,003 523,191
Receivables from construction revenue, net of allowance
for doubtful accounts of ₩29,559 million in 2008
and ₩4,380 million in 2007 438,504 122,250
Other accounts receivable, net of allowance for doubtful
accounts of ₩10,576 million in 2008 and
₩4,078 million in 2007 (Note 14) 120,697 48,610
Short-term loans, net of allowance for doubtful accounts
of ₩64,917 million in 2008 and ₩6,489 million
in 2007 (Note 14) 440,086 207,493
Accrued income, net of allowance for doubtful accounts
of ₩9 million in 2008 and ₩280 million in 2007
(Note 14) 50,693 19,153
Advanced payments, net of allowance for doubtful
accounts of ₩16,361 million in 2008 and 15 million
in 2007 (Note 14) 263,661 12,032
Prepaid expenses 41,584 8,872
Guarantee deposits (Notes 4 and 14) 6,817 80
Current portion of deferred tax assets (Note 13) 23,300 1,285
Financial derivative assets 64,807 15,339
Inventories (Note 5) 415,927 349,202
Others 14,587 5,747
Total current assets 3,338,900 1,988,413
NON-CURRENT ASSETS:
Long-term financial instruments (Notes 3 and 14) 16,800 9,884
Available-for-sale securities (Notes 6 and 14) 600,937 565,022
Held-to-maturity securities (Note 6) 55,166 5,415
Equity method investments (Note 7) 554,601 293,675
Long-term loans, net of allowance for doubtful accounts
of ₩34,468 million in 2008 and ₩1,730 million in 2007
(Note 14) 259,517 211,729
Other investments, net of allowance for doubtful accounts
of ₩836 million in 2008 and ₩69 million in 2007 130,644 15,254
Deferred tax assets (Note 13) 140,086 3,423
Property, plant and equipment, net (Notes 8 and 23) 1,550,808 1,385,068
Intangible assets, net (Notes 9 and 23) 53,553 (26,085)
Other non-current assets 125,670 73,621
Total non-current assets 3,487,782 2,537,006
Total assets ₩ 6,826,682 ₩ 4,525,419
(Continued)
TAIHAN ELECTRIC WIRE CO., LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
AS OF DECEMBER 31, 2008 AND 2007
Korean Won
2008 2007
(In millions)
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Trade accounts and notes payable (Notes 14 and 22) ₩ 515,675 ₩ 137,958
Short-term borrowings (Notes 10 and 14) 1,785,987 1,205,981
Other accounts payable (Note 14) 166,942 73,502
Advances from construction revenue 32,703 28,262
Accrued expenses 80,798 30,992
Income tax payable (Note 13) 80,094 52,128
Current maturities of long-term debts, net (Note 11) 813,391 225,632
Current portion of deferred tax liabilities (Note 13) 561 1,574
Financial derivative liabilities 262,238 16,789
Others 114,635 95,790
Total current liabilities 3,853,024 1,868,608
NON-CURRENT LIABILITIES:
Long-term borrowings, net of current maturities
(Notes 11 and 14) 479,082 209,875
Debentures, net (Note 11) 508,090 432,378
Bonds with stock warrants, net (Notes 11 and 14) - 133,673
Convertible bonds, net (Note 11) 42,561 207,011
Exchangeable bonds, net (Note 11) 43,306 -
Finance lease liabilities (Notes 11, 14 and 24) 7,570 22
Guarantee deposits received 349,980 324,924
Financial derivative liabilities (Note 24) 6,887 -
Deferred tax liabilities (Note 13) 24,567 2,722
Accrued severance benefits, net (Note 12) 29,420 12,505
Others (Note 15) 36,359 17,077
Total non-current liabilities 1,527,822 1,340,187
Total liabilities 5,380,846 3,208,795
COMMITMENTS AND CONTINGENCIES (Note 24):
SHAREHOLDERS’ EQUITY (Note 15):
Capital stock 122,650 122,650
Capital surplus 508,798 623,148
Capital adjustments (68,609) (23,650)
Accumulated other comprehensive loss (Note 18) (159,219) (91,613)
Retained earnings 478,070 432,303
Minority interests 564,146 253,786
Total shareholders' equity 1,445,836 1,316,624
Total liabilities and shareholders’ equity ₩ 6,826,682 ₩ 4,525,419
See accompanying notes to consolidated financial statements.
TAIHAN ELECTRIC WIRE CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
Korean Won
2008 2007
(In millions)
Sales (Notes 22 and 23) ₩ 4,734,656 ₩ 3,130,719
Cost of sales (Notes 16 and 22) 4,003,641 2,830,196
Gross profit 731,015 300,523
Selling and administrative expenses 624,354 175,027
Operating income (Note 23) 106,661 125,496
Non-operating income
Interest income 80,881 43,784
Dividend income 16,583 1,045
Gain on foreign currency transactions 133,857 21,633
Gain on foreign currency translation 102,071 10,184
Reversal of allowance for doubtful accounts 1,926 13,632
Gain on valuation of available-for-sale securities - 622
Gain on disposal of available-for-sale securities 5,839 10,205
Recovery of impairment losses on available-for-sale securities 621 36
Gain on valuation of equity method investments (Note 7) 42,845 2,532
Gain on disposal of equity method investments (Note 7) 6,902 5,390
Gain on disposal of property, plant and equipment (Note 8) 382,904 68,304
Gain on futures transactions 72,415 16,798
Gain on valuation of financial derivatives 51,613 4,487
Gain on financial derivatives transactions 63,240 844
Amortization of negative goodwill 9,242 7,834
Gain on recovery of bad debts 7,045 6,513
Gain on debt exemption 499 10,744
Others 26,191 9,012
1,004,674 233,599
Non-operating expenses
Interest expenses 287,289 99,619
Loss on foreign currency transactions 84,869 24,346
Loss on foreign currency translation 130,031 6,391
Other bad debt expenses 83,734 1,734
Loss on disposal of available-for-sale securities 1,134 88
Impairment losses on available-for-sale securities (Note 6) 1,148 5,572
Loss on valuation of equity method investments (Note 7) 50,212 1,901
Loss on disposal of equity method investments 4 -
Loss on disposal of property, plant and equipment 4,745 4,285
Loss on valuation of financial derivatives 216,342 6,509
Loss on financial derivatives transactions 25,841 400
Loss on valuation of inventories 26 915
Loss on redemption of bonds 7,307 247
Loss on futures transactions 94,906 15,510
Impairment losses on investments 24,174 -
Others 30,290 31,677
1,042,052 199,194
(Continued)
TAIHAN ELECTRIC WIRE CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
Korean Won
2008 2007
(In millions, except per share amounts)
Income from continuing operations before income tax ₩ 69,283 ₩ 159,901
Income tax expense (Note 13) 60,026 61,802
Net loss of newly consolidated subsidiaries before acquisition (6,766) (19,315)
Income from continuing operations 16,023 117,414
Income (loss) from discontinued operations, net (15,793) 2,857
Net income ₩ 230 ₩ 120,271
Parent interests in net income 69,954 76,289
Minority interests in net income (69,724) 43,982
Basic earnings per share from continuing operations (Note 19) ₩ 1,564 ₩ 1,535
Basic earnings per share (Note 19) ₩ 1,473 ₩ 1,595
Diluted earnings per share from continuing operations (Note 19) ₩ 1,557 ₩ 1,535
Diluted earnings per share (Note 19) ₩ 1,466 ₩ 1,595
See accompanying notes to consolidated financial statements.
TAIHAN ELECTRIC WIRE CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOE THE YEARS ENDED DECEMBER 31, 2008 AND 2007
Korean Won
Common
stock
Capital
surplus
Capital
adjustments
Accumulated
other
comprehensive
income (loss)
Retained
earnings
Minority
interests
Total
(In millions)
Balance as of January 1, 2007 ₩ 119,465 ₩ 558,843 ₩ (37,801) ₩ 22,207 ₩ 379,515 ₩ 225,648 ₩1,267,877
Payment of dividends - - - - (23,200) - (23,200)
Balance after appropriations 119,465 558,843 (37,801) 22,207 356,315 225,648 1,244,677
Net income - - - - 76,289 43,982 120,271
Conversion of convertible bonds 3,185 20,209 - - - - 23,394
Issuance of bonds with stock warrants - 10,444 - - - - 10,444
Issuance of convertible bonds - 16,281 - - - - 16,281
Disposal of treasury stock - 21,266 11,024 - - - 32,290
Changes in capital surplus of
consolidated subsidiaries - (3,804) - - - - (3,804)
Changes in equity arising
from equity method investments - - - 1,622 - - 1,622
Loss on valuation of
available-for-sale securities - - - (139,603) - - (139,603)
Compensation expenses
associated with stock options - - 2,940 - - - 2,940
Changes in the scope of consolidation - (91) - - - (28,886) (28,977)
Decrease from translation of foreign
currency of minority interest - - - - - (497) (497)
Changes in minority interests - - - - - 14,937 14,937
Others - - 187 24,161 (301) (1,398) 22,649
Balance as of December 31, 2007 ₩ 122,650 ₩623,148 ₩ (23,650) ₩ (91,613) ₩ 432,303 ₩253,786 ₩1,316,624
Balance as of January 1, 2008 ₩ 122,650 ₩623,148 ₩ (23,650) ₩ (91,613) ₩ 432,303 ₩ 253,786 ₩1,316,624
Payment of dividends - - - - (24,187) (3,487) (27,674)
Balance after appropriations 122,650 623,148 (23,650) (91,613) 408,116 250,299 1,288,950
Net income - - - - 69,954 (69,724) 230
Acquisition of treasury stock - - (43,117) - - - (43,117)
Changes in capital surplus of
consolidated subsidiaries - (117,303) - - - - (117,303)
Changes in capital adjustments of
consolidated subsidiaries - - (1,781) - - - (1,781)
Changes in equity arising
from equity method investments - - - 29,476 - - 29,476
Loss on valuation of
available-for-sale securities - - - (257,148) - - (257,148)
Gain on revaluation of
property, plant and equipment, - - - 73,111 - - 73,111
Changes in the scope of consolidation - - (61) - - 148,790 148,790
Changes in minority interests - - - - - 193,414 193,414
Others - 2,952 - 86,955 - 41,368 131,275
Balance as of December 31, 2008 ₩ 122,650 ₩508,797 ₩ (68,609) ₩ (159,219) ₩ 478,070 ₩ 564,147 ₩1,445,836
See accompanying notes to consolidated financial statements.
TAIHAN ELECTRIC WIRE CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
Korean Won
2008 2007
(In millions)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ₩ 230 ₩ 120,271
Adjustments to reconcile net income
to net cash provided by (used in) operating activities
Depreciation 111,979 86,769
Amortization of intangible assets 39,138 7,116
Provision for severance benefits 16,522 9,687
Bad debt expenses 22,555 3,635
Other bad debt expenses 83,734 1,734
Compensation expenses associated with stock options, net (89) 2,617
Interest, net 97,594 3,337
Loss on valuation of short-term marketable securities 1,919 24
Loss on disposal of short-term marketable securities 7 -
Gain on valuation of available-for-sale securities - (622)
Gain on disposal of available-for-sale securities, net (4,701) (10,117)
Gain on valuation of equity method investments, net (1,618) (32)
Gain on disposal of equity method investments (6,898) (5,390)
Impairment losses of available-for-sale securities 1,148 5,572
Gain on disposal of property, plant and equipment, net (378,262) (63,987)
Loss (gain) on foreign currency translation, net 57,440 (3,317)
Loss on valuation of financial derivatives, net 164,729 2,022
Impairment losses of investments 24,174 -
Reversal of allowance for doubtful accounts (1,914) (13,632)
Amortization of negative goodwill (8,667) (7,834)
Net loss of newly consolidated subsidiaries before acquisition - (19,315)
Others 20,970 (6,711)
239,760 (8,444)
Changes in operating assets and liabilities
Decrease (increase) in trade accounts and notes receivable 114,962 (73,758)
Decrease (increase) in other accounts receivable (49,407) 27,478
Increase in accrued income (33,070) (20,067)
Decrease (increase) in advanced payments (99,407) 5,245
Increase in prepaid expenses (12,045) (2,160)
Increase in inventories (61,491) (64,311)
Cash dividends from equity method investments 3,358 4,716
Decrease (increase) in other current assets (271) 266
Increase in current maturities of deferred tax assets (730) -
Increase in deferred tax assets (33,833) (1,191)
Increase (decrease) in trade accounts and notes payable 85,054 (86,591)
Increase (decrease) in other accounts payable (76,738) 15,453
Increase in accrued expenses 5,724 17,943
Increase in income tax payable 24,349 17,822
Decrease in other current liabilities (1,942) (2,167)
Decrease in current maturities of deferred tax liabilities (7,339) (1,220)
Payment of severance benefits (8,220) (5,849)
Decrease in contribution to National Pension Fund 17 38
Increase in pension plan assets (7,485) (2,075)
Decrease in deferred tax liabilities (6,221) (20,411)
Others (55,872) 51,179
(220,607) (139,660)
Net cash provided by (used in) operating activities 19,383 (27,833)
(Continued)
TAIHAN ELECTRIC WIRE CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
Korean Won
2008 2007
(In millions)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposal of short-term marketable securities ₩ 801 ₩ 1,038
Withdrawal of short-term financial instruments 283,753 -
Withdrawal of long-term financial instruments 41,155 8,310
Proceeds from disposal of available-for-sale securities 95,989 33,616
Proceeds from disposal of held-to-maturity securities 2,049 86,975
Collection of short-term loans 204,709 153,176
Collection of long-term loans 4,268 3,213
Proceeds from disposal of property, plant and equipment 686,543 111,036
Acquisition of short-term financial instruments (673,591) (82,341)
Acquisition of long-term financial instruments (6,242) (6,203)
Acquisition of short-term marketable securities - (1,169)
Acquisition of available-for-sale securities (204,491) (655,788)
Acquisition of held-to-maturity securities (49,464) (4,502)
Acquisition of equity method investments (248,933) (163,337)
Acquisition of a subsidiary (75,000) -
Extension of short-term loans (490,400) (305,310)
Extension of long-term loans (54,509) (126,177)
Acquisition of property, plant and equipment (191,050) (134,021)
Acquisition of intangible assets (46,832) (58,902)
Others, net 65,135 54,689
Net cash used in investing activities (656,110) (1,085,697)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of debentures 289,633 382,411
Issuance of bonds with stock warrants 3,991 145,624
Issuance of exchangeable bonds 50,964 -
Issuance of convertible bonds 1,151 227,005
Proceeds from short-term borrowings 823,160 1,085,609
Proceeds from long-term borrowings 223,374 126,622
Proceeds from stock issuance 33,379 58,052
Proceeds from disposal of treasury stock - 40,356
Cash inflows from the transactions between consolidated
companies and minorities 11,650 13,930
Repayment of short-term borrowings (529,368) (267,106)
Repayment of current maturities of long-term borrowings (302,583) (324,003)
Repayment of debentures (53,989) (15,796)
Repayment of long-term borrowings (22,428) (26,184)
Payment of dividends (27,697) (25,119)
Purchase of treasury stock (43,130) -
Cash outflows from the transactions between consolidated
companies and minorities (139,580) -
Others, net (19,459) (14,700)
Net cash provided by financing activities 299,068 1,406,701
(Continued)
TAIHAN ELECTRIC WIRE CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
Korean Won
2008 2007
(In millions)
EFFECT OF CHANGES IN CONSOLIDATED SUBSIDIARIES ₩ 91,231 ₩ (55,096)
EFFECT OF EXCHANGE RATE ON
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 4,334 13,201
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (242,095) 251,356
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 467,191 215,835
CASH AND CASH EQUIVALENTS,
END OF YEAR ₩ 225,097 ₩ 467,191
See accompanying notes to consolidated financial statements.
- 2 -
TAIHAN ELECTRIC WIRE CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
1. GENERAL INFORMATION:
The Company
Taihan Electric Wire Co., Ltd. (the “Company”) was incorporated in 1955 under the laws of the Republic of
Korea to engage in manufacturing, processing and selling electric wires, cables and related products.
In December 1968, the Company offered its shares for public ownership and all shares were listed on the Korea
Stock Exchange. On April 19, 2002, the Company split its common share by two-for-one, thereby, decreasing
the par value per share from ₩5,000 to ₩2,500.
As of December 31, 2008 and 2007, the shareholders of the Company are as follows:
2008 2007
Shareholder Number of
shares
Percentage of
ownership (%)
Number of
shares
Percentage of
ownership (%)
Sam Yang Metal Co., Ltd. ₩ 13,000,010 26.5 ₩ 13,000,010 26.5
Seul, Yoon Suk 7,979,432 16.3 7,979,432 16.3
Seul, Yoon Sung 2,849,821 5.8 2,849,821 5.8
Yang, Kyue Ae 1,156,340 2.4 1,156,340 2.4
Others 22,388,448 45.6 23,388,448 47.6
47,374,051 96.6 48,374,051 98.6
Treasury stock 1,685,931 3.4 685,931 1.4
₩ 49,059,982 100.0 ₩ 49,059,982 100.0
- 3 -
Consolidated Subsidiaries
Consolidated subsidiaries as of December 31, 2008 and 2007 are as follows:
Percentage of
ownership (%)
Number of
shares
2008 2007 2008 2007
Taihan Bulk Terminal Co., Ltd. (*1) - 100.00 - 928,000
Malesela T.E.C. Ltd. (*2) 49.00 49.00 10,569 10,569
Skytel Co., Ltd. 34.03 39.97 - -
Taihan Reach Ltd. 51.00 51.00 - -
Muju Resort Inc. 74.50 74.50 12,200,537 12,200,537
Trybrands Inc. (*3) 38.36 - 3,188,013 -
KTC Co., Ltd. 49.75 49.75 199,000 199,000
TMC Co., Ltd. 42.86 42.86 135,000 135,000
Korea Rental Corporation 68.47 68.47 2,359,400 2,359,400
Taihan Techren Co., Ltd. 100.00 100.00 200,000 66,660
TSC Co., Ltd. 70.00 70.00 19,600,000 19,600,000
Standard Telecom Congo 51.00 51.00 4,080,000 4,080,000
Taihan Global Holdings Ltd. 100.00 100.00 140,548,504 50,000,000
Taihan Luxemburg Investment Ltd. 100.00 100.00 1,000,000 150
Silkroad Telecom Ltd. 100.00 - 1,800,000 -
Taihan ST Co., Ltd. 80.10 80.10 3,204,000 3,204,000
Daimyung TMS Co., Ltd. 100.00 100.00 250,080 250,080
Jilin Try Textile Co., Ltd. 100.00 100.00 - -
TEC Construction Co., Ltd.
(formerly Myungji Construction Co., Ltd.)
44.07
90.00
11,900,000
9,900,000
TEC&R Co., Ltd. (*3) 67.50 - 5,400,000 -
Muju Enterprises City Co., Ltd. (*4) 96.07 96.07 8,800,000 8,800,000
Namkwang E&C (*5) 41.28 - 8,921,404 -
Aldex Co., Ltd. (*6) 51.37 - 56,421,706 -
SJD Co., Ltd. (*7) 42.00 - - -
Onse Telecom Co., Ltd. (*7) 52.65 - 75,947,474 -
Aldex Canada Enterprises Ltd. (*7) 100.00 - - -
Taihan Global Canada Investments Ltd. (*4) 100.00 100.00 8,700,000 7,000,000
TEC&Co Co., Ltd. (*3) 36.52 38.36 6,010,506 7,948,520
(*1) Taihan Bulk Terminal Co., Ltd. was excluded from the scope of consolidated subsidiaries due to the
disposal of its shares.
(*2) The fiscal year for Malesela T.E.C. Ltd. ends on June 30. In preparing the consolidated financial
statements, the unaudited financial statements as of and for the year ended December 31, 2008 were used.
(*3) TEC&Co Co., Ltd., the surviving company, spun off its clothing business unit to establish a new company,
Trybrands Co., Ltd. on April 30, 2008. In addition, TEC&Co Co., Ltd. dropped its development of real
estate business unit to establish a new company, TEC&R Co., Ltd. on April 30, 2008.
(*4) Muju Enterprises City Co., Ltd. and Taihan Global Canada Investments Ltd. were added to the scope of
consolidated subsidiaries since its total assets were more than the required level of ₩7,000 million for
consolidation with substantial control as of the prior year end.
(*5) Namkwang Engineering and Construction Co., Ltd. (“Namkwang E&C”) was added to the scope of
consolidated subsidiaries because the sum of equity ratio after adding the Company and its subsidiaries is
more than 30% and the Company and its subsidiaries are the largest shareholders.
(*6) Aldex Co., Ltd. was added to the scope of consolidated subsidiaries because the Company had substantial
control over Aldex Co., Ltd.
(*7) Onse Telecom Co., Ltd., Aldex Canada Enterprises Ltd. and SJD Co., Ltd. were added to the scope of
consolidated subsidiaries because they were subsidiaries of Aldex Co., Ltd.
- 4 -
The major business of consolidated subsidiaries and their relationship with the Company are summarized as
follows:
Company Major business Relationship
Malesela T.E.C. Ltd. Manufacturing and marketing of cable Supplier of
products and merchandise
Skytel Co., Ltd. Telecommunication service No relationship
Taihan Reach Ltd. Rent service of communication Supplier and purchaser of
of products and merchandise
Muju Resort Inc. Leisure sports and resort Lessor
Trybrands Inc. Manufacturing and marketing
fiber clothes
No relationship
KTC Co., Ltd. Manufacturing and marketing of cable Supplier and purchaser of
products and merchandise
TMC Co., Ltd. Manufacturing cable and fiber cable Supplier and purchaser of
products and merchandise
Korea Rental Corporation Rent and marketing of meters
and office automations
Lessor
Taihan Techren Co., Ltd. Photovoltaic development Lessor
TSC Co., Ltd. Manufacturing and marketing of cable Supplier of
products and merchandise
Standard Telecom Congo Wire communication Supplier of
products and merchandise
Taihan Global Holdings Ltd. Trading and investment Supplier of
products and merchandise
and purchaser of raw materials
Silkroad Telecom Ltd. Telecommunication service No relationship
Taihan Luxemburg Investment Ltd. Investment Purchaser of raw materials
Taihan ST Co., Ltd. Manufacturing, rolling and extruding of
other nonferrous metal
Supplier and purchaser of
products and merchandise
Daimyung TMS Co., Ltd. Manufacturing and tooling of metal No relationship
Jilin Try Textile Co., Ltd. Spinning and manufacturing of textile No relationship
TEC Construction Co., Ltd. Construction Lessor and construction
contract
TEC&R Co., Ltd. Development of real estate and consulting Lessor
Muju Enterprise City Co., Ltd. Leisure and sports No relationship
Namkwang E&C Construction No relationship
Aldex Co., Ltd. Manufacturing of aluminum ingot,
pellet and mini pellet
Loans
SJD Co., Ltd. Manufacturing of electronic devices and
construction materials
No relationship
Onse Telecom Co., Ltd. Telecommunication service Loans
Aldex Canada Enterprises Ltd. Development of real estate No relationship
Taihan Global Canada Investments Ltd. Hotel business No relationship
TEC&Co Co., Ltd. Manufacturing, wholesaling and
home-network system
Lessor
- 5 -
A summary of condensed financial information of the Company and its subsidiaries included in the
accompanying consolidated financial statements as of and for the years ended December 31, 2008 and 2007 is
as follows:
2008
Company Total assets
Shareholders’
equity Sales
Net income
(loss)
(In millions)
Taihan Electric Wire Co., Ltd. ₩ 3,394,483 ₩ 878,415 ₩ 2,444,536 ₩ 70,770
Malesela T.E.C. Ltd. (*1) 59,923 41,075 120,883 4,757
Skytel Co., Ltd. 51,781 48,017 40,046 14,937
Taihan Reach Ltd. 19,787 9,737 6,718 1,615
Muju Resort Inc. 745,560 236,167 76,682 (9,676)
T.E.C & Co Co., Ltd. 101,264 88,862 5,926 (33,955)
Trybrands Inc. 116,616 68,587 90,031 3,133
KTC Co., Ltd. 125,425 34,447 220,830 1,741
TMC Co., Ltd. 113,470 34,758 212,811 13,568
Korea Rental Corporation 181,400 67,825 103,188 (753)
Taihan Techren Co., Ltd. 6,621 5,960 33,993 52
TSC Co., Ltd. 39,809 30,329 19,037 (3,339)
Standard Telecom Congo 32,667 (12,080) 5,630 (4,795)
Taihan Global Holdings Ltd. (*2) 1,162,025 638,424 499,023 (209,585)
Taihan ST Co., Ltd. 190,288 90,673 274,517 4,787
TEC Construction Co., Ltd. 263,914 34,905 174,212 (49,074)
Jilin Try Textile Co., Ltd. 51,681 15,500 38,424 1,463
Daimyung TMS.Co., Ltd. 32,901 (13,693) 57,798 (1,171)
TEC&R Co., Ltd 75,685 44,623 343 (413)
Muju Enterprise City Co., Ltd. 64,267 46,518 - 1,283
Namkwang E&C 1,075,768 184,087 669,875 (7,155)
Aldex Co., Ltd. 163,536 87,378 121,569 (48,611)
SJD Co., Ltd. 15,538 8,167 26,236 (2,027)
Onse Telecom Corporation 297,205 50,350 385,750 (44,888)
Aldex Canada Enterprises Ltd. 14,617 5,683 44 (2,170)
Taihan Global Canada Investments,
Ltd.
53,553
8,132
20,114
(1,179)
8,449,784 2,732,846 5,648,216 (300,685)
Consolidation adjustments (1,623,102) (1,287,010) (913,560) 300,915
₩ 6,826,682 ₩ 1,445,836 ₩ 4,734,656 ₩ 230
(*1) Unaudited financial statements were used in preparing consolidated financial statements due to the
different fiscal year.
(*2) The financial information of Taihan Global Holdings Ltd., which has 100% ownership of Taihan
Luxemburg Investment Ltd. and Silkroad Telecom Ltd., is based on the consolidated financial statements.
- 6 -
2007
Company Total assets
Shareholders’
equity Sales
Net income
(loss)
(In millions)
Taihan Electric Wire Co., Ltd. ₩ 2,981,272 ₩ 1,071,751 ₩ 2,078,618 ₩ 77,625
Taihan Bulk Terminal Co., Ltd. 38,118 36,903 9,301 2,857
Malesela T.E.C. Ltd. (*1) 59,139 33,810 137,387 6,823
Skytel Co., Ltd. 32,934 29,277 24,932 9,782
Taihan Reach Ltd. 15,073 8,122 6,577 (758)
Muju Resort Inc. 632,786 147,024 68,918 (17,341)
Trybrands Inc. (*2) 512,523 175,491 377,351 53,170
KTC Co., Ltd. 67,663 19,375 156,562 1,752
TMC Co., Ltd. 76,813 22,555 141,179 9,422
Korea Rental Corporation 159,719 68,578 91,950 6,503
Taihan Techren Co., Ltd. 7,468 1,923 8,069 (799)
TSC Co., Ltd. 32,122 27,580 12,819 623
Standard Telecom Congo (*1) 25,230 (5,043) 2,881 (4,063)
Taihan Global Holdings Ltd. (*2) 463,059 371,370 56 4,838
Taihan ST Co., Ltd. (*2) 234,165 85,810 296,201 15,886
5,338,084 2,094,526 3,412,801 166,320
Consolidation adjustments (812,665) (777,902) (282,082) (46,049)
₩ 4,525,419 ₩ 1,316,624 ₩ 3,130,719 ₩ 120,271
(*1) Unaudited financial statements were used in preparing consolidated financial statements.
(*2) The financial information of Trybrands Inc., a direct subsidiary, is based on the consolidated financial
statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Company prepared its consolidated financial statements in conformity with Statements of Korea
Accounting Standards (“SKASs”) No. 25 “Consolidated Financial Statements”.
The significant accounting policies followed by the Company in the preparation of its consolidated financial
statements are summarized below.
Basis of Financial Statement Presentation
The Company maintains its official accounting records in Korean Won and prepares financial statements in the
Korean language (Hangul) in conformity with the accounting principles generally accepted in the Republic of
Korea. Certain accounting principles applied by the Company that conform with financial accounting
standards and 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 consolidated financial
statements have been condensed, restructured and translated into English from the Korean language financial
statements. Certain information included in the Korean language financial statements, but not required for a
fair presentation of the Company and its subsidiaries’ financial position, results of operations, changes in
shareholders’ equity or cash flows, is not presented in the accompanying consolidated financial statements.
The Company prepared its consolidated financial statements as of December 31, 2008 in accordance with
Financial Accounting Standards and Statements of Korea Accounting Standards (“SKASs”) in the Republic of
Korea, and adopted SKAS No. 1 through No. 25 (except for No.14). The significant accounting policies
applied by the Company in preparation of its consolidated financial statements for the year ended December 31,
2008 are identical to those for the year ended December 31, 2007, except for current amendments in SKASs.
- 7 -
Principles of Consolidation
(1) Elimination of Investment and Capital Accounts
Investments and equity accounts of subsidiaries were eliminated at the dates the Company obtained substantial
control of the subsidiaries.
(2) Amortization of Goodwill and Negative Goodwill
The difference between the cost of acquisition and the book value of the subsidiary is amortized using the
straight-line method within five years from the year the acquisition occurred or reversed over the remaining
weighted average useful life of the identifiable acquired depreciable assets for negative goodwill using the
straight-line method.
(3) Elimination of Intercompany Unrealized Income
Profits and losses on inter-company sales of products, property or other assets are eliminated in the consolidated
financial statements based on the gross profit or loss recognized. Unrealized gains and losses arising from
sales by a controlling company to its subsidiary (downstream sales) are eliminated entirely and charged
(credited) to controlling interest, and unrealized gains and losses arising from sales by a subsidiary to its
controlling company or from transactions among subsidiaries (upstream sales) are eliminated entirely and
allocated to controlling interest and minority interest.
Unrealized income included as a result of intercompany transactions are as follows:
2008 2007
Tangible
assets
Convertible
bonds Inventories Total
Tangible
assets
Convertible
bonds Total
(In millions)
Malesela T.E.C, Ltd. (350) - - (350) (731) - (731)
KTC Co., Ltd. (2,357) - - (2,357) (3,000) - (3,000)
Standard Telecom Congo (1,603) - - (1,603) (1,927) - (1,927)
Taihan ST Co., Ltd. (45,364) - - (45,364) (46,765) - (46,765)
TMC Co., Ltd. - (304) - (304) - (304) (304)
Taihan Techren Co., Ltd. - - - - - (315) (315)
Jilin Try Textile Co., Ltd.
(112) - (322) (434) - - -
TEC&R Co., Ltd
(4,901) - - (4,901) - - -
Total ₩ (54,687) ₩ (304) ₩ (322) ₩ (55,313) ₩ (52,423) ₩ (619) ₩ (53,042)
(4) Adjustment of Different Accounting Policy
Differences in accounting policy between the Company and consolidated subsidiaries are adjusted in preparing
the consolidated financial statements.
(5) Translation of Foreign Currency Financial Statements
Accounts and records of the overseas subsidiaries are maintained in foreign currencies. For presentation in the
accompanying consolidated financial statements, the financial statements of the overseas subsidiaries have been
translated to Korean Won at exchange rates as of the balance sheet date for the balance sheet accounts and
average exchange rate for income statement accounts. Resulting differences are accounted for as gain (loss) on
overseas operation translation in accumulated other comprehensive income (loss) account within shareholders’
equity.
- 8 -
Recent Changes in Korean Accounting Standards
Korea Financial Accounting Standards, SKAS, Interpretation on Korea Financial Accounting Standards,
Opinion on Application of Accounting Standards and Opinion on Financial Reporting Practice (collectively
referred to as “KFAS and others”) that were issued or amended by the Korea Accounting Institute and the
Financial Supervisory Service for the year ended December 31, 2008 and adopted by the Company are
summarized below.
(1) SKAS No. 5 “Property, Plant and Equipment”
The Company and its certain subsidiaries adopted the amendment to the SKAS No. 5 “Property, Plant and
Equipment”, which permits certain items of its lands and buildings to be revalued after acquisition date,
applying the revaluation models permitted under SKAS No. 5. As a result of this adoption, the book value of
the lands & buildings as of December 31, 2008 increased by ₩138,612 million, the Company accounted for the
amount of gain on revaluation as “Gain on revaluation of property, plant and equipment” in accumulated other
comprehensive income (₩108,608 million) and the amount of loss on revaluation as “Loss on revaluation of
property, plants and equipment” in non-operating expenses (₩491 million).
(2) SKAS No. 53-70 “Accounting for Derivatives”
According to the Interpretation for SKAS No. 53-70 “Accounting for Derivatives” (newly amended on
December 30, 2008), the Company designated the foreign currency denominated borrowings as a hedging
instrument to the exposure of fluctuating expected future cash flows produced by a foreign currency risk and
accordingly, the effective portion of the gain or loss on the derivatives instruments, which incurred from July 1,
2008 to December 31, 2008, was recorded as loss on valuation of derivatives included in accumulated other
comprehensive loss. In addition, such adoption of the above Interpretation for SKAS increased net income for
the year ended December 31, 2008 by ₩21,934 million.
Revenue Recognition
Revenue is the gross inflow of economic benefits arising in the ordinary course of the Company’s activities and
is measured at the fair value of the consideration received or receivable for the sale of goods and services in the
said ordinary course of the Company’s activities. Revenue is shown as net of value-added tax, sales discounts
and sales returns. The Company recognizes revenue when the amount of revenue can be reliably measured,
and it is probable that future economic benefits will flow into the Company.
Revenue from the sale of goods is recognized when the significant risks and rewards of ownership of goods are
transferred to the buyer. Revenue from the rendering of services is recognized under the percentage-of-
completion method, under which revenue is generally recognized based on the costs incurred to date as a
percentage of the total estimated costs to be incurred.
Allowance for Doubtful Accounts
The Company provides an allowance for doubtful accounts and based on management’s estimate of the
collectibility of the receivables and prior years’ collection experience.
Inventories
The quantities of inventories are determined using the perpetual method and periodic inventory count, while the
costs of inventories are determined using the weighted-average method, except for materials in-transit which is
stated at cost, determined using the specific identification method. Inventories are stated at the lower of cost or
net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less
applicable variable selling expense. Replacement cost is used for the estimate of net realizable value of raw
materials. If, however, the circumstances which caused the valuation loss cease to exist, the valuation loss is
reversed up to the original carrying amount before valuation. The reversal of valuation loss is deducted from
cost of sales.
- 9 -
Investments in Securities (Excluding Equity Method Investments)
Costs of securities are determined using the weighted-average method. Investments in equity securities or debt
securities are classified into trading, available-for-sale and held-to-maturity securities, depending on the
acquisition and holding purpose. Investments in equity securities of companies, over which the Company
exercises a significant control or influence, are recorded using the equity method of accounting. Trading
securities are classified as current assets; available-for-sale securities and held-to-maturity securities are
classified as non-current assets, unless they mature or are certain to be disposed of within one year, which are
then classified as current assets.
Held-to-maturity securities are carried at amortized cost while available-for-sale and trading securities are
recorded at fair value. However, non-marketable securities, classified as available-for-sale securities, are
carried at cost when the fair values are not readily determinable.
Gains and losses related to trading securities are recognized in the income statement, while unrealized gains and
losses of available-for-sale securities are recognized under other comprehensive income (loss). Realized gains
and losses of available-for-sale securities are recognized in the income statement.
Equity Method Investments
Investments in equity securities of companies, over which the Company exercises significant influence, are
reported using the equity method of accounting.
Under the equity method of accounting, the Company records changes in its proportionate equity of the net
assets of the investee depending on the nature of the underlying changes in the investee as follows; (i) “equity
in income (loss) of associates” in the non-operating income (expense) for net income (loss) of the investee; (ii)
“increase (decrease) in retained earnings of associates” in the retained earnings for changes in beginning
retained earnings of the investee; (iii) “increase (decrease) in equity of associates” in accumulated other
comprehensive income (loss) for other changes in shareholders’ equity of the investee.
When the equity method investee’s unappropriated retained earnings carried over from prior period changes due
to significant error corrections, the Company records the changes in equity as “equity in income (loss) of
associates” included in the non-operating income (expense) if the impact of the changes on the Company’s
consolidated financial statements is not significant. If the changes results from the changes in accounting
policies of the equity method investee, they are reflected in unappropriated retained earnings carried over from
prior period in accordance with SKAS on changes in accounting policy and errors corrections. When the
investee declares cash dividends, the dividends to be received are deducted directly from equity method
investments.
Difference between the acquisition cost and the Company’s proportionate equity in the fair value of net assets of
the investee upon acquisition (“Investment difference”) is considered as (negative) goodwill and accounted for
in accordance with accounting standards for business combination. The goodwill portion is amortized over
useful lives within 5 years on a straight line method while the negative goodwill portion is amortized over the
weighted average useful lives of depreciable non-monetary assets of the investee. The amortization is included
in “equity in income (loss) of associates”.
When the Company’s equity interest in the investee increases due to an increase (or decrease) in contributed
capital with (or without) consideration, the changes in the Company’s proportionate equity in the investee are
accounted for as investment difference. If the Company’s equity interest decreases, the changes are accounted
for as “gain (loss) on disposal of the equity method investments”.
Upon acquisition of the equity method investments, the Company’s proportionate shares in the differences
between the fair values and book values of the identifiable assets and liabilities of the investee are
amortized/reversed and included in “equity in income (loss) of associates” in accordance with the investee’s
methods of accounting for the assets and liabilities.
- 10 -
The Company’s proportionate share in the gain (loss) arising from transactions between the Company and the
investee, which remains in the book value of assets held as of balance sheet date, is considered unrealized gain
(loss) and adjusted to equity method investments.
When there is objective evidence that the equity method investments is impaired and the recoverable amount is
lower than the carrying amount of the equity method investments, an impairment loss is recognized as “loss on
impairment of equity method investments” included in non-operating expense and the unamortized investment
difference is first reduced. When the recoverable amount is recovered after the recognition of impairment loss,
the reversal of impairment loss is recognized as income up to the previously recorded impairment loss. The
book value of the equity method investments after the reversal of the impairment loss cannot exceed the book
value calculated as if the impairment loss would not been originally recognized. The reversal of the
impairment loss recognized against the unamortized investment difference is not allowed.
Property, Plant and Equipment
Property, plant and equipment are stated at cost (acquisition cost or manufacturing cost plus expenditures
directly related to preparing the assets ready for use). However, certain assets, for which the revaluation
method in accordance with the Korean Assets Revaluation Act or revaluation model in accordance with the
amendment to SKAS No. 5 is elected, are recorded at revalued amounts. The Company presents the amount of
gain on revaluation performed in accordance with the Korean Assets Revaluation Act on the other capital
surplus. The Company accounts for the amount of gain on revaluation performed in accordance with the
amendment to SKAS No. 5 as “Gain on revaluation of property, plant and equipment” in accumulated other
comprehensive income or “Loss on revaluation of property, plants and equipment” in non-operating expenses.
Property, plant and equipment are stated net of accumulated depreciation calculated based on the following
depreciation method and estimated useful lives:
Estimated useful lives
Buildings 6 - 60 years
Structures 5 - 48 years
Machinery and equipment 2 - 40 years
Vehicles 2 - 10 years
Others 2 - 20 years
Rental assets 3 - 10 years
Expenditures incurred after the acquisition or completion of assets are capitalized if they enhance the value of
the related assets over their recently appraised value or extend the useful life of the related assets. Routine
maintenance and repairs are charged to expense as incurred.
Accounting for Leases
A lease is classified as a finance lease or an operating lease depending on the extent of transfer to the Company
of the risks and rewards incidental to ownership. If a lease meets any one of the following criteria, it is
accounted for as a finance lease:
1) The lease transfers ownership of the asset to the lessee by the end of the lease term;
2) The lessee has the option to purchase the asset at a bargain price and it is certain that the option will be
exercised;
3) The lease term is for the major part (75% or more) of the economic life of the asset even if title is not
transferred;
4) At the date of lease commencement the present value of the minimum lease payments amounts to at least
substantially all (90% or more) of the fair value of the leased asset; or
5) The leased assets are of such a specialized nature that only the Company can use them without major
modifications.
- 11 -
All other leases are treated as operating leases.
For operating leases, lease payments excluding guaranteed residual value are recognized as an expense on a
straight-line basis over the lease term and contingent rent is expensed as incurred. Finance leases are
recognized as assets and liabilities at the lower of fair value of the leased property or the present value of the
minimum lease payments discounted using the implicit interest rate of the lessor (or the Company’s incremental
borrowing rate if the implicit interest rate is not practicable to determine). Any initial direct costs incurred by
the Company are added to the amount recognized as an asset. The depreciation policy for depreciable leased
assets is consistent with that for the similar depreciable assets that are owned by the Company. Annual
minimum lease payments excluding guaranteed residual value is allocated to interest expense, which is
calculated using the effective interest rate, and finance lease repayment amount. Contingent rent relating to
finance lease is charged as expenses in the periods in which they are incurred, however, if the amount is
material, it is allocated to principal and interest, respectively, over the remaining lease term.
Government Grants
Government grants received, which are to be repaid, are recorded as liability, and while grants without
obligation to be repaid are offset against cost of assets purchased with such grants. Grants received for a
specific purpose are offset against the specific expense for which it was granted, and other grants are recorded as
a gain for the period.
Intangible Assets
Intangible assets are stated at cost, which includes acquisition cost, production cost and other costs required to
prepare the asset for its intended use. Intangible assets are stated net of accumulated amortization calculated
based on using the straight-line method over the estimated useful lives.
Development costs, which are individually identifiable and directly related to a new technology or to new
products that carry probable future benefits, are capitalized as intangible assets. Amortization of development
cost begins at the commencement of the commercial production of the related products or use of the related
technology.
Estimated useful life
Goodwill 5 years
Development cost 5 years
Industry property rights 5 - 10 years
Others 4 - 20 years
Impairment of Assets
When the book value of an asset is significantly greater than its recoverable value due to obsolescence, physical
damage or an abrupt decline in the market value of the asset, the said decline in value is deducted from the book
value to agree with recoverable amount and is recognized as an asset impairment loss for the period. When the
recoverable value subsequently exceeds the book value, the impairment amount is recognized as gain for the
period to the extent that the revised book value does not exceed the book value that would have been recorded
without the impairment.
Derivatives
All derivative instruments are accounted for at their fair value according to the rights and obligations associated
with the derivative contracts. The resulting changes in fair value of derivative instruments are recognized
either under the income statement or shareholders’ equity, depending on whether the derivative instruments
qualify as a cash flow hedge. Fair value hedge accounting is applied to a derivative instrument purchased with
the purpose of hedging the exposure to changes in the fair value of an asset or a liability or a firm commitment
that is attributable to a particular risk. The resulting changes in the fair value of derivatives that are designated
and qualify as cash flow hedges are recognized under the shareholders’ equity as accumulated other
comprehensive income (loss).
- 12 -
Income Tax and Deferred Income Tax
Income tax expense includes the current income tax under the relevant income tax law and the changes in
deferred tax assets or liabilities. Deferred tax assets and liabilities represent temporary differences between
financial reporting and the tax bases of assets and liabilities. Deferred tax assets are recognized for temporary
differences which will decrease future taxable income or operating loss to the extent that it is probable that
future taxable income will be available against which the temporary differences can be utilized. Deferred tax
effects applicable to items in the shareholders’ equity are directly reflected in the shareholders’ equity.
Deferred income tax assets (liabilities) for temporary differences are classified into current assets (current
liabilities) or investments (non-current liabilities) according to the classification of the assets (liabilities) on
balance sheet, to which the temporary differences are related. For temporary differences that are not related to
the assets (liabilities) on balance sheet, the deferred income tax assets (liabilities) are classified into current or
non-current assets (liabilities) according to the expected reversal date of the temporary differences.
Discounts on Debentures
Discounts on debentures are amortized over the term of the debentures using the effective interest rate method.
Amortization of the discount is recorded as part of interest expense.
Convertible Bonds and Consideration for Conversion Rights
The Company has recorded the conversion rights as other capital surplus, calculated by deducting the present
value of ordinary bonds from the issuance price of convertible bonds. Conversion rights adjustments and
discounts on convertible bonds are deducted from convertible bonds, while redemption premiums are added.
Accrued Severance Benefits
The Company has a defined contribution pension plan, and accrues severance benefits for current employees
and pension payables for retired employees.
Pension plan assets are presented as a deduction from the total accrued severance benefits and pension payables.
The excess of pension plan assets over pension plan liabilities is recorded as investment assets.
Approximately 47.0% of accrued severance benefits are funded as of December 31, 2008 (2007: 47.6%),
through pension plan assets or group severance insurance deposits with Kyobo Life Insurance Co., Ltd. and
others. are presented as a deduction from accrued severance benefits.
Provisions and Contingent Liabilities
When there is a probability that an outflow of economic benefits will occur due to a present obligation resulting
from a past event, and whose amount is reasonably estimable, a corresponding amount of provision is
recognized in the consolidated financial statements. However, when such outflow is dependent upon a future
event, is not certain to occur, or cannot be reliably estimated, a disclosure regarding the contingent liability is
made in the notes to the consolidated financial statements.
Translation of Assets and Liabilities Denominated in Foreign Currencies
Monetary assets and liabilities denominated in foreign currencies are translated into Korean Won at the rates of
exchange in effect at the balance sheet date, and the resulting translation gains and losses are recognized in
current operations.
The Company designated the foreign currency denominated borrowings as a hedging instrument to the exposure
of fluctuating expected future cash flows produced by a foreign currency risk and accordingly, the effective
portion of the gain (loss) on the derivatives instruments are recorded as a gain (loss) on valuation of derivatives
included in accumulated other comprehensive income (loss).
- 13 -
Share-based Payments
In case of equity-settled share-based payment, the fair value of the goods or employee services received in
exchange for the grant of the options is recognized as an expense and a capital adjustment. If the fair value of
goods or employee services cannot be estimated reliably, the fair value is estimated based on the fair value of
the equity granted.
Net Income (Loss) of Newly Consolidated Subsidiaries before Acquisition
Namkwang E&C, Aldex Co., Ltd., Onse Telecom Co., Ltd., Aldex Canada Enterprises Ltd. and SJD Co., Ltd.
became consolidated subsidiaries of the Company during current year and its results of operations were reflected
in the income statement on an annual basis. However, total net income (loss) of the consolidated subsidiaries
until the deemed acquisition date (March 31, 2008) was deducted from net income before income tax and
accounted for as net income (loss) of newly consolidated subsidiaries before acquisition.
Reclassification of the Subsidiaries’ Financial Statements
The Company reclassified some accounts in the subsidiaries’ financial statements according to the Company’s
financial statements. This reclassification does not affect the amount of net income or net assets in the
subsidiaries’ financial statements.
3. RESTRICTED FINANCIAL INSTRUMENTS:
Details of restricted deposits as of December 31, 2008 and 2007 are as follows:
Korean Won
2008 2007
(In millions)
Short-term financial
instruments
Term-deposits and
others ₩ 639,849 ₩ 11,554 Pledged as collateral for derivatives
transactions and borrowings
Long-term financial
instruments
Term-deposits and
others 25,327 7,570 Pledged as collateral for borrowings
Guarantee deposits 54 51 Guarantee deposits for checking account
₩ 665,230 ₩ 19,175
In additions, pension plan assets or severance insurance deposits are made under defined contribution pension
plan and withdrawals are restricted to the actual payment of severance benefits.
4. DEPOSITS PAID FOR GUARANTEES:
The Company was named as a defendant in a lawsuit filed by Jinro Co. Ltd.’s subordinated secured creditors,
claiming amounts totaling ₩14,664 million with respect to the Jinro receivables acquired in 2003. The
plaintiffs contested the profits received by the Company after collecting the restructured receivables from Jinro
Co., Ltd. The amount was deposited with the court and is presented as deposits paid for guarantees, net of
allowance amounting to ₩4,399 million in the balance sheet as of December 31, 2006. The Company won
the first trial on June 23, 2006 and the second trial on June 22, 2007, and the Company collected the deposits in
2007. Accordingly, the allowance for deposits paid for guarantees amounting to ₩4,399 million was reversed
in the prior year.
- 14 -
5. INVENTORIES:
Inventories as of December 31, 2008 and 2007 consist of the following:
Korean Won
2008 2007
(In millions)
Merchandise ₩ 93,372 ₩ 56,021
Finished products 105,741 48,884
Semi-finished products 476 470
Work-in-process 75,035 111,181
Raw materials and supplies 94,420 66,312
Materials-in-transit 39,071 18,786
Uncompleted construction - 2,165
Completed housing 3,761 8,060
Commercial facilities unsold - 34,395
Land for construction 4,051 2,928
₩ 415,927 ₩ 349,202
6. INVESTMENTS IN SECURITIES (EXCLUDING EQUITY METHOD INVESTMENTS):
Investments in securities as of December 31, 2008 and 2007 consist of the following:
Korean Won
2008 2007
Current Non-current Current Non-current
(In millions)
Trading securities ₩ 79 ₩ - ₩ 1,714 ₩ -
Available-for-sale securities 23,014 600,937 9,828 565,022
Held-to-maturity securities 648 55,166 807 5,415
₩ 23,741 ₩ 656,103 ₩ 12,349 ₩ 570,437
Trading securities as of December 31, 2008 and 2007 consist of the following:
Korean Won
Book value before
valuation of its fair value
Fair value (Book value)
2008 2007 2008 2007
(In millions)
Beneficiary certificates ₩ - ₩ 800 ₩ - ₩ 801
National government bonds for housing - 402 - 411
Local government bonds
for regional development
-
365
-
365
Others 137 171 79 137
₩ 137 ₩ 1,738 ₩ 79 ₩ 1,714
- 15 -
Available-for-sale securities as of December 31, 2008 and 2007 consist of the following:
Korean Won
2008 2007
Current
assets
Non-current
assets
Current
assets
Non-current
assets
(In millions)
Marketable equity ₩ - ₩ 392,983 ₩ - ₩ 95,003
Non-marketable equity - 185,076 - 36,128
Other debt securities 23,014 22,878 9,828 433,891
₩ 23,014 ₩ 600,937 ₩ 9,828 ₩ 565,022
Marketable equity of available-for-sale securities as of December 31, 2008 and 2007 consist of the following:
Korean Won
Percentage of
ownership (%) Acquisition cost
Book value
Dec. 31,
2008
Dec. 31,
2007
Dec. 31,
2008
Dec. 31,
2007
Dec. 31,
2008
Dec. 31,
2007
(In millions)
Shinhan Financial Group Co, Ltd. 0.20 0.20 ₩ 45,088 ₩ 45,088 ₩ 23,646 ₩ 42,594
SK Broadband Co., Ltd. (*1) 0.21 0.21 18,082 18,082 2,796 5,278
Korea Technology Investment Co., Ltd. - 0.60 - 517 - 1,064
KT Freetel Co., Ltd. (*2) 0.02 0.02 309 358 1,256 1,407
KT Co., Ltd. - 0.04 - 4,081 - 4,890
Yuhwa Securities Co. Ltd. 3.53 1.76 7,254 3,618 4,880 4,680
Dong-A Pharm Co., Ltd. - 1.47 - 11,087 - 14,568
Daewoo Motor Sales Co., Ltd. 0.81 0.81 12,059 12,059 1,637 9,313
Bookook Securities Co., Ltd. 2.49 2.69 8,032 8,680 3,867 8,637
JS Cable Co., Ltd.
(formerly, Jinro-Cable Industries Co., Ltd.) -
0.74 -
423 -
1,507
Eugene Securities Co. Ltd. 0.26 - 2,162 - 1,499 -
Timo technology Co., Ltd. (*3) 12.66 - 11,188 - 6,532 -
Others 785,405 2,014 346,870 1,065
₩ 889,579 ₩ 106,007 ₩ 392,983 ₩ 95,003
(*1) The name of the company was changed (formerly, Hanaro Telecom Co., Ltd.) in 2008.
(*2) As of December 31, 2008 and 2007, these securities are provided to KT Freetel Co., Ltd. as collaterals in
connection with a certain arrangement.
(*3) As of December 31, 2008, 729,927 shares are provided to Hana Daetoo Securities Co., Ltd. as collaterals
in connection with a consolidated company’s short-term borrowings (Note 10).
- 16 -
Non-marketable equity of available-for-sale securities as of December 31, 2008 and 2007 consist of the
following:
Korean Won
Percentage of
ownership (%)
Fair value or Net
asset value (*1)
Acquisition cost
Book value (*2)
Dec. 31,
2008
Dec. 31,
2007
Dec. 31,
2008
Dec. 31,
2007
Dec. 31,
2008
Dec. 31,
2007
Dec. 31,
2008
Dec. 31,
2007
(In millions)
The Korea Economic Daily 0.02 0.05 ₩ 59 ₩ 18 ₩ 43 ₩ 43 ₩ 9 ₩ 9
Versus Tech Inc. 0.26 0.55 24 24 535 535 7 7
Taihan Telecom Co., Ltd. 19.00 19.00 16 16 19 19 19 19
Taihan Powersystem Co., Ltd. 19.00 19.00 17 17 19 19 19 19
TMT Co., Ltd. 19.00 19.00 12 12 10 10 10 10
T.E.USA, Ltd. (*3) 100.00 100.00 867 797 1,670 1,670 847 847
Jinro Co., Ltd. 0.01 0.01 33 17 1,033 1,033 2 2
C U Media. Inc. 14.53 10.38 2,690 1,933 5,675 3,755 5,675 3,754
Jinro Industries Co., Ltd. 1.00 1.00 - 608 - 471 471 471
Sky Networks Co., Ltd. (*3) 28.57 28.57 1,236 754 887 405 887 405
POSCore Co., Ltd. - - 2 2 2 2 2 2
TU Media Corp. 4.85 4.85 1,914 5,088 10,600 10,600 5,088 5,088
Gyunggi Savings bank 19.56 9.28 30,989 12,330 25,000 10,000 25,000 10,000
KTC Leisure (*3) 40.00 40.00 376 376 376 376 376 376
0769167BC (*3) 100.00 100.00 1 1 1 1 1 1
First Standard Bank 8.17 3.39 828 935 2,354 935 2,354 935
Finanstar Co., Ltd. - 19.00 - 3,800 - 3,800 - 3,800
Cambodia Development (*3) 40.00 40.00 200 200 200 200 200 200
KR reconstruction estate Co., Ltd. 1.42 1.42 5,000 5,000 5,000 5,000 5,000 5,000
Incheon United FC - - - - - 30 - -
KTC Telecom Co., Ltd. 18.00 - 900 - 900 - 900 -
NH-IBK Private Equity Fund No1 18.07 - 423 - 423 - 423 -
KERR Asset Management Co., Ltd. 9.90 - 1,980 - 1,980 - 1,980 -
HRDC C0., Ltd. - - 30 - 30 - 30 -
Yeung Nam Savings Bank 6.71 - 5,000 - 5,000 - 5,000 -
AMP Partners Co., Ltd. (*3) 46.98 - 23 - 23 - 23 -
SBW USA Inc. - 2.77 - - - 114 - -
SBW INT’L Inc. - 49.00 - - - 767 - -
Taeyoung Wool Spinning Co., Ltd. - 49.50 - - - 3,000 - -
Meltonwool Pty, Ltd. - 100.00 - - - 3,580 - -
Ilshin Leisure Co., Ltd. - - - - 2 2 2 2
Jeonbuk Knitting Industry Co. - 11.03 - - - 3 - 3
Hunchun TRY Knitting Co., Ltd. - 100.00 - - - 1,158 - 597
Hunchun Ssangbangwool
Knitting Co., Ltd. - 85.70 - - - 261 - 261
TMC.POSI (DALINA) Co., Ltd. (*3) 50.00 - 1,992 - 1,992 - 1,992 -
KMA Consultants Inc. 2.50 2.50 270 270 100 100 100 100
Pyeongtaek-Dangjin Port Grain
Quay Co., Ltd. 3.88 - 1,261 - 1,261 - 1,261 -
Jeonla Railroad Co., Ltd. 18.00 - 3,420 - 3,420 - 3,420 -
Korea Housing Guarantee Co., Ltd. 0.08 - 4,133 4,073 3,299 3,299 4,133 3,745
Electric Contractors'
Financial Cooperative 3.00 - 1,800 - 1,800 - 1,800 -
Yongsan International Business District 0.40 - 4,000 - 4,000 - 4,000 -
- 17 -
Korean Won
Percentage of
ownership (%)
Fair value or Net
asset value (*1)
Acquisition cost
Book value (*2)
Dec. 31,
2008
Dec. 31,
2007
Dec. 31,
2008
Dec. 31,
2007
Dec. 31,
2008
Dec. 31,
2007
Dec. 31,
2008
Dec. 31,
2007
(In millions)
PacMetalXchange (*3) 53.00 - ₩ 1,733 ₩ - ₩ 972 ₩ - ₩ 972 ₩ -
E-Ron Technologies Corp. and others - - 82,857 419 113,810 1,212 113,073 475
₩154,086 ₩ 36,690 ₩192,436 ₩ 52,400 ₩185,076 ₩ 36,128
(*1) Net asset values are reported based on recent available financial statements of the investee. If the fair
value is not measurable, the non-marketable securities are carried at cost.
(*2) If the fair value is not reliably measurable, the non-marketable securities are reported at the acquisition
cost, unless there is objective evidence of an impairment loss which decreases the book value.
(*3) As the effect of using the equity method is not significant on the valuation of the investments, the equity
method is not applied on those investees.
Available-for-sale debt securities as of December 31, 2008 and 2007 consist of the following:
Korean Won
Annual interest rate(%) Acquisition cost Book value
Dec. 31,
2008
Dec. 31,
2007
Dec. 31,
2008
Dec. 31,
2007
Dec. 31,
2008
Dec. 31,
2007
Current assets: (In millions)
Investment in debt securities 6.70 6.70 ₩ 23,014 ₩ 9,828 ₩ 23,014 ₩ 9,828
Non-current assets:
Government bonds 2.5-6.0 2.5 ~ 6.0 1,528 1,451 1,536 1,451
Beneficiary certificates - - 12,105 11,584 11,828 11,584
Investment in debt securities 6.70~7.88 6.70~7.88 5,539 4,545 5,425 4,164
Others - - 4,337 416,709 4,089 416,710
₩ 23,509 ₩ 434,289 ₩ 22,878 ₩433,891
Held-to-maturity securities as of December 31, 2008 and 2007 consist of the following:
Korean Won
Annual interest rate(%) Acquisition cost Book value
2008 2007 2008 2007 2008 2007
Current assets: (In millions)
Shinhan Bank debenture 7.50 7.50 ₩ 377 ₩ - ₩ 377 ₩ -
National bonds 6.00 6.00 271 807 271 807
₩ 648 ₩ 807 ₩ 648 ₩ 807
Non-current assets:
Sunwoon Lakevalley Co., Ltd. - 1.00 5,865 4,500 5,865 4,500
National bonds - - 47,500 975 47,500 915
Subordinated bonds - - 1,801 - 1,801 -
₩ 53,365 ₩ 5,475 ₩ 55,166 ₩ 5,415
- 18 -
Maturities of the held-to-maturity securities as of December 31, 2008 and 2007 are as follows:
Korean Won
Held-to-maturity securities
2008 2007
(In millions)
Within one year ₩ 648 ₩ 807
More than 1 year to 5 years 7,653 5,415
More than 5 year to 10 years 47,513 -
₩ 55,814 ₩ 6,222
7. EQUITY METHOD INVESTMENTS:
Equity method investments as of December 31, 2008 and 2007 consist of the following:
Korean Won
Percentage of
ownership (%) Acquisition cost
Net asset value Book value
2008 2007 2008 2007 2008 2007 2008 2007
(In millions)
Novelis Korea Ltd. 23.50 23.50 ₩ 53,746 ₩ 53,746 ₩ 95,189 ₩ 86,393 ₩ 95,189 ₩ 86,385
Optomagic Co., Ltd. 28.53 25.82 20,205 18,894 16,373 23,253 17,035 24,057
KTC Cambodia Co., Ltd. 58.84 58.84 2,500 2,500 3,833 3,046 3,833 2,764
Phil BXT Corp. 40.00 40.00 14,579 14,579 15,443 12,850 17,148 15,237
NPS07-1 Corporate
Restructuring Fund QCP12 53.08 26.54 118,320 59,160 100,263 59,057 102,481 59,160
TEC Networks Co., Ltd. 45.55 45.55 9,110 9,110 4,742 7,127 4,856 7,276
Korea Investment & Credit
Capital Corporation 25.74 25.67 23,069 17,892 21,534 16,679 22,854 18,270
Kookmin Cable Investment
Fund II Co. 99.50 - 100,000 - 98,012 - 98,048 -
CEP 1st Private Equity Fund 21.39 - 18,192 - 18,021 - 18,022 -
BERRY I.B. 49.98 - 50,000 - 42,206 - 41,853 -
K3 Equity Partners 70.00 - 17,086 - 16,820 - 16,821 -
ALD I Co., Ltd. 46.98 - 2,349 - (11,015) - - -
SkyResort LLC 44.80 - 4,242 - 5,174 - 5,174 -
Khmer Union Bank 40.50 - 5,416 - 6,595 - 6,595 -
Taihan Global Canada
Investments. Ltd. (*1) - 100.00 - 5,752 - 6,585 - 6,585
Muju Enterprise City Co., Ltd.(*1) - 96.07 - 44,000 - 43,458 - 44,000
NT Development I Co., Ltd. 94.98 - 4,749 - 7,986 - 7,986 -
TEC Media Co., Ltd. 100.00 - 7,224 - 6,801 - 6,802 -
KIpartners Co., Ltd. - 93.26 - 6,819 - 3,291 - 3,291
KPF 21.11 - 21,439 - 22,292 - 22,292 -
Bulace Investments Co., Ltd. 50.00 50.00 - 16,454 - 17,408 29,729 17,408
Hunchun TRY Knitting Co., Ltd. 100.00 - 597 - 1,231 - 597 -
Hunchun Ssangbangwool
Knitting Co., Ltd. 100.00 - 291 - 326 - 291 -
Pan-Gyo 1st Fercilities Land
Development PFV Co., Ltd. 30.00 - 1,500 - - - - -
Dok-san 1st Commercial-
residential building
Development PFV Co., Ltd. 60.00 - 3,000 - 2,864 - 2,864 -
OTC Realty 49.00 - 245 - 178 - 178 -
Nanum D&I. Co., Ltd. 49.00 - 417 - 302 - 417 -
Shenyang Sanli Nanguang
Real Estate Development Co. 50.00 - 6,897 - - - - -
- 19 -
Korean Won
Percentage of
ownership (%) Acquisition cost
Net asset value Book value
2008 2007 2008 2007 2008 2007 2008 2007
(In millions)
SK New York L.L.C. 40.00 - ₩ 3,478 ₩ - ₩ - ₩ - ₩ - ₩ -
Bong-Hwa Solatech. Co., Ltd. 90.00 - 2,250 - 2,211 - 2,250 -
Namkwang Int’l Engineering
& Construction, LIMITADA, 45.00 - 105 - 17,383 - 17,383 -
Namkwang NK Co. Ltd. 100.00 - 2,496 - 6,220 - 4,494 -
Yingchu International Trade
(Shanghai) Co., Ltd. 100.00 - 2,311 - 3,461 - 3,461 -
Onse America, Inc. 100.00 - - - 595 - 595 -
Anyuser, Inc. 22.54 - 3,844 - 1,608 - - -
DMCC PF. Co., Ltd. 38.71 - 3,000 - 2,781 - 2,781 -
DMCC Management. Co., Ltd. 34.78 - 17 - 18 - 18 -
Shanghai Longming Property
Management Co., Ltd. 93.33 - 1,906 - 2,412 - 2,412 -
Onse Telecom SA (PTY) Ltd. 28.57 - 268 - 142 - 142 -
Sunwoon Lakevalley Co., Ltd. - 30.00 - 4,800 - 2,487 - 4,202
Hantur D&D - 42.00 - 5,040 - 2,182 - 5,040
₩504,848 ₩258,746 ₩ 512,001 ₩ 283,816 ₩554,601 ₩293,675
(*1) Muju Enterprises City Co., Ltd. and Taihan Global Canada Investments Ltd. were added to the scope of
consolidated subsidiaries since its total assets were more than the required level of ₩7,000 million for
consolidation with substantial control as of the prior year end.
Changes in equity method investments during the years ended December 31, 2008 and 2007 are as follows:
Korean Won
2008
Beginning
book
value
Changes in
scope of
consolidation Acquisition Disposal
Dividends
received
Valuation
gain (loss)
Other
changes
Ending
book value
(In millions)
Novelis Korea Ltd. ₩ 86,385 ₩ - ₩ - ₩ - ₩ 3,358 ₩ 12,162 ₩ - ₩ 95,189
Optomagic Co., Ltd. 24,057 - 1,312 - - (9,154) 820 17,035
KTC Cambodia Co., Ltd. 2,764 - - - - 978 91 3,833
Phil BXT Corp. 15,237 - - - - (969) 2,880 17,148
NPS07-1 Corporate
Restructuring Fund QCP12
59,160
55,889
-
-
-
(11,805)
(763)
102,481
TEC Networks Co., Ltd.
(formerly, TEC Wizhome
Co., Ltd.)
7,276
-
-
-
-
(1,362)
(1,058)
4,856
Korea Investment & Credit
Capital Corporation
18,270
-
5,177
-
-
610
(1,203)
22,854
Kookmin Cable Investment
Fund II Co.
-
-
100,000
-
-
(2,005)
53
98,048
CEP 1st Private Equity Fund - - 18,232 - - (210) - 18,022
BERRY I.B. - - 50,000 - - (8,554) 407 41,853
K3 Equity Partners - - 17,086 - - (265) - 16,821
ALD I Co., Ltd. - - 2,349 - - (2,349) - -
SkyResort LLC - - 4,901 - - 14 259 5,174
Khmer Union Bank - - 5,417 - - (25) 1,203 6,595
Taihan Global Canada
Investments, Ltd.
6,585
(6,585)
-
-
-
-
-
-
Muju Enterprise City Co., Ltd. 44,000 (44,000) - - - - - -
NT Development I Co., Ltd. - 4,749 - - 3,237 - 7,986
TEC Media Co., Ltd. - - 7,224 - - (314) (108) 6,802
KIpartners Co., Ltd. 3,291 - - (3,360) - 69 - -
- 20 -
Korean Won
2008
Beginning
book
value
Changes in
scope of consolidation Acquisition Disposal
Dividends
received
Valuation
gain (loss)
Other
changes
Ending
book value
(In millions)
KPF ₩ - ₩ - ₩ 21,439 ₩ - ₩ - ₩ 1,011 ₩ (158) ₩ 22,292
Bulace Investments Co., Ltd. 17,408 - - - - 11,359 962 29,729
Hunchun TRY Knitting Co., Ltd. - 597 - - - - - 597
Hunchun Ssangbangwool
Knitting Co., Ltd.
-
291
-
-
-
-
-
291
Pan-Gyo 1st Fercilities Land
Development PFV Co., Ltd.
-
-
1,500
-
-
(1,500)
-
-
Dok-san 1st Commercial-
residential building
Development PFV Co., Ltd.
-
-
3,000
-
-
(136)
-
2,864
OTC Realty - - 245 - - (67) - 178
Nanum D&I. Co. Ltd. - - 417 - - - - 417
Bong-Hwa Solatech. Co., Ltd. - 2,250 - - - - - 2,250
Kunwi Solartech Co., Ltd. - 1,035 - (1,035) - - - -
Namkwang Int’l Engineering
& Construction, LIMITADA,
-
4,373
-
-
-
10,696
2,314
1,738
Namkwang NK Co. Ltd. - 2,193 127 - - 1,236 938 4,494
Yingchu International Trade
(Shanghai) Co., Ltd.
-
2,440
-
-
-
(359)
1,380
3,461
Onse America, Inc. - - 289 - - 166 140 595
DMCC PF. Co. Ltd. - - 3,000 - - (214) (5) 2,781
DMCC Management. Co. Ltd. - - 17 - - 1 - 18
Shanghai Longming Property
Management Co., Ltd.
-
-
1,906
-
-
(109)
615
2,412
Onse Telecom SA (PTY) Ltd. - - 546 - - (401) (3) 142
Sunwoon Lakevalley Co., Ltd 4,202 (4,202) - - - - - -
Hantur D&D 5,040 (5,040) - - - - - -
Berry M&C Co., Ltd.
(formerly Setizen Co., Ltd.)
-
4,894
-
(4,647)
-
(123)
(124)
-
Aldex Networks Co., Ltd. - 20 - (20) - - - -
₩ 293,675 ₩ 14,155 ₩ 248,933 ₩ (9,062) ₩ (3,358) ₩ 1,618 ₩ 8,640 ₩ 554,601
Korean Won
2007
Beginning
book
value
Changes in
scope of
consolidation Acquisition Disposal
Dividends
received
Valuation
gain (loss)
Other
changes
Ending
book value
(In millions)
Novelis Korea Ltd. ₩ 90,493 ₩ - ₩ - ₩ - ₩ (4,716) ₩ 789 ₩ (181) ₩ 86,385
Optomagic Co., Ltd. - 18,313 5,390 - 66 288 24,057
KTC Cambodia Co., Ltd. 2,516 - - - - 13 235 2,764
Taihan WizHome Co., Ltd. 580 - 8,510 - - (863) (951) 7,276
Phil BXT Corp. (7,230) - 7,000 - - (934) 1,941 15,237
Taihan Global
Canada Investments Ltd.
-
-
5,752
-
-
(104)
937
6,585
Muju Enterprise City Co., Ltd. - - 44,000 - - - - 44,000
Korea Investment & Credit
Capital Corporation
-
-
17,892
-
-
496
(118)
18,270
NPS07-1 Corporate
Restructuring Fund QCP12
-
-
59,160
-
-
-
-
59,160
Sunwoon Lakevalley Co., Ltd. - - 4,800 - - (598) - 4,202
Hantur D&D - - 5,040 - - - - 5,040
Korea Investment Partners 3,078 - - - - 213 - 3,291
Bulace Investments Co., Ltd. - - 16,454 - - 954 - 17,408
₩ 103,897 ₩ 18,313 ₩ 168,608 ₩ 5,390 ₩ (4,716) ₩ 32 ₩ 2,151 ₩ 293,675
- 21 -
The accumulated unamortized differences between the purchase price and the underlying proportionate net book
value of equity investments, along with changes in such amounts for the years ended December 31, 2008 and
2007 are as follows:
Korean Won
2008
Beginning
book
value
Changes in
scope of
consolidation
Increase
(decrease)
Amortization
(recovery)
Ending
balance
(In millions)
Novelis Korea Ltd. ₩ (9) ₩ - ₩ - ₩ 9 ₩ -
Optomagic Co., Ltd. (111) - (243) 102 (252)
Phil BXT Corp. 2,387 - - (682) 1,705
NPS07-1 Corporate
Restructuring Fund QCP12 103 - 2,670 (555) 2,218
TEC Networks Co., Ltd. 149 - - (35) 114
Korea Investment & Credit
Capital Corporation 1,591 - 86 (357) 1,320
Kookmin Cable Investment
Fund II. Co. - - 45 (9) 36
Berry I.B. - - 798 (80) 718
Muju Enterprise City Co., Ltd 542 (434) - (108) -
KPF - - 7,542 (754) 6,788
Nanum Development &
Investment Co., Ltd - - 115 - 115
Berry M&C Co., Ltd. - 3,305 - (3,305) -
Sunwoon Lakevalley Co., Ltd. 1,715 (1,715) - - -
Hantur D&D 2,858 (2,858) - - -
₩ 9,225 ₩ (1,702) ₩ 11,013 ₩ (5,774) ₩ 12,762
Korean Won
2007
Beginning
book
value
Changes in
scope of
consolidation
Increase
(decrease)
Amortization
(recovery)
Ending
balance
(In millions)
Novelis Korea Ltd. ₩ (34) ₩ - ₩ - ₩ 25 ₩ (9)
Optomagic Co., Ltd. - (292) 181 (111)
Taihan WizHome Co., Ltd. - - 175 (26) 149
Phil BXT Corp. 3,070 - (683) 2,387
Muju Enterprise City Co., Ltd. - - 542 - 542
Korea Investment & Credit
Capital Corporation
-
-
1,768
(177)
1,591
NPS07-1 Corporate
Restructuring Fund QCP12
-
-
103
-
103
Sunwoon Lakevalley Co., Ltd. - - 1,688 27 1,175
Hantur D&D - - 2,858 - 2,858
₩ 3,036 ₩ (292) ₩ 7,134 ₩ (653) ₩ 9,225
- 22 -
The eliminated unrealized gain (loss) incurred from transactions entered into with equity method investees as of
December 31, 2008 and 2007 is as follows:
Korean Won
2008 2007
Inventories PP&E Others Total Inventories PP&E Others Total
(In millions)
Optomagic Co., Ltd. ₩ - ₩ (914) ₩ - ₩ (914) ₩ - ₩ (914) ₩ - ₩ (914) Berry I.B. - - 1,071 1,071 - - - -
ALD I Co., Ltd. - 154,496 - 154,496 - - - - Namkwang NK
Co., Ltd. 1,726 - - 1,726 - - - - ₩ 1,726 ₩153,582 ₩ 1,071 ₩156,379 ₩ - ₩ (914) ₩ - ₩ (914)
The financial information on the equity method investees as of and for the year ended December 31, 2008 is as
follows:
Korean Won
Assets Liabilities Sales
Net income
(loss)
(In millions)
Novelis Korea Ltd. ₩ 1,133,474 ₩ 728,463 ₩ 1,791,370 ₩ 51,710
Optomagic Co., Ltd. 80,318 22,926 50,843 (36,201)
KTC Cambodia Co., Ltd. 20,451 12,060 7,067 2,366
Phil BXT Corp. 90,796 65,534 - (720)
NPS07-1 Corporate
Restructuring Fund QCP12 194,044 294 110 (27,361)
TEC Networks Co., Ltd. 11,779 1,367 1,027 (2,850)
Korea Investment & Credit
Capital Corporation 116,249 32,577 17,828 3,771
Kookmin Cable Investment
Fund II Co. 98,505 3 - (2,007)
CEP 1st Private Equity Fund 84,251 - 36 (949)
Berry I.B 105,775 21,320 3,766 (15,146)
K3 Equity Partners 24,029 - - (379)
ALD I Co., Ltd. 587,375 610,820 8,202 (28,445)
SkyResort LLC 14,079 2,530 - 31
Khmer Union Bank 16,296 13 125 (61)
NT Development I Co., Ltd. 225,798 217,390 300 3,408
TEC Media Co., Ltd. 6,813 12 - (313)
KPF 109,100 35,669 156,902 12,507
Hunchun TRY Knitting Co., Ltd 1,242 11 381 (2)
Hunchun Ssangbangwool Knitting
Co., Ltd. 356 31 337 (39)
Pan-Gyo 1st Fercilities Land
Development PFV Co., Ltd. 176,440 176,764 (1,718) (5,323)
Dok-san 1st Commercial-residential
building Development PFV Co., Ltd. 16,398 11,625 (179) (226)
OTC Realty 33,472 33,100 (5) (137)
Nanum D&I. Co. Ltd. 63,617 63,001 (205) (225)
Bong-Wah Solatech. Co. Ltd. 2,457 1 - (27)
Namkwang Int’l Engineering
& Construction, LIMITADA, 186,536 147,907 175,074 28,406
Namkwang NK. Co., Ltd. 21,456 15,236 - 2,477
NPS07-1 Corporate Restructuring
Fund QCP12 194,044 293 110 (27,361)
Yingchu International Trade
(Shanghai) Co., Ltd. 60 2,485 1,726 (359)
- 23 -
Korean Won
Assets Liabilities Sales
Net income
(loss)
(In millions)
Onse America, Inc. ₩ 1,301 ₩ 436 ₩ 1,951 ₩ 34
Anyuser, Incs. 7,732 599 5 (1,372)
DMCC PF. Co. Ltd. 8,796 1,612 - (552)
DMCC Management. Co. Ltd. 269 216 282 3
Shanghai Longming Property
Management Co., Ltd. 2,587 2 4 (117)
Onse Telecom SA (PTY) Ltd. 4,778 4,280 816 (494)
The market prices of the listed equity method investments as of December 31, 2008 are as follows:
Korean Won
Number of
shares
Acquisition
cost
Book
value
Net asset
value
Market price
per share
Market
value
(In millions) (In Won) (In millions)
Optomagic Co., Ltd. ₩ 4,224,110 ₩ 20,205 ₩ 17,035 ₩ 16,373 ₩ 2,995 ₩ 12,651
Korea Investment & Credit
Capital Corporation 15,826,690 23,069 22,854 21,534 590 9,338
KPF 2,362,650 21,439 22,292 22,292 4,110 45,990
8. PROPERTY, PLANT AND EQUIPMENT:
(1) Changes in property, plant and equipment for the years ended December 31, 2008 are as follows:
Korean Won
2008
Lands Buildings Structures
Machinery
&
equipment Vehicles
Others
(In millions)
Balance as of January 1, 2008 ₩ 538,458 ₩ 329,340 ₩ 219,423 ₩ 152,690 ₩ 5,824 ₩ 20,196
Acquisition during the year 2,941 3,298 151 39,255 2,576 7,350
Disposal (224,064) (46,712) (1,964) (13,315) (345) (2,032)
Transfer (*1) (5,158) 26,938 86 29,118 282 4,274
Changes in the scope of consolidation 64,505 62,886 126 71,774 1,562 10,139
Gain on revaluation of PP&E 136,391 2,712 - - - -
Loss on revaluation of PP&E (199) (292) - - - -
Government subsidies received - - - - - (6)
Impairment of PP&E - - - - - (55)
Depreciation - (14,681) (10,811) (37,776) (2,176) (6,319)
Balance as of December 31, 2008 ₩ 512,874 ₩ 363,489 ₩ 207,011 ₩ 241,746 ₩ 7,723 ₩ 33,547
- 24 -
Korean Won
2008
Woods
Rental
asset
Prepaid
rental asset
Construction-
in-progress
Machinery-
in-transit
Total
(In millions)
Balance as of January 1, 2008 ₩ 5,328 ₩ 80,601 ₩ 461 ₩ 32,747 ₩ - ₩ 1,385,068
Acquisition during the year - 44,768 11,315 97,906 3,236 212,796
Disposal - (9,804) - (1,923) - (300,159)
Transfer (*1) (198) 11,701 (11,761) (52,484) (3,232) (434)
Changes in the scope of consolidation 198 - - 15,211 - 226,401
Gain on revaluation of PP&E - - - - - 139,103
Loss on revaluation of PP&E - - - - - (491)
Government subsidies received - - - - - (6)
Impairment of PP&E - - - - - (55)
Depreciation - (39,423) - (229) - (111,415)
Balance as of December 31, 2008 ₩ 5,328 ₩ 87,843 ₩ 15 ₩ 91,228 ₩ 4 ₩ 1,550,808
(*1) Represents transfer of assets and adjustments of foreign currency translation.
(2) As of December 31, 2008, the values of the lands of the Company and its subsidiaries, as determined by
the local government in Korea for tax assessment purposes, amount to ₩376,730 million (2007:
₩729,438 million).
(3) As of December 31, 2008, the Company and certain subsidiaries adopted the revaluation model to measure
the items of those lands and buildings after the date of acquisition. Details of the lands & buildings
revaluation are as follows:
Date of revaluation is December 31, 2008
In related to the revaluation process, the Company and its subsidiaries utilized the results from a
specialist who is a reliable and publicly independent property appraiser.
Fair value of the lands was valuated based on related acts such as “Public Notice of Values and
Appraisal of Real Estate Act”, “Rules of Appraisal of Real Estate” and appraisal theories.
The book value using cost model of the revaluated lands is as follows:
Korean Won
Revaluated amounts Book value using cost model
(In millions) (In millions)
Lands ₩ 512,874 ₩ 376,483
Buildings 363,489 360,777
The changes in other comprehensive income related to the revaluation are as follows:
Korean Won
Beginning balance Increase (Decrease) Ending balance
(In millions)
Gain on revaluation of PP&E ₩ - ₩ 139,103 ₩ 139,103
Deferred tax effect - (30,495) (30,495)
Total, net - 108,608 108,608
Minority interest - (35,497) (35,497)
Parent interest ₩ - ₩ 73,111 ₩ 73,111
In addition, the Company presented the loss on revaluation of lands and buildings as non-operating
expenses of ₩199 million and 292 million, respectively.
- 25 -
(4) On January 2005, the Company contracted to sell a part of plant located in Geumcheon district in Seoul to
Yongjo Co., Ltd. (“Yongjo”) for ₩104,528 million. Subsequently, Yongjo was not able to fully repay
the sale price; thus, the Company adjusted the sale price to ₩147,136 million on October, 2005, and
extended the closing date. In 2007, Yongjo transferred its business including the above contract to
Daewan Planning Co., Ltd. (“Daewan”). As a result, Yongjo’s contractual position was transferred to
Daewan. The Company then revised the sales contract with Daewan on August, 2007 and transferred
ownership of real estate of the plant to Daewan upon payment of the sale price in August 2007.
The Company has provided loans amounting to ₩100 billion to Daewan for the purpose of investing in
Daewan’s real estate complex development project on the plant site. As these arrangements imply that the
significant risks and rewards of the plant ownership were not transferred to Daewan, the Company has not
recorded the transactions as sale of the assets. Accordingly, the land, of which legal ownership has been
transferred to Daewan, was recorded as an asset on the Company’s balance sheet as of December 31, 2008,
and the loans to Daewan were eliminated from the Company’s balance sheet.
The Company has entered into a sales contract of land and buildings (located in Anyang) with ALD I Co.,
Ltd. on June 28, 2008 after the board of directors’ decision to improve the financial structure of the
Company by obtaining additional operational funds and the debt repayment through increased liquidity of
assets. On September 12, 2008, the asset transfer was completed and gain on disposal of PP&E was
recognized amounting to ₩328,854 million. The transfer price of the assets is as follows:
Korean Won
Area Transfer price
(m2) (In millions)
Land 260,323.2 ₩ 550,000
Building 128,500.4 -
Total 388,823.6 ₩ 550,000
The above transferred assets will be appraised by independent property appraiser for its fair value
immediately after the change in its intended usage of the purchasing party. Any additional transfer price
resulting from the appraisal should be paid to the Company after three months of the notice of the appraisal
result and the receipt of the related information. The date of the payment can be changed based on
mutual discussions between the parties involved.
In addition, the Company has leased the above lands and buildings from ALD I Co., Ltd., the purchaser.
(5) The Company has entered into a sales contract of land and buildings (located in Seoul) with D&DS Co.,
Ltd. on December 29, 2008 after the board of directors’ decision to improve the financial structure of the
Company by obtaining additional operational funds and the debt repayment through increased liquidity of
assets. On December 29, 2008, the asset transfer was completed and gain on disposal of PP&E was
recognized amounting to ₩50,261 million. The transfer price of the assets is as follows:
Korean Won
Area Transfer price
(m2) (In millions)
Land 5,036 ₩ 71,925
Building 31,284 23,075
Total 36,320 ₩ 95,000
In addition, the Company has leased the above lands and buildings from D&DS Co., Ltd., the purchaser.
- 26 -
(6) As of December 31, 2008, property, plant and equipment, except for land, and inventories are insured
against fire and other casualty losses for up to ₩3,060,121 million (2007: ₩1,425,857 million).
Insured amount of ₩ 21,264 million for TMC Co., Ltd. are collateralized for borrowings from the Korea
Development Bank. In addition, insured amount of ₩6,692 million for fire insurance of buildings and
machineries of Aldex Co., Ltd. are collateralized for borrowings from the Korea Development Bank.
9. INTANGIBLE ASSETS:
The changes in intangible assets for the year ended December 31, 2008 are as follows:
Korean Won
2008
Goodwill
Negative
goodwill
Industry
property
rights
Development
cost
Right of
Telecommu-
nication line Others
Total
(In millions)
Beginning balance ₩ 71,659 ₩ (112,040) ₩ 2,379 ₩ 2,771 ₩ - ₩ 9,146 ₩ (26,085)
Increase - - 198 593 - 1,272 2,063
Changes in the scope of
consolidation
123,892
(23,712)
14
5,025
23,355
2,727
131,301
Transfer - - 1,176 1,048 - 1,416 3,640
Decrease (20,913) - (4) - - (337) (21,254)
Impairment - - (2) (5,639) - - (5,641)
Amortization (33,272) 8,667 (553) (2,690) (1,377) (1,246) (30,471)
Ending balance ₩ 141,366 ₩ (127,085) ₩ 3,208 ₩ 1,108 ₩ 21,978 ₩ 12,978 ₩ 53,553
10. SHORT-TERM BORROWINGS:
Short-term borrowings as of December 31, 2008 and 2007 consist of the following:
Korean Won
Annual interest
rates (%)
Amount
2008 2008 2007
(In millions)
Won currency borrowings:
General term loans
Commercial papers discounted
Others
5.83~10.00
6.38~7.98
5.23~10.00
₩ 768,294
41,000
62,961
₩ 848,277
-
32,299
872,255 880,576
Foreign currency borrowings of USD
726,625 thousand (USD 198,456 thousand
and JPY 418,521 thousand in 2007):
Usance 6.00 399,110 135,672
General term loans 5.20~5.88 473,532 78,194
Others 5.20~6.00 41,090 111,539
913,732 325,405
₩ 1,785,987 ₩ 1,205,981
A substantial portion of the Company's property, plant and equipment, short-term financial instruments and
various notes and checks have been pledged as collaterals for the above borrowings (Notes 3, 8 and 24).
- 27 -
11. LONG-TERM DEBTS:
Long-term debts as of December 31, 2008 and 2007 consist of the following:
Korean Won
Reference 2008 2007
(In millions)
Long-term borrowings
Debentures
Bonds with stock warrants
Convertible bonds
Finance lease liabilities
Exchangeable Bonds
(1)
(2)
(3)
(4)
(5)
(6)
₩ 479,082
508,090
-
42,561
7,570
43,306
₩ 209,875
432,378
133,673
207,011
22
-
₩ 1,080,609 ₩ 982,959
(1) Long-term borrowings
Annual interest
rates (%) Korean Won
2008 2008 2007
Won currency loans: (In millions)
General term loan
Energy development loan
Others
6.69~7.15
4.25
5.90
₩ 343,662
-
167,625
₩ 140,657
435
23,861
511,287 164,953
Less: Current maturities (62,489) (34,727)
448,798 130,226
Foreign currency loans:
General term loan
Others
4.04~6.19
3.28~6.61
90,386
9,222
170,535
-
99,608 170,535
Less: Current maturities (65,209) (87,013)
34,399 83,522
483,197 213,748
Less: Present value discounts on loans (4,115) (3,873)
₩ 479,082 ₩ 209,875
A substantial portion of the Company's property, plant and equipment, and long-term financial instruments have
been pledged as collateral for the above borrowings (Notes 3, 8 and 24).
(2) Debentures
Annual interest
rates (%)
Korean Won
2008 2008 2007
(In millions)
Non-guaranteed debentures,
payable through 2010
Private offered debentures,
payable through 2010
5.20~10.65
5.70~6.60
₩ 513,000
258,088
₩ 234,200
299,000
771,088 533,200
Less: Current maturities (261,088) (100,112)
510,000 433,088
Less: Discount on debentures issued (1,910) (710)
₩ 508,090 ₩ 432,378
- 28 -
(3) Bonds with stock warrants
Annual interest
rates (%) Korean Won
2008 2008 2007
(In millions)
Overseas bonds with stock warrants
of EUR 100,400 thousand (EUR
107,900 in 2007) (*1)
-
₩ 178,332
₩ 149,038
Overseas bonds with stock warrants
of USD 2,000 thousand in 2007
Overseas bonds with stock warrants
of USD 2,400 thousand (*2)
6M Libor + 1
-
3,018
1,876
-
181,350 150,914
Less: Current maturities (181,350) -
Add: Redemption premium - 25,682
Less: Conversion right adjustment - (39,636)
Less: Discount on bonds - (3,287)
₩ - ₩ 133,673
(*1) The Company presented the bonds with stock warrants as current liability due to the early redemption of
the option holders within 1 year.
(*2) The bonds with stock warrants were issued by Onse Telecom Co., Ltd., a subsidiary.
Major terms of the overseas bonds with stock warrants which issued by the Company are as follows:
Issuance date: November 26, 2007
Issuance price: EUR 107,900 thousand (equivalent to ₩148,927 million)
Interest: No coupon interest
Redemption method: If the bonds are not previously redeemed, converted or purchased and cancelled, the bonds
shall then be redeemed at an amount equal to 116.633% of the principal on November 26, 2012.
Redemption at the option of the issuer: On or after November 26, 2009 but not less than seven business days
prior to maturity date, the issuer may redeem the bonds in whole or in part at their early redemption amount,
provided that the closing price of the shares (translated into Euros at the prevailing rate) on any 20 trading days
out of the 30 consecutive trading days prior to the date upon which notice of such redemption is given was at
least 130% of the applicable early redemption amount divided by the exercise ratio to require the issuer to
redeem all or some of that holder’s bonds at 106.348% of their principal amount upon the decision of the issuer.
Redemption at the option of the holders: On November 26, 2009, the holder of each bond with stock warrants
will have the right at such holders’ option, to require the issuer to redeem all or some of those holders’ bonds
with stock warrants at 106.348% of their principal amount.
Conversion period: From November 26, 2008 to November 12, 2012
Conversion price: ₩85,000 per share
Conversion stock: Common stock
- 29 -
(4) Convertible bonds
Annual interest
rates (%) Korean Won
2008 2008 2007
(In millions)
Overseas convertible bonds of
EUR 150,400 thousand (EUR
168,200 thousand in 2007) (*1)
-
₩ 207,587
₩ 232,155
Convertible bonds (*2) - 1,538 1,093
Convertible bonds (*3) - 15,849 -
Convertible bonds (*4)
0.07 40,000 -
Convertible bonds (*5)
0.05~0.15 29,651 -
294,625 233,248
Less: Current maturities (252,240) -
Add: Redemption premium 2,836 39,038
Less: Conversion right adjustment (2,658) (60,214)
Less: Discount on bonds (2) (5,061)
₩ 42,561 ₩ 207,011
(*1) The Company presented the bonds with stock warrants as current liability due to the early redemption of
the option holders within 1 year.
(*2) The convertible bonds were issued by KTC Co., Ltd., a subsidiary.
(*3) The convertible bonds were issued by Aldex Co., Ltd., a subsidiary.
(*4) The convertible bonds were issued by TEC Construction Co., Ltd., a subsidiary.
(*5) The convertible bonds were issued by Onse Telecom Co., Ltd., a subsidiary.
Major terms of the overseas convertible bonds, which issued by the Company are as follows:
Issuance date: November 26, 2007
Issuance price: EUR 168,200 thousand (equivalent to ₩165,488 million)
Interest: No coupon interest
Redemption method: If the bonds are not previously redeemed, converted or purchased and cancelled, the bonds
shall then be redeemed at an amount equal to 116.633% of the principal on November 26, 2012.
Redemption at the option of the issuer: On and at any time after November 26, 2009 but not less than seven
business days prior to the maturity date, the issuer may redeem the bonds in whole or in part at their early
redemption amount, provided that the closing price of the shares (translated into Euros at the prevailing rate) on
any 20 trading days out of the 30 consecutive trading days prior to the date upon which notice of such
redemption is given was at least 130% of the applicable early redemption amount divided by the exercise ratio
to require the issuer to redeem all or some of that holder’s bonds at 106.348% of their principal amount upon the
decision of the issuer.
Redemption at the option of the holders: On November 26, 2009, the holder of each convertible bond will have
the right at such holders’ option, to require the issuer to redeem all or some of those holders’ bonds convertible
bonds at 106.348% of their principal amount.
Conversion period: From November 26, 2008 to November 12, 2012
Conversion price: ₩85,000 per share
Conversion stock: Common stock
- 30 -
(5) Finance lease liabilities
Annual interest
rates (%) Korean Won
2008 2008 2007
(In millions)
GE Capital Korea Co., Ltd. 5.3 ₩ 10,604 ₩ 3,825
Korea Exchange Capital Co., Ltd. - 22
LG Card Co., Ltd. 1,502 3,847
12,106 (3,825)
Less: Current maturities (4,536) (3,825)
₩ 7,570 ₩ 22
(6) Exchangeable bonds
Annual interest
rates (%) Korean Won
2008 2008 2007
(In millions)
Exchangeable Bonds - ₩ 51,939 ₩ -
Less: Current maturities - -
Add: Redemption premium 14,350 -
Less: Conversion right adjustment (22,358) -
Less: Discount on bonds (625) -
₩ 43,306 ₩ -
Major terms of the exchangeable bonds are as follows:
Issuance date: April 29, 2008
Issuance price: ₩ 51,939 million
Interest: No coupon interest
Redemption method: If the bonds are not exchanged into exchange stock, then the bonds shall then be redeemed
at an amount equal to 127.628% of the principal on April 29, 2013.
Redemption at the option of the issuer (put option for early redemption): With notice on 24th
, 36th
and 48th
month day, the debtor may demand early payment of the principle and interest calculated at 5% of compounded
interest method.
Exercise period
Exercise date
Advanced
redemption rate From To
2010.03.01 2010.03.29 2010.04.29 110.2500%
2011.03.01 2011.03.29 2011.04.29 115.7625%
2012.03.01 2012.03.29 2012.04.29 121.5506%
Exchange period: From April 29, 2009 to March 29, 2013
Exchange price: ₩65,250 per share (Exchange price will be adjusted in case of increased paid-in capital
with or without consideration prior to exchange)
Exchange stock: 796,000 shares of Securities of Shinhan Financial Group Co., Ltd.
As of December 31, 2008, the Company recorded exchange rights amounting to ₩6,109 million as financial
derivative liabilities. Every year, the Company evaluates exchange right using faire value method and records
the related gain (loss) as gain (loss) on valuation of financial derivates (Note 24).
- 31 -
The aggregate annual maturities of long-term borrowings outstanding at December 31, 2008 are as follows:
Korean Won
Year Borrowings Debentures
Convertible
bonds
Finance
lease
Exchangeable
bonds Total
(In millions)
2010
2011
2012
2013
₩ 206,826
145,797
90,490
37,031
₩ 270,000
240,000
-
-
₩ 2,386
40,000
-
-
₩ 6,320
1,250
-
-
₩ -
-
-
51,939
₩ 485,532
427,047
90,490
88,970
Thereafter 3,053 - - - - 3,053
₩ 483,197 ₩ 510,000 ₩ 42,386 ₩ 7,570 ₩ 51,939 ₩1,095,092
12. ACCRUED SEVERANCE BENEFITS:
Changes in accrued severance benefits for the years ended December 31, 2008 and 2007 are as follows:
Korean Won
2008
Beginning
balance
Changes in
scope of
consolidation Increase Decrease
Ending
balance
(In millions)
Provision for severance benefits ₩ 24,089 ₩ 23,649 ₩ 16,522 ₩ (8,220) ₩ 56,040
Deposits for severance benefits (5,665) (9,932) - (210) (15,807)
Pension plan assets (5,794) 2,729 (7,485) - (10,550)
Contribution to National Pension Plan (125) (155) - 17 (263)
₩ 12,505 ₩ 16,291 ₩ 9,037 ₩ (8,413) ₩ 29,420
Korean Won
2007
Beginning
balance
Changes in
scope of
consolidation Increase Decrease
Ending
balance
(In millions)
Provision for severance benefits ₩ 16,441 ₩ 3,810 ₩ 9,687 ₩ (5,849) ₩ 24,089
Deposits for severance benefits (3,350) (2,433) (763) 881 (5,665)
Pension plan assets (4,133) 414 (2,075) - (5,794)
Contribution to National Pension Plan (78) (85) - 38 (125)
₩ 8,880 ₩ 1,706 ₩ 6,849 ₩ (4,930) ₩ 12,505
- 32 -
13. INCOME TAX:
Income tax expense for the years ended December 31, 2008 and 2007 consists of the following:
Korean Won
2008 2007
(In millions)
Current income tax
Deferred income taxes
Deferred income taxes directly deducted from
shareholders’ equity
₩ 105,280
(45,254)
60,026
-
₩ 91,286
(13,117)
(16,367)
Income tax expense ₩ 60,026 ₩ 61,802
An explanation of the relationship between income tax expense and accounting income before income tax
expense for the years ended December 31, 2008 and 2007 is as follows
Korean Won
2008 2007
(In millions)
Income before income tax ₩ 69,283 ₩ 159,901
Tax effect at the rate of 27.5% 19,053 43,973
Adjustment:
Non-taxable income (138) (320)
Non-deductible expenses 6,142 3,443
Tax credit (2,589) 9,491
Effect of tax rate discount 13,001 -
Other 24,557 5,215
Income tax expense ₩ 60,026 ₩ 61,802
Effective tax rate (income tax expense/pretax income) 86.6% 38.7%
- 33 -
The changes in temporary differences and deferred income tax assets (liabilities) for the years ended December
31, 2008 and 2007 are as follows:
Korean Won
2008
Temporary differences (*1)
Deferred income
tax assets (liabilities)
Beginning
balance Increase Decrease
Ending
balance Current Non-current
(In millions)
Accrued interest income ₩ (12,770) ₩ (35,849) ₩ (9,313) ₩ (39,306) ₩ (8,505) ₩ -
Allowance for doubtful accounts 213,911 114,419 26,633 301,697 17,200
Available-for-sale securities (*3) 45,383 11,410 88 56,705 7,846
Gain (loss) on valuation of
financial derivatives (2,885) (44,369) (1,411) (45,843) (9,972) (1,020)
Equity method investments (*3) 3,908 319,554 (4,743) 328,205 - 57,644
Convertible bonds and bonds
with stock warrants (45,401) 3,330 (24,528) (17,543) (3,217) 325
Exchangeable bonds - (1,899) - (1,899) - (418)
Gain on disposal of
property, plant and equipment 100,218 (173,289) - (73,071) - (16,216)
Division evaluation marginal
profits (47,924) - - (47,924) - (10,543)
Government subsidy 5,681 7 21 5,667 - 1,211
Gain (loss) on foreign currency
translation (23) 94,670 (2) 94,649 17,102 1,977
Depreciation 20,727 9,137 2,796 27,068 932
Others (*3) 109,524 116,486 82,495 143,515 10,131 11,114
₩438,273 ₩413,607 ₩ 72,036 ₩779,844 22,739 63,395
Available-for-sale securities (*3) - 9,087
Equity method investments (*2,3) - 66,988
Loss on valuation of financial
derivatives
-
7,612
Gain on revaluation of PP&E - (30,495)
Others - (1,068)
Deferred tax assets ₩ 22,739 ₩ 115,519
(*1) Adjustment to the temporary differences arising from the prior period tax return and the final tax
assessment and the amount reported in the financial statements are included under increase or decrease
columns.
(*2) The Company recognized the deferred income tax assets on equity method investments because the
Company is planning to dispose of its interest in certain investees in the predictable future.
(*3) As of December 31, 2008, temporary differences, which were not recognized as deferred income tax assets
(liabilities), are as follows:
Korean Won
Temporary differences
Deferred income tax assets
(liabilities)
(In millions)
Available-for-sale securities ₩ 822 ₩ 181
Equity method investments (26,853) (5,908)
Others 18,098 3,982
₩ (7,933) ₩ (1,745)
- 34 -
Korean Won
2007
Temporary differences (*1) Deferred income tax assets (liabilities)
Beginning
balance Increase Decrease
Ending
balance
Beginning
balance
Ending
balance
(In millions)
Accrued interest income ₩ (3,008) ₩ (5,206) ₩ (2,393) ₩ (5,821) ₩ (811) ₩ (1,576)
Allowance for doubtful
accounts 6,305 4,510 4,400 6,415 102 561
Available-for-sale securities 27,183 5,492 3,452 29,223 5,615 6,248
Equity method investments (37,380) (3,438) (5,825) (34,993) (11,192) (9,823)
Shareholders’ equity (9,869) 64,516 (9,329) 63,976 (3,446) 18,139
Others (66,726) 52,655 (14,902) 831 (3,000) 23,114
₩ (83,495) ₩ 118,529 ₩(24,597) ₩ 59,631 ₩ (12,732) ₩ 385
(*1) Adjustment to the temporary differences arising from the prior period tax return and the final tax
assessment, and the amount reported in the financial statements are included under increase or decrease
columns.
The gross deferred tax assets and liabilities as of December 31, 2008 are follows:
Korean Won
Current Non-current Total
(In millions)
Deferred tax assets ₩ 23,300 ₩ 140,086 ₩ 163,386
Deferred tax liabilities (561) (24,567) (25,128)
Deferred tax effect 22,739 115,519 138,258
Income tax payable 80,094
Prepaid tax 2,240
14. ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES:
Monetary assets and liabilities denominated in foreign currency as of December 31, 2008 and 2007 other than
those accounts of overseas subsidiaries consisted of the following:
Foreign currencies Korean Won
2008 2007 2008 2007
(In thousands) (In millions)
Cash and cash equivalents USD 44,797 USD 860 ₩ 56,336 ₩ 807
JPY 108,632 JPY 2 1,514 -
Others - Others 123 -
Short-term financial instruments USD 17,021 USD 136,306 21,402 127,882
EUR 89 - 158 -
Long-term financial instruments USD 10,627 USD 10,000 13,439 9,402
Trade accounts receivable USD 186,311 USD 148,193 245,392 139,041
JPY 56,631 JPY 305,472 791 2,546
SGD 414 SGD 10,466 308 6,792
Others - Others - 17,064 14,121
Other accounts receivable USD 6,413 USD 4 8,064 4
Accrued income USD 1,228 - 1,545 -
Available-for-sale securities USD 1,888 USD 4,639 2,374 4,352
Held -to-maturity bond USD 498 - 627 -
Short-term loans USD 14,400 - 18,108 -
Long-term loans CAD 840 CNY 43 872 9
USD 24,093 - 30,279 -
Guarantee deposits USD 3,346 USD 26,579 4,167 24,937
Assets in overseas branches 21,569 11,309
₩ 476,513 ₩ 341,202
- 35 -
Foreign currencies Korean Won
2008 2007 2008 2007
(In thousands) (In millions)
Trade accounts payable USD 31,813 USD 20,999 ₩ 39,783 ₩ 19,707
JPY 2,956 JPY 89,724 41 746
EUR 115 - 205 -
Other accounts payable USD 4,819 USD 1,059 6,068 1,000
AUD 16 - 14 -
JPY 1,178 - 16 -
EUR 2 - 4 -
Others within long-term liabilities USD - USD 5,260 - 4,935
Short-term borrowings USD 14,449 USD 465,118 18,170 47,205
Long-term borrowings USD 60,227 USD 18,272 69,465 17,052
JPY 744,233 JPY 1,358,863 10,374 11,324
Bonds with stock warrants EUR 100,400 - 178,332 -
USD 2,400 - 3,018 -
Finance lease USD 8,432 - 10,604 -
Liabilities in overseas branches 78,385 97,947
₩ 414,479 ₩ 199,916
15. SHAREHOLDERS’ EQUITY:
(1) Common Stock
As of December 31, 2008, the Company is authorized to issue 120 million shares with a par value of ₩2,500
per share. 1,274,057 shares are issued through the conversion of overseas convertible bonds in 2007. As of
December 31, 2008, the outstanding common stocks are 49,059,982 shares and the capital stock amounts to
₩122,650 million.
(2) Capital adjustments
Korean Won
Reference 2008 2007
(In millions)
Treasury stocks
Stock options
Other capital adjustments
(*1)
(*2)
₩ (53,920)
8,004
(22,693)
₩ (10,803)
8,004
(20,852)
₩ (68,609) ₩ (23,650)
(*1) Detail of treasury stock as of December 31, 2008 and 2007 is as follows:
Korean Won
Number of treasury stock Face value Book value
2008 2007 2008 2007 2008 2007
(In millions)
1,685,931 685,931 ₩ 4,215 ₩ 1,715 ₩ 53,920 ₩ 10,803
The Company is expecting to dispose of its treasury stock through the exercise of stock options.
- 36 -
(*2) The Company granted stock options to its executives in accordance with the resolution of the Board of
Directors dated September 26, 2005. Details of the stock options are as follows:
Korean Won
Grant date
Number of shares to
be issued (*3)
Exercise period Exercise price
September 26, 2005 990,000 shares September 26, 2008 ~
Semtember 26, 2012 ₩ 13,826
(*3) The number of shares to be issued decreased by 80,000 shares due to retirement of an officer after 2005
and will be adjusted on a basis of comparison between the increasing ratio of composite stock exchange
index and that of the Company’s stock price between the grant date and the exercise date. Details are as
follows:
Ratio of the Company’s stock price to
composite stock exchange index Exercise ratio
Less than 40% Cancellation
40% ~ 50% 60%
50% ~ 60% 70%
60% ~ 70% 80%
70% ~ 80% 90%
More than 80% 100%
The Company recorded ₩2,940 million as stock compensation expense in the current year. As the
requisite service period has passed hereinafter, no further recognition of compensation cost will be made.
(3) Accumulated other comprehensive loss
Accumulated other comprehensive loss as of December 31, 2008 and 2007 consist of the following:
Korean Won
2008 2007
(In millions)
Loss on valuation of available-for-sale securities ₩ (387,640) ₩ (130,489)
Changes in equity arising from equity method investments 53,398 23,922
Loss on valuation of financial derivates (23,842) (1,314)
Gain on overseas operation translation 124,278 16,778
Gain on revaluation of property, plant and equipment 73,111 -
Others 1,476 (510)
Total ₩ (159,219) ₩ (91,613)
- 37 -
(4) Retained earnings
Legal Reserve
The Korean Commercial Code requires the Company to appropriate an amount equal to a minimum of 10% of
its cash dividends as a legal reserve until such reserve equals 50% of its paid-in capital. This reserve is not
available for the payment of cash dividends. Subject to the approval of the Board of Directors, it may be
transferred to common stock or may be used to dispose of accumulated deficit, if any.
Other Reserves
Pursuant to Korean tax laws, the Company is allowed to claim the amounts of retained earnings appropriated for
technology development and overseas investment losses as deductions from taxable income for the current year.
These amounts were not available for dividends until used for the specified purposes or otherwise reversed.
The voluntary reserve did not have any specified purpose and may be reversed to unappropriated retained
earnings with the ratification of the majority shareholders.
16. COST OF SALES:
Costs of sales for the years ended December 31, 2008 and 2007 are as follows:
Korean Won
2008 2007
(In millions)
Cost of manufacture
Beginning inventory of finished goods ₩ 48,884 ₩ 42,862
Consolidation adjustments 5,413 (3,218)
Cost of products manufactured for the year 2,112,077 1,829,013
Ending inventory of finished goods (68,387) (48,884)
Transfer from other accounts (48,118) (35,415)
Refund of customs duties (17,886) (23,209)
2,031,983 1,761,149
Cost of commodities
Beginning inventory of commodities 56,021 58,638
Consolidation adjustments 1,667 773
Purchases of commodities for the year 650,015 470,288
Transfer from other accounts 268,408 155,533
Ending inventory of commodities (88,341) (54,355)
Transfer to other accounts (5,594) (6,540)
882,176 624,337
Cost of construction revenue 870,638 213,906
Cost of lotting out revenue 2,459 34,953
Other costs 216,385 195,851
Total ₩ 4,003,641 ₩ 2,830,196
- 38 -
17. THE DETAILS FOR THE NET INCOME OF THE COMPANY AND THE NET INCOME OF THE
MINORITY INTERESTS:
The parent interest (loss) and minority interests (loss) for the years ended December 31, 2008 and 2007 are
calculated as follows:
Korean Won
2008 2007
Parent
interest
Minority
interests Total
Parent
interest
Minority
interests Total
(In millions)
Non-consolidated
net income
₩ (228,384)
₩ (72,301)
₩ (300,685)
₩ 100,040
₩ 66,280
₩ 166,320
Consolidation
adjustments
298,338
2,577
300,915
(23,751)
(22,298)
(46,049)
Consolidated net
income
₩ 69,954
₩ (69,724)
₩ 230
₩ 76,289
₩ 43,982
₩ 120,271
18. STATEMENTS OF COMPREHENSIVE INCOME (LOSS):
The statements of comprehensive income (loss) for the years ended December 31, 2008 and 2007 consist the
followings:
Korean Won
2008 2007
(In millions)
Net income ₩ 230 ₩ 120,271
Accumulated other comprehensive income (loss):
Gain on valuation of available-for-sale securities (258,861) (139,603)
Gain on valuation of equity method investments 45,096 1,958
Loss on valuation of equity method investments (11,982) (337)
Loss on valuation of derivatives (578) (1,307)
Gain on overseas operation translation 114,656 29,659
Gain on revaluation of PP&E 108,609 -
Loss on translation of financial instruments (21,934) -
Others 1,984 (4,191)
Comprehensive income (loss) ₩ (22,780) ₩ 6,450
Parent interest 2,348 (37,532)
Minority interests (25,128) 43,982
- 39 -
19. EARNINGS PER SHARE:
Basic Earnings per Share
Basic earnings per share is computed by dividing net income allocated to common stock by the weighted
average number of common shares outstanding during the year.
Basic earnings per share for the years ended December 31, 2008 and 2007 is as follows:
Korean Won
2008 2007
(In thousands except per share amounts)
Net income of continuing operations(A) ₩ 74,292,902 ₩ 73,432,308
Net income (C) 69,954,162 76,288,830
Weighted average number of
common shares outstanding during the year(B) (*1) 47,497,749 shares 47,833,229 shares
Basic income per share from continuing
operations(A/B) ₩ 1,564 ₩ 1,535
Basic earnings per share(C/B) ₩ 1,473 ₩ 1,595
(*1) The weighted average number of common shares outstanding for the years ended December 31, 2008 and
2007 is calculated as follows:
2008
Period Shares Days
Weighted
shares
Beginning 2008.01.01 ~ 2008.01.29 48,374,051 29 1,402,847,479
Acquisition of treasury stock 2008.01.29 ~ 2008.01.30 48,274,051 1 48,274,051
〃 2008.01.30 ~ 2008.01.31 48,134,051 1 48,134,051
〃 2008.01.31 ~ 2008.02.03 48,009,781 3 144,029,343
〃 2008.02.03 ~ 2008.02.04 47,943,441 1 47,943,441
〃 2008.02.04 ~ 2008.02.10 47,899,791 6 287,398,746
〃 2008.02.10 ~ 2008.02.11 47,849,791 1 47,849,791
〃 2008.02.11 ~ 2008.02.12 47,785,791 1 47,785,791
〃 2008.02.12 ~ 2008.02.13 47,727,901 1 47,727,901
〃 2008.02.13 ~ 2008.02.14 47,710,391 1 47,710,391
〃 2008.02.14 ~ 2008.02.17 47,660,391 3 142,981,173
〃 2008.02.17 ~ 2008.02.18 47,652,891 1 47,652,891
〃 2008.02.18 ~ 2008.02.19 47,646,391 1 47,646,391
〃 2008.02.19 ~ 2008.02.21 47,604,771 2 95,209,542
〃 2008.02.21 ~ 2008.03.19 47,554,771 27 1,283,978,817
〃 2008.03.19 ~ 2008.03.20 47,520,751 1 47,520,751
〃 2008.03.20 ~ 2008.03.23 47,477,751 3 142,433,253
〃 2008.03.23 ~ 2008.03.25 47,454,911 2 94,909,822
〃 2008.03.25 ~ 2008.03.26 47,408,411 1 47,408,411
〃 2008.03.26 ~ 2008.12.31 47,374,051 280 13,264,734,280
366 17,384,176,316
- 40 -
Weighted average number of common shares outstanding: 17,384,176,316 / 366 = 47,497,749 shares
2007
Period Shares Days
Weighted
Shares
Beginning 2007.01.01 ~ 2007.12.31 47,785,925 365 17,441,862,625
Treasury stock as of 2007.1.1 2007.01.01 ~ 2007.12.31 (1,385,931) 365 (505,864,815)
Disposal of treasury stock 2007.10.10 ~ 2007.12.31 700,000 83 58,100,000
Conversion of convertible bonds 2007.01.01 ~ 2007.12.31 1,274,057 365 465,030,805
17,459,128,615
Weighted average number of common shares outstanding: 17,459,128,615/ 365 = 47,833,229 shares
Diluted Earnings per Share
Diluted earnings per share is computed by dividing diluted net income as adjusted by adding back the after-tax
amount of expenses on diluted securities, by the weighted average number of common shares and potential
shares of diluted securities outstanding during the year.
Diluted earnings per share for the years ended December 31, 2008 and 2007 is as follows:
Korean Won
2008 2007
(In thousands except per share)
Diluted net income of continuing operations(A) (*1) ₩ 74,292,902 ₩ 73,432,308
Diluted net income (C) (*1) 69,954,162 76,289,830
Weighted average number of
common shares outstanding during the year(B) (*2) 47,714,430 shares 47,833,229 shares
Diluted basic income per share from continuing
operations(A/B) ₩ 1,557 ₩ 1,535
Diluted basic earnings per share(C/B) ₩ 1,466 ₩ 1,595
(*1) Diluted ordinary income and net income for the years ended December 31, 2008 and 2007 are calculated
as follows:
Korean Won Korean Won
2008 2007
(In thousands)
Net income of continuing operations (A) ₩ 74,292,902 ₩ 73,432,308
Net income (C) 69,954,162 76,288,830
Interest expense of convertible bonds, net of tax - -
Diluted net income of continuing operations (A) 74,292,902 73,432,308
Diluted net income ₩ 69,954,162 ₩ 76,288,830
(*2) Weighted average number of common shares and potential shares of diluted securities outstanding for the
years ended December 31, 2008 and 2007 is calculated as follows:
2008 2007
Weighted average number of common shares 47,497,749 47,833,229
Stock options (not exercised) 216,681 -
Weighted average number of common shares and potential shares 47,714,430 47,833,229
- 41 -
Potentially dilutive securities excluded from calculation as they have no dilutive effects for the year ended
December 31, 2008 are as follows:
Expense after tax
Weighted average
number of shares
Earnings Per
Share
Bonds with stock warrants ₩ - - ₩ - No dilutive effect
Convertible bonds 8,271,468,815 2,482,790 shares 3,332 No dilutive effect
Stock options - 216,681 shares - Dilutive effect
Dilutive potential shares
Details of dilutive potential shares as of December 31, 2008 are as follows:
Period
Number of common
shares to be issued
Bonds with stock warrants 2008.11.26 ~ 2012.11.12 2,056,674 shares
Convertible bonds 2008.11.26 ~ 2012.11.12 2,482,790 shares
Stock options 2008.09.26 ~ 2012.09.26 990,000 shares
20. DIVIDENDS:
Details of dividends for the years ended December 31, 2008 and 2007 are as follows:
(1) Dividend yield ratio
Korean Won
2008 2007
Dividend per share (A)
Market value at the end of the year (B) ₩ 500
17,700
₩ 500
49,000
Dividend yield ratio (A/B) 2.8% 1.0%
(2) Dividends
Korean Won
2008 2007
Common shares issued (par value ₩2,500) 47,374,051 shares 48,374,051 shares
Cash dividend per share (ratio) ₩ 500(20%) ₩ 500 (20%)
Dividend amount ₩ 23,687 million ₩ 24,187 million
(3) Dividend payout ratio
Korean Won
2008 2007
Total dividends (A)
Net income of the Company (B) ₩ 23,687 million
69,954 million
₩ 24,187 million
76,289 million
Dividend payout ratio (A/B) 33.86% 31.70%
- 42 -
21. SUPPLEMENTARY CASH FLOW INFORMATION:
Major transactions not involving an inflow or outflow of cash and cash equivalents for the years ended
December 31, 2008 and 2007 are as follows:
Korean Won
2008 2007
(In millions)
Reclassification of long-term debts to current maturities
Acquisition of finance lease assets
Transfer of advanced rental asset to rental assets
Transfer of construction-in-progress to property, plant and equipment
Transfer of machinery-in-transit to property, plant and equipment
Transfer of advanced payment to long-term loans
Revaluation of property, plant and equipment
Increase of net assets due to merge and acquisition
Decrease of net assets due to spin-off
Others
₩ 813,389
18,511
11,761
52,484
3,232
4,668
139,103
₩ 256,535
432
11,500
23,728
105
-
-
85,288
65,184
1,986
22. RELATED PARTY TRANSACTIONS:
Significant transactions, which occurred in the ordinary course of business with consolidated subsidiaries for the
years ended December 31, 2008 and 2007 and related account balances as of those dates, are summarized as
follows:
Korean Won
2008
Seller Buyer Sales
Purchases Receivables(*1) Payables
(In millions)
Taihan Electric Wire Co., Ltd. Muju Resort Inc. ₩ 23 ₩ 128 ₩ 2 ₩ -
Taihan Electric Wire Co., Ltd. TEC&Co Co., Ltd. 43 225 - 248
Taihan Electric Wire Co., Ltd. Taihan Reach Limited 1,205 - 1,048 -
Taihan Electric Wire Co., Ltd. TMC Co., Ltd. 76,291 1,077 8,910 7,169
Taihan Electric Wire Co., Ltd. Korea Rental Corporation - 138 - 1
Taihan Electric Wire Co., Ltd. KTC Co., Ltd. 132,018 81,648 - 14,035
Taihan Electric Wire Co., Ltd. Malesela T.E.C. Ltd. 1,074 - 3,831 -
Taihan Electric Wire Co., Ltd. Skytel Co., Ltd. 1,547 - - -
Taihan Electric Wire Co., Ltd. TSC Co., Ltd. 6,859 - 1,145 -
Taihan Electric Wire Co., Ltd. Standard Telecom Congo 912 - 16,684 -
Taihan Electric Wire Co., Ltd. Taihan Global Holdings Ltd. 85,208 429,725 117,698 8,232
Taihan Electric Wire Co., Ltd. Taihan Techren Co., Ltd. 950 - 1 -
Taihan Electric Wire Co., Ltd. TEC Construction Co., Ltd. 331 15,414 - 15,414
Taihan Electric Wire Co., Ltd. Taihan ST Co., Ltd. 1,320 322 - -
Taihan Electric Wire Co., Ltd. Trybrands Co., Ltd. - 47 - -
Taihan Electric Wire Co., Ltd. TEC&R Co., Ltd. 24 - - -
Taihan Electric Wire Co., Ltd. Namkwang E&C - - 302 -
Taihan Electric Wire Co., Ltd. ALDEX Co., Ltd. 43 - 8,043 -
Taihan Electric Wire Co., Ltd. Onse telecom Corporation 95 - 14,095 -
Trybrands Co., Ltd. Jilin Try Textile Co., Ltd. 4,819 22,510 14,085 -
Daimyung TMS Co., Ltd. Taihan ST Co., Ltd. 35,408 5,852 15,644 -
Onse Telecom Corporation Taihan Electric Wire Co., Ltd. - 297 8,000 45,487
Aldex Co., Ltd. SJD Co., Ltd. 236 351 - -
Others (between subsidiaries) 5,983 7,818 8,156 11,091
₩ 354,389 ₩ 565,552 ₩ 216,644 ₩ 101,677
- 43 -
(*1) Includes convertible bonds issued by and loan receivables from consolidated subsidiaries.
Korean Won
2007
Seller Buyer Sales
Purchases Receivables(*1) Payables
(In millions)
Taihan Electric Wire Co., Ltd. Taihan Bulk Terminal Co.,
Ltd. ₩ 43 ₩ - ₩ 1 ₩ 122
Taihan Electric Wire Co., Ltd. Malesela T.E.C. Ltd.1 2,269 - 3,545 -
Taihan Electric Wire Co., Ltd. Skytel Co., Ltd. 1,017 - 225 -
Taihan Electric Wire Co., Ltd. KTC Co., Ltd. 106,927 98,825 3,461 -
Taihan Electric Wire Co., Ltd. Muju Resort Inc. 473 33 2 342
Taihan Electric Wire Co., Ltd. Taihan Reach Limited 782 - 782 -
Taihan Electric Wire Co., Ltd. TMC Co., Ltd. 59,932 2,642 8,511 371
Taihan Electric Wire Co., Ltd. Standard Telecom Congo 4,666 - 12,760 -
Taihan Electric Wire Co., Ltd. Korea Rental Corporation - 4 - -
Taihan Electric Wire Co., Ltd. Taihan Techren Co., Ltd. 35 - 4,100 465
Taihan Electric Wire Co., Ltd. Trybrands Co., Ltd 4 124 - 4
Taihan Electric Wire Co., Ltd. Taihan ST Co., Ltd. 1,296 158 - 21
Taihan Electric Wire Co., Ltd. Taihan Global Holdings Ltd. - 4,252 - -
Trybrands Co., Ltd. Jilin Try Textile Co., Ltd. 5,674 23,565 1,112 -
Trybrands Co., Ltd. Muju Resort Inc. 6 88 - -
Taihan Bulk Terminal Co., Ltd. Trybrands Co., Ltd. - 3 - -
Taihan Bulk Terminal Co., Ltd. Muju Resort Inc. - 300 - -
Taihan ST Co., Ltd. Daimyung TMS Co., Ltd. 4,298 - 4,649 -
Korea Rental Corporation Taihan Electric Wire Co., Ltd. 4 - - -
Korea Rental Corporation Muju Resort Inc. 10 - 3 -
₩ 187,436 ₩ 129,994 ₩ 39,151 ₩ 1,325
(*1) Includes convertible bonds issued by and loan receivables from consolidated subsidiaries.
Significant transactions, which occurred in the ordinary course of business with related companies for the years
ended December 31, 2008 and 2007 and related account balances as of those dates, are summarized as follows:
Korean Won
2008
Buyer Sales
Purchases Receivables Payables
(In millions)
T.E. USA ₩ 25,983 ₩ - ₩ 7,282 ₩ -
Novelis Korea Ltd. 3,358 - - -
Sam Yang Metal Co., Ltd. - 46,039 - 1,494
Phil. BXP Co., Ltd. 1,814 - 5,323 -
Optomagic Co., Ltd. 168 8,302 15 1,073
ALD I Co., Ltd. - 8,202 - -
Others 160,602 265,950 149,991 42,135
₩ 191,925 ₩ 328,493 ₩ 162,611 ₩ 44,702
- 44 -
Korean Won
2007
Buyer Sales
Purchases Receivables Payables
(In millions)
T.E. USA ₩ 30,560 ₩ - ₩ 20,489 ₩ -
Novelis Korea Ltd. 4,716 - - -
Sam Yang Metal Co., Ltd. - 44,629 - 100
KTC Cambodia Co., Ltd. 1,287 - 501 -
TEC Networks Co., Ltd. 66 - 6 495
Others 31,415 46,771 2,745 -
₩ 68,044 ₩ 91,400 ₩ 23,741 ₩ 595
23. SEGMENT INFORMATION:
Financial information of each business division as of and for the years ended December 31, 2008 and 2007 is as
follows:
Korean Won
2008
Cable
Others Adjustment Amounts
(In millions)
Total sales ₩ 3,013,269 ₩ 2,634,947 ₩ (913,560) ₩ 4,734,656
Intercompany sales (296,498) (617,062) 913,560 -
Sales, net 2,716,771 2,017,885 - 4,734,656
Operating income (loss) 115,557 17,549 (26,445) 106,661
Property, plant and equipment, and
intangible assets
236,144
1,386,686
(18,470)
1,604,360
Korean Won
2007
Cable
Others Adjustment Amounts
(In millions)
Total sales ₩ 2,078,618 ₩ 1,349,272 ₩ (297,171) ₩ 3,130,719
Intercompany sales (236,552) 60,619 297,171 -
Sales, net 1,842,066 1,288,653 - 3,130,719
Operating income (loss) 67,474 60,807 (2,785) 125,496
Property, plant and equipment, and
intangible assets
402,908
1,004,786
(48,712)
1,358,982
- 45 -
24. COMMITMENTS AND CONTINGENCIES:
(1) As of December 31, 2008, in the ordinary course of business, the Company has provided as collaterals to
creditors and guarantors 25 blank checks and 9 promissory notes, and checks and promissory notes with
face values totaling ₩42,401 million.
(2) The Company and domestic subsidiaries have bank overdraft agreements with various banks amounting to
₩15,800 million as of December 31, 2008.
(3) Outstanding guarantees provided by financial institutions and third parties to the Company as of December
31, 2008 are as follows:
Guarantor Guarantee Currency Amount Remarks
(In millions, except USD in thousands)
Hana Bank & others The Company USD 371 Related to import of raw materials, etc.
Seoul Guarantee
Insurance Company
The Company KRW 156,502 Implementation of construction contracts
and rectification warranty on defects
Kim, Seong Kyun SJD Co., Ltd. KRW 6,500 In connection with borrowings
Shinhan Bank &
others
Korea Rental
Corporation
KRW 1,000 In connection with the agreement of
purchasing from Apple Computer Korea
Co., Ltd.
Myungji Academy TEC Construction
Co., Ltd.
KRW 10,044 In connection with borrowings
Kyoungnam
Enterprise Ltd.
Namkwang E&C KRW 3,085,202 Implementation of construction contracts
Woori Bank &
others
Daemyung TMS
Co., Ltd.
KRW 360 In connection with long-term borrowings
(4) Outstanding guarantees provided to third parties and between consolidated companies as of December 31,
2008 are as follows:
Guarantor Guarantee
Creditors Currency Amount Details of guarantee
(In millions, except USD in thousands)
TEC&Co Co., Ltd. Jilin Try Textile Co.,
Ltd.
The Export-Import
Bank of Korea
KRW 4,904 Payment guarantee to
borrowings Trybrands Inc. (USD) (3,900)
Taihan ST Co., Ltd. Daemyung TMS Co.,
Ltd.
Woori Bank&
others
KRW 27,500 Payment guarantee to
borrowings
JPY 533,739
TEC Construction
Co., Ltd.
Myungji Academy Woori Bank &
others
KRW
37,346
Payment guarantee to project
financing
TEC&R Co., Ltd. PINE STONE CC. Financial institution KRW
9,800
Payment guarantee to project
financing
Jilin Try Textile Co.,
Ltd.
Financial institution USD
3,900
Payment guarantee to
borrowings
Aldex Co., Ltd. Mamquam Ocean
Chennel Development
HSBC CAD
9,610
Payment guarantee to
mortgage loans
Onse Telecom Co.,
Ltd.
Aldex Co., Ltd. Woori Bank &
others
KRW
5,000
Issue of the 12th
convertible
bonds
TEC&Co., Ltd. Taihan Global
Holdings Ltd.
Woori Bank &
others
USD
124,750
Payment guarantee to
mortgage loans
Namkwang E&C Deawoo E&C &
others
NongHyup &
others
KRW 3,377,119 Implementation
of construction contracts
- 46 -
(5) Details of pledged assets
The pledged assets in connection with the short and long-term borrowings as of December 31, 2008 are as
follows:
Creditor Pledged assets Currency 2008 2007
(In millions)
KDB and others Lands, buildings,
machineries and others
KRW
351,367
561,389
USD 8,957 92,672
GBP - 603
JPY 419,894 1,884,814
Construction Contractors'
Financial Cooperative
Available-for-sale
securities and others
KRW
80,960
-
Shinhan Capital
Co., Ltd.
Advanced payments
KRW
26,800
-
HK Mutual Savings
and Finance Co., Ltd.
Inventories
KRW
28,900
-
Korea Exchange
Bank
Accounts receivables,
memberships and
others
KRW
141,760
-
As of December 31, 2008, certain securities of Aldex Co., Ltd. are provided as collateral as follows:
Creditor Pledged assets
Number of
shares Remarks
Green Non-life
Insurance Co., Ltd.
Securities of
Namkwang E&C
4,447,299
In connection with the short-term
borrowings of Aldex Co., Ltd.
1,096,750
In connection with the borrowings of Onse
Telecom Co., Ltd.
National Federation
of Fisheries
Cooperatives &
others
Securities of Onse
Telecom co., Ltd.
17,422,718
In connection with the short-term
borrowings of Aldex Co., Ltd.
Woori Bank
9,826,005
In connection with the 12th
debenture of
Aldex Co., Ltd.
36,395,365 Custodial (until May 12, 2009)
In connection with borrowings of ₩163,500 million borrowed from Korea Exchange Bank and other
creditors, Namkwang E&C Co., Ltd. offered the title of land as collateral. Additionally, in connection
with short-term borrowings of ₩28,900 million borrowed from Hana Capital Co., Ltd. and other creditors,
Namkwang E&C Co., Ltd. offered beneficiary right of first ranked priority which was obtained by trust of
unsold apartments of developer.
(6) As of December 31, 2008, the 174 notes and 62 checks issued by TEC&Co Co., Ltd. before October 1997
are still outstanding because these were misplaced, used as collateral of which one note issued for the
reorganization creditor by Onse Telecom Co., Ltd. is still outstanding as it is missing.
(7) Namkwang E&C recognized allowance for doubtful accounts in relation to the fraud amount (loans to
customers) in connection with the former chief executive officer’s embezzlement case. In addition,
Namkwang E&C could not obtain sufficient reliable information in relation to the appropriate tax
adjustments needed for the fraud amount as of December 31, 2008. As such, the consolidated financial
statements do not include any adjustment that may arise from the uncertainty on the tax position.
- 47 -
(8) As of December 31, 2008, the Company and its subsidiaries are defendants in 45 legal cases involving an
aggregate amount of ₩ 71,477 million in damages. The result of the cases could not be ascertained as
of December 31, 2008.
(9) As of December 31, 2008, the outstanding balance of notes receivable discounted with recourse of the
certain subsidiaries amounts to ₩94,345million.
(10) The Company and several banks have entered into a business loan agreement with Daewan and others for
the purpose of investing in Daewan’s real estate complex development business. According to this
agreement, ₩100 billion of the Company’s loans to Daewan is subordinated to other creditors’ loans, and
the Company guarantees the interest of the last six months of original loan period and the interest for any
extended maturity or overdue payments in case Daewan fails to repay the principal or interest due to other
creditors.
(11) The outstanding derivative contracts of the Company and its subsidiaries as of December 31,
2008 are as follows:
Futures Contracts
Type of Raw
Materials Counterpart Maturities Position Price (USD/ton)
Quantity
(in tons)
Copper SEMPRA and others 2009.1.2~2012.7.18 Buying 2,845.0~7,240.0 26,450
Copper SEMPRA and others 2009.1.2~2012.9.21 Selling 2,941.5~8,020.0 24,100
Interest Rate Swap Contracts
U.S. dollars
Counterpart Initial date Maturities Amount Payment rate Receipt rate
(In thousands)
Citibank 2008.03.11 2009.03.11 USD 34,322 Fixed interest
rate - 5.20%
Libor (3M) + 1.0%
Shinhan Bank 2006.06.30 2009.06.12 20,975 Fixed interest
rate - 5.57%
Libor (3M) + 0.94%
Kookmin Bank 2006.08.25 2009.08.25 21,000 Fixed interest
rate - 5.30%
Libor + 0.82%
Kookmin Bank 2008.05.27 2009.05.27 20,000 Fixed interest
rate - 5.88%
Libor + 2.48%
Nonghyup Bank 2008.10.26 2009.10.26 25,000 Fixed interest
rate - 8.90%
Libor + 6.0%
Shinhan Bank 2007.11.13 2010.11.19 ₩ 100,000 Fixed interest
rate - 6.29%
CD 91days + 0.91% (IRS)_
Currency Swap Contracts
Foreign currency Korean Won Exchange rate
Counterpart Initial date Maturities Disbursements Receipts terms
(In thousands) (In millions) (1/USD)
Citibank 2008.03.11 2009.03.11 USD 34,322 ₩ 32,218 ₩ 938.7
Shinhan Bank 2006.06.30 2009.06.12 USD 20,975 20,000 953.5
Kookmin Bank 2006.08.25 2009.08.25 USD 21,000 20,000 1,050.0
Kookmin Bank 2008.05.27 2009.05.27 USD 20,000 21,000 952.4
Nonghyup Bank 2008.10.26 2009.10.26 USD 25,000 36,000 1,440.0
Industrial Bank of Korea 2007.09.21 2008.10.02 USD 15,000 13,815 921.0
Industrial Bank of Korea 2007.11.30 2008.12.04 EUR 57,900 78,744 1,360.0
SC First Bank 2007.11.23 2008.11.24 USD 25,000 22,750 910.0
Goldman Sachs 2007.12.03 2008.11.26 EUR 50,000 68,250 1,365.0
Goldman Sachs 2007.12.03 2008.06.05 EUR 20,000 27,100 1,365.0
- 48 -
Muju Resort Co., Ltd. has entered into forwards contracts with Woori Bank to hedge the exposure to
changes in foreign exchange rate in connection with short-term borrowings. The details of the
contracts are as follows:
Foreign currency Korean Won Exchange rate
Maturities Disbursements Receipts terms
(In thousands) (In millions) (1/USD)
2009.02.09 USD 494 ₩ 518 ₩ 1,048.37
2009.05.08 USD 478 508 1,048.37
2009.05.08 USD 29,606 31,000 1,407.70
Korea Rental Corporation has entered into derivative instrument contracts including futures to convert
the variable interest rate to fixed rate and hedge the exposure to changes in foreign exchange rate. The
details of the contracts are as follows:
Exchange rate
Amount Interest rate terms
(In millions, except USD in thousands) (%) (1/USD)
Korea Exchange Bank KRW 5,000 6.5 -
Kookmin Bank KRW 5,000 6.22 -
Kookmin Bank KRW 6,900 5.78 -
Kookmin Bank KRW 2,000 7.92 -
Hana Bank KRW 10,000 7.12 -
Shinhan Bank USD 5,209 5.17 959.9
KTC Co., Ltd. has entered into forwards contracts to hedge the exposure to changes in foreign
exchange rate in connection with the foreign currency accounts receivables and borrowings. The
details of the outstanding forwards contracts are as follows:
Exchange rate
Amount terms Fair value
(In USD) (1/USD) (In millions)
Kookmin Bank 2008.03.18 2009.11.16 USD 2,800,000 975.00 (1,934)
Kookmin Bank 2008.03.18 2009.11.15 USD 7,800,000 990.00 (778)
USD 10,600,000 (2,713)
- 49 -
Details of the valuation gain and loss in relation to the outstanding derivative contracts for the years
ended December 31, 2008 and 2007 are as follows:
Korean Won
2008 2007
Valuation Valuation Valuation Valuation
gain
loss
gain
loss
(In millions)
Futures contracts ₩ 13,888 ₩ 886 ₩ - ₩ 2,929
Interest rate swap - 591 - 1,435
Currency swap 25,987 212,152 4,487 1,215
Currency forward 6,230 2,713 - 462
Currency option 871 - - 468
Gain on valuation of exchange right 4,637 - - -
₩ 51,613 ₩ 216,342 ₩ 4,487 ₩ 6,509
Cash flow hedge
Interest rate swap 1,907
Loss on translation of financial
instruments (*1) 21,934
(*1) Foreign currency translation loss related to short-term borrowings is ₩49,780 million, of which ₩28,121
million (₩21,294 million after deferred tax effect) was recognized as accumulated other comprehensive
loss which is an effective portion of hedging cash flow risk in relation the future sales.
(12) On January 6, 2003, Taihan Reach Ltd. entered into a Head Services Agreement with Reach Global
Services Ltd. There are receivables and payables which are calculated in accordance with the agreement
with Reach Global Services Ltd. Taihan Reach Ltd. recognized revenue of ₩6,590 million from this
agreement in 2008 (2007: ₩6,540 million). Further, on December 10, 2004, the subsidiary entered into
a similar agreement with Reach Network Services Korea Co., Ltd., a related party. Expenses incurred
according to the Agreement amount to ₩1,876 million in 2008 (2007: ₩1,536 million).
(13) According to the option agreement between the Company and Reach International Holdings BV and its
subsidiaries (hereinafter referred to as “Reach Group”), as shareholders of Taihan Reach Ltd., the Reach
Group has call options to buy all or part of the shares of Taihan Reach Ltd. from the Company, while the
Company has put options to sell those stocks to Reach Group after the end of call option exercise period or
when restrictions imposed on foreign-owned equity are lifted. The call option exercise period can be
extended to an additional year upon the request of the Reach Group. Total price for call and put options
of all shares for Taihan Reach Ltd. owned by the Company is USD 10,000 thousand.
(14) In 2006, the Company transferred a portion of machinery and equipment at their total book value of
₩10,005 million and contracted a sale-finance leaseback of machinery and equipment with GE Capital
Korea Co., Ltd.
Book value of finance lease assets as of December 31, 2008 is as follows:
Korean Won
Amount
(In millions)
Acquisition ₩ 20,451
Less: Accumulated depreciation (7,005)
Net book value ₩ 13,446
- 50 -
Details of future minimum lease payments according to the finance lease contract are summarized below:
Korean Won
Minimum lease payment
(In millions)
2009.01.01~2009.12.31 ₩ 11,422
Less: Present value discounts (818)
Present value of finance lease
liability ₩ 10,604
(15) The Company has leased the lands and buildings located in Seoul and Anyang, which it sold in current
year, from their purchasing parties. The payment schedule of lease fee by years is as follows:
Korean Won
Year Anyang (*1) Seoul
(*2)
(In millions)
2009
2010 ₩ 27,240
28,057
₩ 5,268
-
₩ 55,297 ₩ 5,268
(*1) The purchasing party is ALD I Co., Ltd. The leasing period is 30 months, the conditions of lease period
and lease fee may be changed according to the progress of permission on the purchasing party’s
development plan.
(*2) The purchasing party is D&DS Co., Ltd. The lease period will be renewed every year.
25. SUBSEQUENT EVENTS:
(1) At the extraordinary shareholders’ meeting on January 30, 2009, it approved to issue preferred convertible
shares and preferred redemption shares, and revised the articles of incorporation which involves increasing
flexibility of third-party designation and increasing the limit of convertible bonds and bonds with stock
warrants.
(2) The Company issued additional stocks based on the resolutions at the Board of Directors’ meeting on
February 3, 2009 and the details of stock issuance are as follows:
Numbers and type of additionally issued stock: 3,000,000 shares of authorized common stock
Issue price: ₩ 8,510 per share
Date of issue: March 9, 2009
Due date of payment: February 26, 2009
Initial date reckoning in dividend: January 1, 2009
Details of changes in capital by stock issuance are as follows:
Korean Won
Before issuance Increased by issuance After issuance
(In millions)
Common stock ₩ 110,000 ₩ 15,000 ₩ 125,000
Additional paid in capital 19,946 10,263 30,209
(3) Aldex Co., Ltd. redeemed early the 12th convertible bonds (par value: ₩2,500 million) and 15th
convertible bonds (par value: ₩3,000 million) on January 16, 2009 and February 4, 2009, respectively, to
improve the financial status.
- 51 -
26. DISCONTINUED OPERATIONS:
(1) In 2008, the Company disposed its shares of Taihan Bulk Terminal Co., Ltd. and eliminated it from the
scope of consolidated subsidiaries. As a result, the Company recognized the profit from discontinued
operations related to the gain on valuation of equity method investments from beginning of the fiscal year
to the date of sale (₩955 million) and gain on disposal of securities (₩2,142 million).
In addition, the consolidated financial statements of prior year were restated in accordance with SKAS No.
11 “Discontinued operations”, the profit of Taihan Bulk Terminal Co., Ltd. (₩2,856 million) was
recognized as profit from discontinued operation.
(2) On November 28, 2008, Onse Telecom Co., Ltd. decided to discontinue its manufacturing and sales of
ubiquitous unit to prevent losses due to decrease of sales and concentrate to existing main business.
Consequently, Onse Telecom Co., Ltd. sold certain inventories, properties and intangibles to Digito. Com
Inc. and transferred certain assets to another unit to use as continuing operation assets. The Company
recognized the loss from discontinued operations including loss on impairment of discontinued operation
assets (₩5,695 million), loss of ubiquitous unit (before tax: ₩13,195 million) from beginning of the
fiscal year to the date of sale.