Title of Each Class | Name of Each Exchange on Which Registered | ||
American Depositary Shares, each representing one-half of one share of Common Stock | New York Stock Exchange, Inc. | ||
Common Stock, par value Won 5,000 per share | New York Stock Exchange, Inc.* |
i
ii
Item 1. | Identity of Directors, Senior Managers and Advisors |
Item 1.A. | Directors and Senior Management |
Item 1.B. | Advisers |
Item 1.C. | Auditors |
Item 2. | Offer Statistics and Expected Timetable |
Item 3. | Key Information |
Item 3.A. | Selected Financial Data |
1
Year Ended December 31, | ||||||||||||||||||||||||
2000 | 2001 | 2002 | 2003 | 2004 | 2004 | |||||||||||||||||||
(In billions of Won and millions of Dollars, except per share data) | ||||||||||||||||||||||||
Korean GAAP(1): | ||||||||||||||||||||||||
Operating revenues | W | 13,538 | W | 15,978 | W | 16,437 | W | 16,068 | W | 17,068 | US$ | 16,490 | ||||||||||||
Operating expenses | 12,487 | 14,002 | 14,056 | 14,245 | 14,588 | 14,093 | ||||||||||||||||||
Operating income | 1,051 | 1,976 | 2,382 | 1,822 | 2,481 | 2,396 | ||||||||||||||||||
Donations and contribution payments(2) | 145 | 157 | 145 | 182 | 147 | 142 | ||||||||||||||||||
Gain (loss) on disposition of available-for-sale securities(3) | 941 | 628 | 1,177 | 772 | (15 | ) | (15 | ) | ||||||||||||||||
Income taxes(4) | 551 | 421 | 741 | 524 | 578 | 588 | ||||||||||||||||||
Net earnings | 986 | 1,113 | 1,947 | 822 | 1,282 | 1,239 | ||||||||||||||||||
Basic earnings per share(5) | 3,165 | 3,576 | 7,504 | 3,802 | 6,084 | 5.88 | ||||||||||||||||||
Diluted earnings per share(6) | 3,165 | 3,576 | 6,601 | 3,313 | 5,697 | 5.50 | ||||||||||||||||||
Dividends per share(7) | 511 | 720 | 860 | 2,000 | 3,000 | 2.90 | ||||||||||||||||||
U.S. GAAP(8): | ||||||||||||||||||||||||
Operating revenues | W | 10,512 | W | 11,588 | W | 11,508 | W | 11,776 | W | 12,240 | US$ | 11,825 | ||||||||||||
Operating income | 613 | 1,146 | 1,860 | 1,167 | 1,944 | 1,878 | ||||||||||||||||||
Income taxes | 181 | 250 | 520 | 218 | 387 | 374 | ||||||||||||||||||
Net earnings | 701 | 1,106 | 1,556 | 395 | 1,405 | 1,357 | ||||||||||||||||||
Basic earnings per share(5) | 2,251 | 3,233 | 5,997 | 1,830 | 6,663 | 6.44 | ||||||||||||||||||
Basic earnings per share before cumulative effect of accounting change(5) | 2,966 | 3,233 | 5,997 | 1,830 | 6,663 | 6.44 | ||||||||||||||||||
Diluted earnings per share(6) | 2,251 | 3,233 | 4,972 | 1,655 | 6,215 | 6.00 | ||||||||||||||||||
Diluted earnings per share before cumulative effect of accounting change(6) | 2,966 | 3,233 | 4,972 | 1,655 | 6,215 | 6.00 |
Year Ended December 31, | ||||||||||||||||||||||||
2000 | 2001 | 2002 | 2003 | 2004 | 2004 | |||||||||||||||||||
(In billions of Won and millions of Dollars) | ||||||||||||||||||||||||
Korean GAAP(1): | ||||||||||||||||||||||||
Working capital(9) | W | (3,252 | ) | W | (331 | ) | W | 499 | W | (1,184 | ) | W | (1,526 | ) | US$ | (1,474 | ) | |||||||
Net property, plants and equipment | 17,435 | 17,139 | 16,853 | 16,374 | 15,721 | 15,188 | ||||||||||||||||||
Total assets | 28,393 | 30,012 | 29,050 | 25,557 | 26,473 | 25,576 | ||||||||||||||||||
Long-term debt, excluding current portion | 5,319 | 6,513 | 9,877 | 9,050 | 6,985 | 6,748 | ||||||||||||||||||
Refundable deposits for telephone installation(10) | 3,040 | 2,349 | 1,534 | 1,227 | 1,087 | 1,050 | ||||||||||||||||||
Total stockholders’ equity | 12,370 | 13,759 | 9,833 | 8,397 | 9,026 | 8,720 | ||||||||||||||||||
U.S. GAAP(8): | ||||||||||||||||||||||||
Working capital(9) | W | (1,985 | ) | W | (666 | ) | W | 678 | W | (99 | ) | W | (763 | ) | US$ | (737 | ) | |||||||
Net property, plants and equipment | 13,600 | 12,804 | 11,995 | 11,515 | 10,846 | 10,479 | ||||||||||||||||||
Total assets | 23,066 | 22,856 | 21,737 | 19,532 | 20,384 | 19,693 | ||||||||||||||||||
Total stockholders’ equity | 10,637 | 11,189 | 7,270 | 5,890 | 6,660 | 6,434 |
2
As of December 31, | ||||||||||||||||||||
2000 | 2001 | 2002 | 2003 | 2004 | ||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Lines installed (thousands)(11) | 24,383 | 24,854 | 25,062 | 25,202 | 25,577 | |||||||||||||||
Lines in service (thousands)(11) | 21,525 | 21,898 | 22,327 | 21,841 | 21,091 | |||||||||||||||
Lines in service per 100 inhabitants(12) | 44.1 | 44.9 | 46.8 | 45.6 | 43.1 | |||||||||||||||
Lines in service per employee(11)(13) | 473 | 497 | 511 | 580 | 559 | |||||||||||||||
PCS subscribers (thousands)(14) | 8,416 | 9,591 | 10,333 | 10,442 | 11,729 | |||||||||||||||
Broadband Internet subscribers (thousands) | 1,729 | 3,858 | 4,922 | 5,589 | 6,078 |
Year Ended December 31, | ||||||||||||||||||||||||
2000 | 2001 | 2002 | 2003 | 2004 | 2004 | |||||||||||||||||||
(In billions of Won and millions of Dollars) | ||||||||||||||||||||||||
Korean GAAP(1): | ||||||||||||||||||||||||
Net cash provided by operating activities | W | 2,651 | W | 3,629 | W | 4,827 | W | 3,190 | W | 4,719 | US$ | 4,559 | ||||||||||||
Net cash used in investing activities | (5,486 | ) | (3,916 | ) | (4,065 | ) | (1,481 | ) | (3,618 | ) | (3,459 | ) | ||||||||||||
Net cash provided by (used in) financing activities | 2,842 | 755 | (844 | ) | (2,065 | ) | (106 | ) | (103 | ) | ||||||||||||||
U.S. GAAP(8): | ||||||||||||||||||||||||
Net cash provided by operating activities | W | 2,196 | W | 2,317 | W | 2,973 | W | 2,174 | W | 3,613 | US$ | 3,491 | ||||||||||||
Net cash used in investing activities | (4,651 | ) | (2,443 | ) | (2,639 | ) | (1,654 | ) | (2,607 | ) | (2,519 | ) | ||||||||||||
Net cash provided by (used in) financing activities | 2,450 | 299 | (254 | ) | (691 | ) | (19 | ) | (19 | ) |
(1) | Effective January 1, 2003, we adopted Statements of Korea Accounting Standards (“SKAS”) No. 2 through No. 9. In accordance with these standards, the cumulative effects on prior years were adjusted to the beginning balance of retained earnings. In addition, certain accounts of the prior year consolidated financial statements were reclassified to conform to the current year’s presentation. See Note 2(a) to the Consolidated Financial Statements. | |
(2) | Includes donations and contributions to the Government’s Information and Telecommunication Improvement Fund, the Korea Electronic Telecommunication Research Institute and other institutes supporting science and technology research. See Note 32 to the Consolidated Financial Statements. | |
(3) | Includes a gain of Won 921 billion in 2000 as a result of our disposition of 2,943,627 shares of SK Telecom to the major shareholders of Hansol M.com in connection with our acquisition of a 47.9% interest in Hansol M.com, a gain of Won 616 billion in 2001 as a result of our disposition of 2,674,580 shares of SK Telecom, a gain of Won 1,154 billion in 2002 as a result of our disposition of 5,457,635 shares of SK Telecom and a gain of Won 776 billion in 2003 as a result of our disposition of 3,809,288 shares of SK Telecom. See Note 8(b) to the Consolidated Financial Statements. | |
(4) | Includes deferred tax expense of Won 233 billion in 2000 related to the write-off of deferred income tax assets of KT M.com due to KT M.com’s conclusion in December 2000 that it was not likely that KT M.com would be able to realize the tax benefit of KT M.com’s loss carryforward. Includes impairment of deferred tax asset of Won 134 billion in 2003 and Won 170 billion in 2004 due to our conclusion in 2003 that we would not be able to realize the tax benefit of our equity in losses of affiliates. See Note 26 to the Consolidated Financial Statements. |
3
(5) | Basic earnings per share under Korean GAAP and U.S. GAAP is calculated by dividing net earnings by the weighted average number of shares outstanding during the period. The weighted average number of shares outstanding during the period was 259,450 thousand for 2002, 216,106 thousand for 2003 and 210,759 thousand for 2004. | |
(6) | Diluted earnings per share are calculated based on the effect of dilutive securities that were outstanding during the period. The denominator of the diluted earnings per share computation is adjusted to include the number of additional common shares that would have been outstanding if the dilutive securities had been converted into common stock. In addition, the numerator is adjusted to include the after-tax amount of interest recognized associated with convertible notes. The weighted average number of shares outstanding was 300,097 thousand for 2002, 263,556 thousand for 2003 and 233,270 thousand for 2004 (Under U.S. GAAP, 300,097 thousand for 2002, 241,291 thousand for 2003 and 233,270 thousand for 2004). | |
(7) | Dividends paid on a per share basis for shares owned by the Government differ from dividends paid on a per share basis to all the other shareholders. The Government completed the disposition of its ownership interest in us in May 2002. The calculation of dividends per share represents the weighted average dividends paid per share. | |
(8) | See Note 36 to the Consolidated Financial Statements for reconciliation to U.S. GAAP. | |
(9) | “Working capital” means current assets minus current liabilities. |
(10) | See “Item 5. Operating and Financial Review and Prospects — Item 5.A. Operating Results — Non-refundable Service Installation Fee,” “Item 4. Information on the Company — Item 4.B. Business Overview — Revenues and Rates — Telephone Services — Local Telephone Service” and Note 16 to the Consolidated Financial Statements for a discussion of changes in the telephone installation charge system. |
(11) | Including public telephones. |
(12) | Excluding public telephones. |
(13) | Excluding employees of our subsidiaries. |
(14) | Includes subscribers of KTF and resale subscribers of KT Corporation and as of December 31, 2000, subscribers of KT M.com. In June and October 2000, we acquired a 47.9% interest in KT M.com. KT M.com merged into KTF on May 1, 2001. As of December 31, 2002, KTF had approximately 8.9 million subscribers and KT Corporation had approximately 1.4 million resale subscribers. As of December 31, 2003, KTF had approximately 8.9 million subscribers and KT Corporation had approximately 1.6 million resale subscribers. As of December 31, 2004, KTF had approximately 9.5 million subscribers and KT Corporation had approximately 2.2 million resale subscribers. |
4
At End | Average | ||||||||||||||||
Period | of Period | Rate(1) | High | Low | |||||||||||||
(Won per US$1.00) | |||||||||||||||||
2000 | 1,267.0 | 1,140.0 | 1,267.0 | 1,105.5 | |||||||||||||
2001 | 1,313.5 | 1,293.4 | 1,369.0 | 1,234.0 | |||||||||||||
2002 | 1,186.3 | 1,242.0 | 1,332.0 | 1,160.6 | |||||||||||||
2003 | 1,192.0 | 1,183.0 | 1,262.0 | 1,146.0 | |||||||||||||
2004 | 1,035.1 | 1,139.3 | 1,195.1 | 1,035.1 | |||||||||||||
2005 (through June 24) | 1,013.5 | 1,009.8 | 1,058.0 | 997.0 | |||||||||||||
January | 1,026.9 | 1,038.0 | 1,058.0 | 1,024.0 | |||||||||||||
February | 1,000.9 | 1,023.1 | 1,044.0 | 1,000.9 | |||||||||||||
March | 1,015.4 | 1,007.8 | 1,023.9 | 997.5 | |||||||||||||
April | 997.0 | 1,010.1 | 1,019.0 | 997.0 | |||||||||||||
May | 1,005.0 | 1,001.8 | 1,009.0 | 997.0 | |||||||||||||
June (through June 24) | 1,013.5 | 1,009.6 | 1,016.0 | 1,003.0 |
(1) | The average rate for each full year is calculated as the average of the noon buying rates on the last business day of each month during the relevant year. The average rate for a full month is calculated as the average of the noon buying rates on each business day during the relevant month (or portion thereof). |
Item 3.B. | Capitalization and Indebtedness |
Item 3.C. | Reasons for Offer and Use of Proceeds |
Item 3.D. | Risk Factors |
5
Fixed-line Telephone Services |
PCS Service |
6
Internet Services |
WTO Agreement |
7
8
• | financial problems or lack of progress in restructuring of chaebols, or Korean conglomerates, other large troubled companies, their suppliers or the financial sector, including credit card companies; | |
• | loss of investor confidence arising from corporate accounting irregularities and corporate governance issues of certain chaebols; | |
• | a slowdown in consumer spending; | |
• | adverse changes or volatility in foreign currency reserve levels, commodity prices, exchange rates, interest rates or stock markets; |
9
• | adverse developments in the economies of countries that are important export markets for Korea, such as the United States, Japan and China, or in emerging market economies in Asia or elsewhere; | |
• | the continued emergence of the Chinese economy, to the extent its benefits (such as increased exports to China) are outweighed by its costs (such as competition in export markets or for foreign investment and the relocation of manufacturing base from Korea to China); | |
• | social and labor unrest; | |
• | a decrease in tax revenues and a substantial increase in the Korean government’s expenditures for unemployment compensation and other social programs that, together, would lead to an increased government budget deficit; | |
• | geo-political uncertainty and risk of further attacks by terrorist groups around the world; | |
• | the recurrence of SARS or avian flu in Asia and other parts of the world; | |
• | deterioration in economic or diplomatic relations between Korea and its trading partners or allies, including deterioration resulting from trade disputes or disagreements in foreign policy; | |
• | political uncertainty or increasing strife among or within political parties in Korea; | |
• | hostilities involving oil producing countries in the Middle East and any material disruption in the supply of oil or increase in the price of oil; and | |
• | an increase in the level of tension or an outbreak of hostilities between North Korea and Korea or the United States. |
10
• | dividends, which will be paid in Won to the depositary bank and converted by the depositary bank into Dollars; | |
• | the Dollar value of the proceeds which a holder will receive upon sale in Korea of the shares; and | |
• | the secondary market price of the ADSs. |
11
• | a registration statement filed by us under the Securities Act of 1933, as amended, is in effect with respect to those shares; or | |
• | the offering and sale of those shares is exempt from or is not subject to the registration requirements of the Securities Act. |
12
Item 4. | Information on the Company |
Item 4.A. | History and Development of the Company |
Item 4.B. | Business Overview |
• | telephone services, including local, domestic long-distance and international long-distance fixed-line telephone services and interconnection services to other telecommunications companies; | |
• | broadband Internet access service and other Internet-related services; | |
• | PCS mobile telecommunications service; and |
13
• | various other services, including leased line service and other data communication service, satellite service and system and network integration service. |
• | We are currently the dominant provider of fixed-line telephone services in Korea with approximately 25.5 million installed lines, of which 21.0 million lines were in service as of March 31, 2005. As of March 31, 2005, our market share of the local market was 93.8% based on the number of local fixed-line subscribers in Korea. Based on revenues in March 2005 estimated by us, our market share of the domestic long-distance market was 83.2% and our market share of the international long-distance market was 45.6%; | |
• | We are one of the world’s largest broadband Internet access providers and Korea’s largest provider in terms of subscribers, with 6.1 million subscribers as of March 31, 2005, representing a market share of 50.7%; | |
• | We are Korea’s second largest mobile telecommunications service provider. KTF, our consolidated subsidiary, had approximately 12.0 million subscribers (including our resale subscribers) as of March 31, 2005, representing a market share of 32.5% of the total mobile service market in Korea based on the number of mobile subscribers; and | |
• | We are also the leading provider of data communication service in Korea, with a market share of 67.5% of the domestic leased line market in March 2005 based on revenues estimated by us. |
14
Broadband Internet Access Market |
Mobile Telecommunications Service Market |
As of December 31, | ||||||||||||||||||||
2000 | 2001 | 2002 | 2003 | 2004 | ||||||||||||||||
Total Korean Population(1) | 47,008 | 47,343 | 47,640 | 47,925 | 48,199 | |||||||||||||||
Mobile Subscribers(2) | 26,817 | 29,046 | 32,342 | 33,592 | 36,586 | |||||||||||||||
PCS(2) | 12,364 | 13,867 | 15,122 | 15,279 | 17,803 | |||||||||||||||
Cellular(2) | 14,453 | 15,179 | 17,220 | 18,313 | 18,783 | |||||||||||||||
Mobile Subscriber Growth Rate | 14.4 | % | 8.3 | % | 11.3 | % | 3.9 | % | 8.9 | % | ||||||||||
Mobile Penetration(3) | 57.0 | % | 61.4 | % | 67.9 | % | 70.1 | % | 75.9 | % |
(1) | In thousands, based on population trend estimates by the National Statistical Office of Korea. |
(2) | In thousands, based on information compiled by the Ministry of Information and Communication. |
(3) | Penetration is determined by dividing mobile subscribers by total Korean population. |
15
We are the only fully integrated telecommunications service provider in Korea |
We have a large customer base, dominant market position and strong brand recognition |
Year Competition | KT Corporation | |||||||
Service | Introduced | Market Share | ||||||
Local(1) | 1999 | 93.8 | % | |||||
Domestic long distance(2) | 1996 | 83.2 | % | |||||
International long distance(2) | 1991 | 45.6 | % | |||||
Broadband Internet access(1) | 1998 | 50.7 | % |
(1) | In terms of subscribers as of March 31, 2005 announced by the Ministry of Information and Communication. |
(2) | In terms of revenues in March 2005 estimated by us. |
16
We have achieved critical mass in the mobile telecommunications service market |
We have a proven track record of improving our efficiency and profitability |
Focus on high-growth, high-margin businesses |
17
Leverage dominant market positions to maximize profitability |
Promote synergies within the KT Corporation group |
• | we have been successful in reselling PCS services through KT Corporation, with approximately 2.5 million resale subscribers as of March 31, 2005; | |
• | our Nespot Swing service and KTF’s mobile service integrate wireless and fixed-line services by enabling subscribers with PDA phones access to high speed Internet in hot-spot zones, Megapass service in fixed-line environments and KTF’s wireless data service outside the hot-spot zones; |
18
• | our One Phone service integrates our fixed-line services and KTF’s wireless service by enabling specially designed handsets to act as cordless phones within the transmission range of a user’s base transmitter, and to act as PCS mobile phones outside such areas; and | |
• | our enhanced video-on-demand services allow subscribers of both our Megapass broadband Internet access service and SkyLife satellite broadcasting service to experience higher-quality video and audio offerings on demand through an integrated set-top box. |
Continue to improve operational efficiencies through company-wide process innovation |
Telephone Services |
As of or for the Year Ended December 31, | ||||||||||||||||||||
2000 | 2001 | 2002 | 2003 | 2004 | ||||||||||||||||
Lines installed (thousands)(1) | 24,383 | 24,854 | 25,104 | 25,202 | 25,577 | |||||||||||||||
Lines in service (thousands)(1) | 21,525 | 21,898 | 22,327 | 21,841 | 21,091 | |||||||||||||||
Lines in service per 100 inhabitants(2) | 44.1 | 44.9 | 46.8 | 45.6 | 43.1 | |||||||||||||||
Percentage of lines connected to digital exchanges | 79.7 | 87.5 | 92.4 | 100.0 | 100.0 | |||||||||||||||
Lines in service per employee(3) | 473 | 497 | 511 | 580 | 559 | |||||||||||||||
Fiber optic cable (kilometers) | 111,728 | 118,815 | 122,243 | 128,478 | 133,181 | |||||||||||||||
Number of public telephones installed (thousands) | 539 | 500 | 446 | 374 | 317 | |||||||||||||||
Domestic long-distance call minutes (millions)(4) | 21,563 | 19,632 | 17,133 | 17,007 | 15,024 | |||||||||||||||
Local call pulses (millions)(5) | 34,691 | 30,968 | 26,859 | 23,597 | 20,585 |
(1) | Including lines used for public telephones, which were 538,983 lines, 499,566 lines, 446,367 lines, 374,000 lines and 317,000 lines, respectively, for the years presented. |
(2) | Source: KT Corporation. Excluding public telephones. |
(3) | Excluding employees of our subsidiaries and including lines used for public telephones. |
(4) | Including calls placed from public telephones. |
(5) | Including calls placed from public telephones. |
19
Year Ended December 31, | |||||||||||||||||||||
2000 | 2001 | 2002 | 2003 | 2004 | |||||||||||||||||
(In millions of billed minutes) | |||||||||||||||||||||
Incoming international long-distance calls | 460.1 | 515.8 | 544.0 | 528.8 | 569.8 | ||||||||||||||||
Outgoing international long-distance calls | 552.1 | 552.9 | 572.3 | 524.7 | 527.4 | ||||||||||||||||
Total | 1,012.2 | 1,068.7 | 1,116.3 | 1,053.5 | 1,097.2 | ||||||||||||||||
Internet Services |
20
• | xDSL services under the “Megapass” brand name; | |
• | fiber-optic cable-based service under the “Ntopia” brand name; and | |
• | wireless LAN service under the “Nespot” brand name, which is designed to integrate fixed-line and wireless services by offering high speed wireless Internet access to laptops and PDAs in hot-spot zones and Megapass service in fixed-line environments. |
21
PCS Service |
22
As of or for the Year Ended December 31, | ||||||||||||
2002 | 2003 | 2004 | ||||||||||
Outgoing Minutes (in thousands) | 16,130,211 | 16,035,117 | 19,950,143 | |||||||||
Average Monthly Outgoing Minutes per Subscriber(1) | 153 | 159 | 181 | |||||||||
Average Monthly Revenue per Subscriber(2) | W38,694 | W38,539 | W39,890 | |||||||||
Number of Subscribers (in thousands)(3) | 10,333 | 10,442 | 11,729 |
(1) | The average monthly outgoing minutes per subscriber is computed by dividing the total minutes of usage for the period by the weighted average number of subscribers for the period and dividing the quotient by the number of months in the period. The weighted average number of subscribers is the sum of the total number of subscribers at the end of each month divided by the number of months in the period. |
(2) | The average monthly revenue per subscriber is computed by dividing total monthly access fees, usage charges, interconnection fees and value-added service fees for the period by the weighted average number of subscribers and dividing the quotient by the number of months in the period. |
(3) | Includes resale subscribers of KT Corporation who utilized KTF’s network. KT Corporation had approximately 2.2 million resale subscribers as of December 31, 2004. |
23
Data Communication Service |
Satellite Services |
Miscellaneous Services |
• | system and network integration service; | |
• | services provided by KTH; and | |
• | real estate-related service. |
24
Year Ended December 31, | |||||||||||||||
2002 | 2003 | 2004 | |||||||||||||
Telephone services: | |||||||||||||||
Local service | 17.6 | % | 18.8 | % | 17.4 | % | |||||||||
Non-refundable service installation fees | 1.5 | 0.8 | 0.5 | ||||||||||||
Domestic long-distance service | 6.5 | 5.8 | 5.0 | ||||||||||||
International long-distance service | 3.3 | 2.8 | 2.5 | ||||||||||||
Land-to-mobile interconnection | 13.1 | 12.9 | 10.9 | ||||||||||||
Sub-total | 42.0 | 41.1 | 36.3 | ||||||||||||
Internet services: | |||||||||||||||
Broadband Internet access service | 9.6 | 11.8 | 12.5 | ||||||||||||
Miscellaneous Internet-related services(1) | 2.5 | 3.0 | 2.8 | ||||||||||||
Sub-total | 12.1 | 14.8 | 15.3 | ||||||||||||
PCS service | 25.1 | 25.9 | 28.1 | ||||||||||||
Sales of goods(2) | 8.3 | 7.2 | 10.3 | ||||||||||||
Other services: | |||||||||||||||
Data communications service | 7.7 | 6.7 | 5.6 | ||||||||||||
Satellite service | 0.8 | 0.8 | 0.7 | ||||||||||||
Miscellaneous(3) | 4.1 | 3.5 | 3.7 | ||||||||||||
Sub-total | 12.5 | 11.0 | 10.0 | ||||||||||||
Total operating revenues | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||
(1) | Includes revenues from Kornet Internet connection service and services provided by our Internet data centers andbizmeka.com. |
(2) | Includes PCS handset sales. |
(3) | Includes revenues from system and network integration services, KTH and real estate related service. |
Telephone Services |
• | installation fees for new lines; | |
• | monthly basic charges; and | |
• | monthly usage charges based on the number of call pulses. |
25
May 1, | Feb. 10, | Aug. 1, | Dec. 1, | Sept. 1, | April 15, | Nov. 1, | |||||||||||||||||||||||
1991 | 1993 | 1994 | 1996 | 1997 | 2001 | 2001 | |||||||||||||||||||||||
Local Usage Charges (per pulse)(1) | |||||||||||||||||||||||||||||
Regular service | W25 | W30 | W40 | W41.6 | W45 | W39 | W39 | ||||||||||||||||||||||
Public telephone | 20 | 30 | 40 | 40 | 50 | 50 | 70 |
(1) | Since January 1, 1990, usage charges for local service in those metropolitan areas subject to measured service have been based on the number of pulses, which are a function of the duration and number of calls, and per pulse rates. Before January 1, 1993, in areas not subject to measured service, a pulse was triggered once for each local telephone call, regardless of the length of the call. Commencing January 1, 1993, measured service applies to all lines in service. A pulse is triggered at the beginning of each local call and every three minutes thereafter from 8:00 a.m. to 9:00 p.m. on weekdays and every 258 seconds thereafter on holidays and from 9:00 p.m. to 8:00 a.m. on weekdays. |
Rates from September 1998 to April 14, 2001 | Original Plan | Second Plan | ||
Installation Deposit (refunded upon termination of service) | Between Won 122,000 to Won 242,000, depending on location | None | ||
Non-refundable Installation Fee | Won 8,000 | Won 100,000 | ||
Monthly Basic Charge | Between Won 1,500 to Won 2,500, depending on location | Between Won 2,000 to Won 4,000, depending on location |
Rates Starting April 15, 2001 | New Plan | |
Installation Deposit (refunded upon termination of service) | None | |
Non-refundable Installation Fee | Won 60,000 (including value added tax) | |
Monthly Basic Charge | Between Won 3,000 to Won 5,200, depending on location |
26
Date of Rate Change(1) | |||||||||||||||||||||||||||||||||
May 1, | Feb. 10, | Aug. 1, | Dec. 1, | Sept. 1, | Dec. 1, | April 15, | Nov. 1, | ||||||||||||||||||||||||||
1991 | 1993 | 1994 | 1996 | 1997 | 2000 | 2001 | 2001 | ||||||||||||||||||||||||||
Domestic Long-Distance Charges (per three minutes)(1)(2) | |||||||||||||||||||||||||||||||||
Up to 30 km | W | 100 | W | 100 | W | 40 | W | 41.6 | W | 45 | W | 45 | W | 39 | W | 39 | |||||||||||||||||
Up to 100 km | 400 | 360 | 200 | 183 | 172 | 192 | 192 | 261 | |||||||||||||||||||||||||
100 km or longer | 900 | 675 | 313 | 277 | 245 | 252 | 252 | 261 |
(1) | Domestic long-distance calls of up to 30 kilometers are billed on the same basis as local calls. Before April 15, 2001, for domestic long-distance calls in excess of 30 kilometers, a pulse was triggered at the beginning of each call and every 47 seconds for calls up to 100 kilometers or every 33 seconds for calls in excess of 100 kilometers. Commencing April 15, 2001, a pulse was triggered at the beginning of each call and every 30 seconds thereafter. Commencing November 1, 2001, a pulse is triggered at the beginning of each call and every 10 seconds thereafter. |
(2) | Rates for domestic long-distance calls in excess of 30 kilometers are currently discounted (by an adjustment in the period between pulses) by 10% on holidays and from 6:00 a.m. to 8:00 a.m. on weekdays, and by 30% from midnight to 6:00 a.m. everyday. |
• | amounts we bill to customers for outgoing calls made to foreign countries (including customers who make calls to Korea from foreign countries under our home country direct-dial service); |
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• | amounts we bill to foreign telecommunications carriers and administrations for connection to the Korean telephone network in respect of incoming calls (including calls placed in Korea by customers of the foreign carriers for home country direct-dial service); and | |
• | other revenues, including revenues from international calls placed from public telephones. |
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Effective Starting | ||||||||||||||||
May 1, | July 1, | July 1, | January 1, | |||||||||||||
2002 | 2003 | 2004 | 2005 | |||||||||||||
SK Telecom | W | on 45.7 | W | on 41.0 | W | on 31.8 | W | on 31.2 | ||||||||
KTF(1) | W | on 53.5 | W | on 48.0 | W | on 47.7 | W | on 46.7 | ||||||||
LG Telecom | W | on 59.0 | W | on 52.9 | W | on 58.5 | W | on 55.0 |
(1) | Eliminated in consolidation of financial statements. |
Effective Starting | ||||||||||||
May 1, | July 1, | September 1, | ||||||||||
2002 | 2003 | 2004 | ||||||||||
Weekday | W | on 93.8 | W | on 89.0 | W | on 87.0 | ||||||
Weekend | W | on 88.9 | W | on 84.0 | W | on 82.0 | ||||||
Evening(1) | W | on 83.9 | W | on 79.2 | W | on 77.2 |
(1) | Evening rates are applicable from 12:00 a.m. to 6:00 a.m. everyday. |
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Effective Starting | ||||||||||||||||
July 1, | January 1, | January 1, | January 1, | |||||||||||||
2002 | 2003 | 2004 | 2005 | |||||||||||||
Local land-to-land and mobile-to-land interconnection | W | on 12.7 | W | on 11.3 | W | on 16.2 | W | on 16.5 | ||||||||
Long-distance land-to-land and mobile-to-land interconnection(1) | W | on 16.2 | W | on 14.9 | W | on 17.8 | W | on 18.1 | ||||||||
Long-distance land-to-land and mobile-to-land interconnection(2) | W | on 20.3 | W | on 19.0 | W | on 20.5 | W | on 20.8 |
(1) | Interconnection between local switching centers and between local switching centers and domestic long-distance switching centers located within 30 kilometers. |
(2) | Interconnection involving domestic long-distance switching centers located greater than 30 kilometers away. |
Internet Services |
Maximum Speed | Monthly Fee(1) | |||||||
Megapass Special II | 50 Mbps | W | on 45,000 | |||||
Megapass Special I | 20 Mbps | W | on 42,000 | |||||
Megapass Premium | 8/13 Mbps | W | on 40,000 | |||||
Megapass Lite | 4 Mbps | W | on 30,000 |
(1) | We provide discounts of up to 20.0% for mandatory subscription periods ranging from one to three years. |
PCS Service and PCS Handset Sales |
• | initial subscription fees; | |
• | monthly access fees; | |
• | usage charges for outgoing calls; | |
• | usage charges for wireless data transmission; and | |
• | value-added monthly service fees. |
30
Data Communication Service |
Network Service Providers |
31
Market Share (%) | ||||||||
KT Corporation | Hanaro | |||||||
December 31, 2002 | 96.0 | 4.0 | ||||||
December 31, 2003 | 95.8 | 4.2 | ||||||
December 31, 2004 | 93.8 | 6.2 |
Market Share (%) | ||||||||||||||||
KT Corporation | DACOM | Onse | Hanaro | |||||||||||||
2002 | 85.0 | 10.6 | 4.4 | — | ||||||||||||
2003 | 84.3 | 11.5 | 4.2 | — | ||||||||||||
2004 | 84.4 | 11.0 | 3.8 | 0.8 |
Market Share (%) | ||||||||||||||||||||
KT Corporation | DACOM | Onse | Hanaro | SK Telink | ||||||||||||||||
Up to 30 kilometers | W | 39 | W | 39 | W | 39 | W | 39 | W | 39 | ||||||||||
30 kilometers or longer | 261 | 250 | 254 | 248 | 248 |
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Market Share (%) | ||||||||||||||||
KT Corporation | DACOM | SK Telink | Onse | |||||||||||||
2002 | 66.5 | 22.1 | — | 11.4 | ||||||||||||
2003 | 64.4 | 24.0 | 1.0 | 10.6 | ||||||||||||
2004 | 53.7 | 23.1 | 14.7 | 8.5 |
KT Corporation | DACOM | Onse | Hanaro | |||||||||||||
United States | W | 288 | W | 288 | W | 276 | W | 276 | ||||||||
Japan | 690 | 678 | 672 | 672 | ||||||||||||
China | 996 | 996 | 984 | 984 | ||||||||||||
Australia | 1,092 | 1,086 | 1,044 | 1,044 | ||||||||||||
Great Britain | 1,008 | 996 | 966 | 966 | ||||||||||||
Germany | 948 | 942 | 912 | 912 |
Market Share (%) | ||||||||||||||||||||
KT Corporation | Hanaro | Korea Thrunet | Cable Providers | Others | ||||||||||||||||
December 31, 2002 | 47.3 | 27.6 | 12.6 | 5.2 | 7.4 | |||||||||||||||
December 31, 2003 | 50.0 | 24.4 | 11.6 | 7.1 | 6.9 | |||||||||||||||
December 31, 2004 | 51.0 | 23.1 | 10.8 | 9.0 | 6.1 |
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KT Corporation | Hanaro | Korea Thrunet | Cable Providers(1) | |||||||||||||
Monthly subscription fee | W | 25,500 | W | 24,920 | W | 23,800 | W | 16,800 | ||||||||
Monthly modem rental fee | 3,000 | 3,000 | 3,000 | 1,000 | ||||||||||||
Initial installation fee | 30,000 | 30,000 | 30,000 | 55,000 | ||||||||||||
Additional installation fee upon moving | 10,000 | 10,000 | 18,000 | 55,000 |
(1) | These are fees typically charged by cable providers. |
Market Share (%) | ||||||||||||
KTF | SK Telecom | LG Telecom | ||||||||||
December 31, 2002 | 32.0 | 53.2 | 14.8 | |||||||||
December 31, 2003 | 31.1 | 54.5 | 14.4 | |||||||||
December 31, 2004 | 32.1 | 51.3 | 16.6 | |||||||||
March 31, 2005 | 32.5 | 51.2 | 16.3 |
KTF | SK Telecom | LG Telecom | ||||||||||
Type of service | PCS | Cellular | PCS | |||||||||
Initial subscription fee | W | 30,000 | W | 55,000 | W | 30,000 | ||||||
Monthly access fee | 13,000 | 13,000 | 12,000 | |||||||||
Usage charge per 10 seconds | 18 | 20 | 18 |
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Value-Added Service Providers |
Specific Service Providers |
Foreign Competition |
• | network service providers, such as us, which typically provide telecommunications services with their own telecommunications networks and related facilities. Their services may include local, domestic long-distance and international long-distance telephone services, mobile communications service, paging service and trunked radio system service; | |
• | value-added service providers, which provide telecommunications services other than those services specified for network service providers, such as data communications using telecommunications facilities leased from network service providers; and | |
• | specific service providers, which may occupy a middle ground between network service providers and value-added service providers and are broadly defined by law as telecommunications service providers that provide network services using the telecommunications network facilities or services of network service providers. |
35
Rates |
Other Activities |
• | engage in businesses other than certain businesses specified in the Presidential Decree under the Telecommunications Business Law such as telecommunications equipment manufacturing business and telecommunications network construction business; | |
• | change the conditions for its licenses; | |
• | transfer, terminate, suspend or spin off all or a part of the business for which it is licensed; | |
• | acquire all or a part of the business of another network service provider; or | |
• | enter into a merger with another network service provider. |
• | formulating the basic plan for the telecommunications industry; | |
• | preparing periodic reports to the National Assembly of Korea regarding developments in the telecommunications industry; | |
• | setting technical standards for all service providers; and | |
• | promoting technological development and technological standardization. |
36
Korea Communications Commission |
• | promote fair competition in the telecommunications industry; | |
• | protect the rights of telecommunications services users; and | |
• | settle disputes between telecommunications service providers. |
Foreign Investment |
37
Individual Shareholding Limit |
Government as Shareholder |
Government as Regulator |
Government as Customer |
Contributions to Government |
38
Item 4.C. | Organizational Structure |
Item 4.D. | Property, Plants and Equipment |
Exchanges and Transmission Equipment |
Access Lines |
39
Domestic Backbone |
International Long-Distance Network |
PCS Networks |
• | cell sites, which are physical locations equipped with base transceiver stations consisting of transmitters, receivers and other equipment used to communicate through radio channels with subscribers’ mobile telephone handsets within the range of a cell; | |
• | base station controllers, which connect to and control, the base transceiver stations; | |
• | mobile switching centers, which in turn control the base station controllers and the routing of telephone calls; and | |
• | transmission lines, which connect the mobile switching centers, base station controllers, base transceiver stations and the public switched telephone network. |
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Mobile switching centers | 28 | |||
Base station controllers | 518 | |||
Base transceiver stations | 13,627 | |||
Indoor and outdoor repeaters | 157,580 | |||
Population coverage of 2.0 generation network | 98 | % | ||
Population coverage of 2.5 generation network | 87 | % | ||
Population coverage of 3.0 generation (W-CDMA) network | 27 | % |
International Submarine Cable Networks |
• | a 20.9% interest in the 1,762-kilometer R-J-K fiber optic submarine cable network connecting Korea, Japan and Russia, completed in January 1995; | |
• | a 2.3% interest in the 12,083-kilometer Asia Pacific Cable Network connecting Korea, Japan and Hong Kong with six Southeast Asian countries and Australia, completed in January 1997; | |
• | a 1.4% interest in the 29,000-kilometer Fiber Optic Link Around the Globe network connecting Korea, Southeast Asia, the Middle East and Europe, completed in April 1997; | |
• | a 2.0% interest in the 39,000-kilometer Southeast Asia-Middle East-Western Europe 3 Cable Network linking 34 countries, completed in December 1999; | |
• | a 6.7% interest in the 30,444-kilometer China-U.S. Cable Network linking Korea, China, Japan, Taiwan and the United States, completed in January 2000; | |
• | a 3.8% interest in the 19,000-kilometer Asia Pacific Cable Network 2 connecting Korea, China, Japan, Taiwan, Hong Kong, Philippines, Singapore and Malaysia, to be completed in September 2001; and | |
• | a 20.0% interest in the 500-kilometer Korea-Japan Cable Network linking Korea and Japan, completed in March 2002. |
Item 5.A. | Operating Results |
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Year Ended December 31, | |||||||||||||||||||||||||||
2002 | 2003 | 2004 | |||||||||||||||||||||||||
(Percentage | (Percentage | (Percentage | |||||||||||||||||||||||||
(In | of total | (In | of total | (In | of total | ||||||||||||||||||||||
billions of | operating | billions of | operating | billions of | operating | ||||||||||||||||||||||
Won) | revenues) | Won) | revenues) | Won) | revenues) | ||||||||||||||||||||||
Operating revenues: | |||||||||||||||||||||||||||
Telephone services: | |||||||||||||||||||||||||||
Local service | W | 2,897 | 17.6 | % | W | 3,026 | 18.8 | % | W | 2,975 | 17.4 | % | |||||||||||||||
Non-refundable service installation fees | 251 | 1.5 | 125 | 0.8 | 79 | 0.5 | |||||||||||||||||||||
Domestic long-distance service | 1,061 | 6.5 | 932 | 5.8 | 854 | 5.0 | |||||||||||||||||||||
International long-distance service | 534 | 3.3 | 451 | 2.8 | 420 | 2.5 | |||||||||||||||||||||
Land-to-mobile interconnection | 2,152 | 13.1 | 2,075 | 12.9 | 1,861 | 10.9 | |||||||||||||||||||||
Sub-total | 6,895 | 42.0 | 6,611 | 41.1 | 6,189 | 36.3 | |||||||||||||||||||||
Internet services: | |||||||||||||||||||||||||||
Broadband Internet access service | 1,572 | 9.6 | 1,885 | 11.8 | 2,135 | 12.5 | |||||||||||||||||||||
Miscellaneous Internet-related services | 418 | 2.5 | 485 | 3.0 | 472 | 2.8 | |||||||||||||||||||||
Sub-total | 1,990 | 12.1 | 2,370 | 14.8 | 2,607 | 15.3 | |||||||||||||||||||||
PCS service | 4,127 | 25.1 | 4,164 | 25.9 | 4,800 | 28.1 | |||||||||||||||||||||
Sale of goods | 1,367 | 8.3 | 1,154 | 7.2 | 1,755 | 10.3 | |||||||||||||||||||||
Others: | |||||||||||||||||||||||||||
Data communication service | 1,262 | 7.7 | 1,084 | 6.7 | 963 | 5.6 | |||||||||||||||||||||
Satellite service | 124 | 0.8 | 120 | 0.8 | 119 | 0.7 | |||||||||||||||||||||
Miscellaneous(1) | 673 | 4.1 | 566 | 3.5 | 636 | 3.7 | |||||||||||||||||||||
Sub-total | 2,059 | 12.5 | 1,769 | 11.0 | 1,718 | 10.0 | |||||||||||||||||||||
Total operating revenues | 16,437 | 100.0 | 16,068 | 100.0 | 17,068 | 100.0 | |||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||
Salaries and related costs | 3,089 | 18.8 | 3,710 | 23.1 | 2,737 | 16.0 | |||||||||||||||||||||
Depreciation and amortization | 3,797 | 23.1 | 3,757 | 23.4 | 3,797 | 22.2 | |||||||||||||||||||||
Other operating and maintenance(2) | 7,170 | 43.6 | 6,778 | 42.2 | 8,054 | 47.2 | |||||||||||||||||||||
Total operating expenses | 14,056 | 85.5 | 14,245 | 88.7 | 14,588 | 85.5 | |||||||||||||||||||||
Operating income | 2,381 | 14.5 | 1,823 | 11.3 | 2,481 | 14.5 |
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(1) | Includes revenues from system and network integration services, KTH and real estate-related service. |
(2) | For a breakdown of other operating and maintenance expenses, see “— Item 5.A. Operating Results — Other Operating and Maintenance Expenses.” |
• | developing and implementing IMT-2000 services; | |
• | stock swap transactions with SK Telecom; | |
• | employee reductions and payment of severance and retirement benefits; | |
• | changes in the rate structure for interconnection; | |
• | changes in the rate structure for local, domestic long-distance and international long-distance telephone services; and | |
• | fines imposed by the Fair Trade Commission. |
Developing and Implementing IMT-2000 Services |
43
Stock Swap Transactions with SK Telecom |
Employee Reductions and Payment of Severance and Retirement Benefits |
A Change in the Rate Structure for Interconnection |
Changes in the Rate Structure for Local, Domestic Long-distance and International Long-distance Telephone Services |
44
Fines for Unfair Collaborative Practices Imposed by the Fair Trade Commission |
• | allowances for doubtful accounts; | |
• | useful lives of property, plant and equipment; | |
• | impairment of long-lived assets including the IMT-2000 frequency usage right; | |
• | impairment of investment securities; and | |
• | income taxes |
Allowances for doubtful accounts |
45
2002 | 2003 | 2004 | ||||||||||
(In millions of Won) | ||||||||||||
Balance at beginning of year | W | 330,345 | W | 430,066 | W | 646,273 | ||||||
Increase due to the changes of consolidated subsidiaries | 483 | 65 | — | |||||||||
Provision | 194,288 | 363,774 | 287,073 | |||||||||
Write-offs | (95,050 | ) | (147,632 | ) | (230,711 | ) | ||||||
Balance at end of year | W | 430,066 | W | 646,273 | W | 702,635 | ||||||
Useful lives of property, plant and equipment |
Impairment of long-lived assets including the IMT-2000 frequency usage right |
46
Impairment of investment securities |
Income Taxes |
47
Telephone Service Revenues |
48
• | amounts we bill to our customers for outgoing calls made to foreign countries (including customers who make calls to Korea from foreign countries under our home country direct-dial service); | |
• | amounts we bill to foreign telecommunications carriers and administrations for connection to the Korean telephone network in respect of incoming calls; | |
• | amounts we charge to fixed-line competitors, mobile service providers and voice resellers as interconnection fees for using our international network in providing their services; and | |
• | other revenues, including revenues from international calls placed from public telephones and international leased lines. |
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Internet Service Revenues |
PCS Revenues |
• | initial subscription fees; | |
• | monthly access fees; | |
• | usage charges for outgoing calls; | |
• | usage charges for wireless data transmission; and | |
• | value-added monthly service fees. |
50
Sale of Goods |
Other Revenues |
Salaries and Related Costs |
51
Depreciation and Amortization |
Other Operating and Maintenance Expenses |
Year Ended December 31, | Year-Ended December 31, | ||||||||||||||||||||
2002 | 2003 | 2004 | 2002/2003 | 2003/2004 | |||||||||||||||||
(In billions of Won) | |||||||||||||||||||||
Commissions and cost of services and settlement payments | W | 2,344 | W | 2,117 | W | 2,616 | (9.7 | ) % | 23.6 | % | |||||||||||
Cost of goods sold | 1,346 | 1,131 | 1,782 | 16.0 | 57.5 | ||||||||||||||||
Interconnection charge | 1,188 | 1,077 | 973 | (9.3 | ) | (9.6 | ) | ||||||||||||||
Repairs and maintenance | 421 | 451 | 488 | 7.1 | 8.2 | ||||||||||||||||
Miscellaneous expenses | 1,871 | 2,002 | 2,195 | 7.0 | 9.6 | ||||||||||||||||
Total | W | 7,170 | W | 6,778 | W | 8,054 | (5.5 | ) % | 18.8 | % | |||||||||||
52
Operating Income |
53
Income Taxes |
Net Earnings |
54
Inflation |
Item 5.B. | Liquidity and Capital Resources |
For the Years Ended December 31, | ||||||||||||
2002 | 2003 | 2004 | ||||||||||
(In billions of Won) | ||||||||||||
Net cash provided by operating activities | W | 4,827 | W | 3,190 | W | 4,719 | ||||||
Net cash used in investing activities | 4,065 | 1,481 | 3,618 | |||||||||
Net cash used in financing activities | 844 | 2,065 | 106 | |||||||||
Cash and cash equivalents at beginning of period | 1,169 | 1,087 | 761 | |||||||||
Cash and cash equivalents at end of period | 1,087 | 761 | 1,756 | |||||||||
Net increase (decrease) in cash and cash equivalents | (82 | ) | (326 | ) | 995 |
55
Payments Due by Period | |||||||||||||||||||||
Less than | 1-3 | 4-5 | After 5 | ||||||||||||||||||
Contractual Obligations(1) | Total | 1 Year | Years | Years | Years | ||||||||||||||||
(In billions of Won) | |||||||||||||||||||||
Long-term debt obligations (including current portion of long-term debt)(2) | W | 11,731 | W | 4,714 | W | 2,543 | W | 1,852 | W | 2,622 | |||||||||||
Capital lease obligations | 22 | 5 | 10 | 7 | — | ||||||||||||||||
Operating lease obligations | 184 | 68 | 73 | 12 | 31 | ||||||||||||||||
Other long-term liabilities reflected on our balance sheet | 704 | 54 | 90 | 240 | 320 | ||||||||||||||||
Total | W | 12,641 | W | 4,841 | W | 2,716 | W | 2,111 | W | 2,973 | |||||||||||
(1) | Contractual obligations represent on-balance sheet contractual liabilities as of the consolidated balance sheet date excluding refundable deposits for telephone installation and payments for customer call bonus points, which do not have definitive payment schedules. |
(2) | Includes: (1) the then outstanding amount of Won 1,179 billion of convertible notes due 2007, of which Won 1,164 billion was repaid on January 4, 2005 upon election by noteholders to exercise their option to redeem the notes, (2) the then outstanding amount of Won 522 billion of bonds due 2005 issued to |
56
Microsoft Corporation, which we repaid on January 4, 2005 upon maturity, and (3) the then outstanding amount of Won 1,323 billion of convertible bonds due 2005 issued to domestic investors, which we repaid, together with accrued interest, on May 25, 2005 upon maturity. |
Liquidity |
57
As of December 31, | ||||||||||||
2002 | 2003 | 2004 | ||||||||||
(In billions of Won) | ||||||||||||
Cash and cash equivalents | W | 1,087 | W | 761 | W | 1,756 | ||||||
Short-term financial instruments | 820 | 61 | 984 | |||||||||
Current portion of available-for-sale securities | 853 | 287 | 258 | |||||||||
Notes and accounts receivable — trade, net of allowance for doubtful accounts | 2,983 | 2,647 | 2,793 | |||||||||
Accounts receivable — other | 513 | 323 | 365 | |||||||||
Inventories | 244 | 365 | 374 |
As of December 31, | ||||||||||||
2002 | 2003 | 2004 | ||||||||||
(In billions of Won) | ||||||||||||
Notes and accounts payable — trade | W | 1,167 | W | 1,023 | W | 853 | ||||||
Short-term borrowings | 1,116 | 632 | 439 | |||||||||
Current portion of long-term debt | 1,846 | 2,173 | 4,756 | |||||||||
Accounts payable — other | 1,485 | 1,233 | 1,123 |
Capital Expenditures |
• | expansion and modernization of our networks, which are expected to account for approximately 29.6% of all capital expenditures in 2005; | |
• | capital investments for our Internet services, which are expected to account for approximately 20.8% of all capital expenditures in 2005; |
58
• | capital investments in PCS and IMT-2000 mobile telecommunications services made by KTF, which are expected to account for approximately 31.1% of all capital expenditures in 2005; | |
• | capital investments in data communications and related services (including investments for leased line service and other data communications services but excluding broadband), which are expected to account for approximately 8.9% of all capital expenditures in 2005; | |
• | capital investments in our fixed-line voice services, which are expected to account for approximately 3.6% of all capital expenditures in 2005; and | |
• | miscellaneous investment expenses which are expected to account for approximately 6.0% of all capital expenditures in 2005. |
• | the difference in the treatment of minority interests; | |
• | the difference in the treatment of impairment loss relating to equity method; | |
• | the difference in the treatment of deferred service installation fees; and | |
• | the difference in the treatment of depreciation, |
• | other differences in the treatment of equity method affiliates; and | |
• | the aggregate effect of deferred income taxes recognized under U.S. GAAP. |
59
Item 5.C. | Research and Development, Patents, Licenses, Etc. |
• | a marketing and technology laboratory; | |
• | a convergence laboratory; | |
• | a telecommunications network laboratory; | |
• | an operations support system laboratory; and | |
• | a new business planning group that organizes all of our research and development activities. |
60
• | integrated operations support system; | |
• | enhanced Internet phone service; | |
• | home network and application services; | |
• | next generation telecommunication network construction and engineering, including broadband convergence network; | |
• | Internet protocol infrastructure and access network engineering; | |
• | development of technology for installation of optical fiber to a subscriber’s home; | |
• | integration of wireless LAN and third generation services; | |
• | wireless broadband Internet access service; and | |
• | various new products and services, including One Phone, Ann and dial-tone services. |
Item 5.D. | Trend Information |
Item 5.E. | Off-balance Sheet Arrangements |
Item 5.F. | Tabular Disclosure of Contractual Obligations |
Item 6. | Directors, Senior Management and Employees |
Item 6.A. | Directors and Senior Management |
• | up to four standing directors, including the President; and | |
• | up to eight outside directors. |
61
Expiration | ||||||||||||||
Years as | of Term | |||||||||||||
Name | Position | Director | Age | of Office | ||||||||||
Standing Directors(1) | ||||||||||||||
Yong-Kyung Lee | President and Chief Executive Officer(2) | 3 | 61 | 2005 | ||||||||||
Woo-Sik Kim | Executive Vice President | 3 | 51 | 2006 | ||||||||||
Sang-Hoon Lee | Executive Vice President | 3 | 50 | 2006 | ||||||||||
Jeong-Soo Suh | Senior Vice President | 1 | 47 | 2006 | ||||||||||
Outside Directors(1) | ||||||||||||||
Sung-Deuk Park | President ofThe Electronic Times | 5 | 65 | 2007 | ||||||||||
Kook-Hyun Moon | Chief Executive Officer of Yuhan-Kimberly Corporation | 3 | 56 | 2005 | ||||||||||
Stuart B. Solomon | Chief Executive Officer of Metropolitan Life Insurance (Korea) | 4 | 55 | 2008 | ||||||||||
Jong-Sang Kim | Chief Executive Officer of Seil Tax-Accounting Service | 3 | 58 | 2006 | ||||||||||
Do-Hwan Kim | Professor, Sejong University | 3 | 46 | 2006 | ||||||||||
Jeong-Ro Yoon | Professor, Korea Advanced Institute of Science and Technology | 2 | 50 | 2007 | ||||||||||
Kon-Sik Kim | Professor, Seoul National University | 2 | 50 | 2007 | ||||||||||
Thae-Surn Khwarg | Chief Executive Officer of SEI Asset Korea | 1 | 46 | 2008 |
(1) | All of our standing and outside directors beneficially own less than one percent of the issued shares of KT Corporation in the aggregate. |
(2) | On June 18, 2005, the president recommendation committee announced the decision to recommend Joong Soo Nam as our next president and chief executive officer. Mr. Nam is currently the president and chief executive officer of KTF. Mr. Nam is expected to succeed Mr. Lee in August 2005, subject to approval by the shareholders. |
• | three outside directors who are elected from among our outside directors; | |
• | one person who is designated by the board of directors from among the ex-presidents or the current president (provided, however, that the incumbent president is prohibited from participation if seeking reelection); and | |
• | one civilian designated by the board of directors, other than the President, standing directors, former and present officers and employees of any telecommunications business operator and any of their related persons as defined in the Monopoly Regulation and Fair Trade Act, as well as our officers and employees. |
62
Current | Years | |||||||||||||
Position | with the | |||||||||||||
Name(1) | Title and Responsibilities | Held Since | Company | Age | ||||||||||
Hi-Chang Roh | Senior Vice President, Management Strategy Office | 2004 | 34 | 52 | ||||||||||
Jong-Lok Yoon | Executive Vice President, New Business Planning Group | 2003 | 25 | 47 | ||||||||||
Won-Pyo Hong | Senior Vice President, Portable Internet Business Group | 2004 | 10 | 45 | ||||||||||
Byoung-Kon Shin | Senior Vice President, Metropolitan North Business Group | 2003 | 18 | 48 | ||||||||||
Tae-Poong Kang | Vice President, Quality Management Office | 2004 | 25 | 50 | ||||||||||
Han-Suk Kim | Senior Vice President, Global Business Center | 2004 | 14 | 49 | ||||||||||
Soo-Ho Maeng | Senior Vice President, Corporate Relations Office | 2004 | 15 | 45 | ||||||||||
Dong-Hoon Kim | Vice President, Jeonbuk Regional Business Group | 2003 | 34 | 54 | ||||||||||
Kyung-Choon Shin | Vice President, Voice Business Center | 2004 | 24 | 50 | ||||||||||
Yo-Dong Kim | Senior Vice President, Chungnam Regional Business Group | 2003 | 30 | 49 | ||||||||||
Gwang-Ju Seo | Senior Vice President, Metropolitan South Business Group | 2004 | 24 | 48 | ||||||||||
Deok-Rae Lim | Vice President, SI Business Center | 2003 | 24 | 50 | ||||||||||
Tae-Soek Ro | Executive Vice President, Customer Service Group | 2005 | 25 | 50 | ||||||||||
Dong-Hoon Han | Vice President, Gangwon Regional Business Group | 2004 | 23 | 45 | ||||||||||
Sung-Man Kim | Vice President, Network Service Group | 2004 | 22 | 48 | ||||||||||
Ok-Kie Lee | Vice President, Convergence Business Center | 2004 | 21 | 46 | ||||||||||
Deok-Kyum Kim | Vice President, Daegu Regional Business Group | 2003 | 22 | 47 | ||||||||||
Young-Whan Kim | Vice President, Special Business Center | 2004 | 22 | 47 | ||||||||||
Jong-Soo Lee | Senior Vice President, Chungbuk Regional Business Group | 2003 | 24 | 50 | ||||||||||
Ki-Yeoul Kim | Senior Vice President, Management Research Laboratory | 2004 | 25 | 48 | ||||||||||
Hee-Kyun Park | Senior Vice President, Human Resource Office | 2004 | 20 | 49 |
63
Current | Years | |||||||||||||
Position | with the | |||||||||||||
Name(1) | Title and Responsibilities | Held Since | Company | Age | ||||||||||
Byung-Woo Lee | Senior Vice President, Public Relations Office | 2003 | 18 | 48 | ||||||||||
Haing Min Kwon | Senior Vice President, Financial Management Office | 2004 | 21 | 46 | ||||||||||
In-Sung Jun | Senior Vice President, U-City Strategy Planning Center | 2004 | 25 | 46 | ||||||||||
In-Kyu Park | Vice President, Purchasing Strategy Office | 2004 | 20 | 49 | ||||||||||
Seong-Beom Kim | Vice President, Network Management & Support Center | 2004 | 21 | 48 | ||||||||||
Sun-Cheol Gweon | Vice President, Network Engineering Center | 2004 | 14 | 43 | ||||||||||
Suk-Joon Park | Vice President, Information Security Center | 2004 | 24 | 47 | ||||||||||
Kil-Ho Song | Vice President, Operation Support System Laboratory | 2004 | 13 | 52 | ||||||||||
Young-Gwun Kim | Vice President, Jeonnam Regional Business Group | 2004 | 30 | 49 | ||||||||||
Sang-Heon Song | Vice President, Construction Center | 2003 | 25 | 46 | ||||||||||
Jeong-Tae Park | Vice President, New Business Development Center | 2003 | 21 | 45 | ||||||||||
Yu-Yeol Seo | Vice President, Business Market Sales Center | 2004 | 26 | 48 | ||||||||||
Sang-Ho Lee | Senior Vice President, Human Resource Development Center | 2003 | 22 | 53 | ||||||||||
Sang-Hong Lee | Vice President, Convergence Laboratory | 2004 | 21 | 49 | ||||||||||
Won-Joong Song | Vice President, Ethics Management Office | 2004 | 29 | 49 | ||||||||||
Tae-Il Park | Vice President, Telecommunication Network Laboratory | 2004 | 27 | 49 | ||||||||||
Yoon-Hak Bang | Vice President(2) | 2004 | 21 | 47 | ||||||||||
Heon-Chul Shin | Senior Vice President, Metropolitan West Business Group | 2003 | 24 | 46 | ||||||||||
Man-Doo Kim | Vice President, Busan Regional Business Group | 2003 | 33 | 54 | ||||||||||
Yeong-Geun Ryou | Vice President, Jeju Regional Business Group | 2003 | 22 | 49 | ||||||||||
Sang-Eun Woo | Vice President, Chungnam Business Center | 2005 | 30 | 49 | ||||||||||
Eun-Hee Kwon | Vice President(2) | 2005 | 19 | 46 | ||||||||||
Sung-Ho Myung | Vice President(2) | 2005 | 21 | 47 | ||||||||||
Dong-Myun Lee | Vice President(2) | 2005 | 13 | 42 | ||||||||||
Hae-Jong Yun | Vice President, U-City Planning Department | 2005 | 22 | 47 | ||||||||||
Ki-Heon Yu | Vice President, Seoul Joongbu Business Center | 2005 | 22 | 48 | ||||||||||
Sang-Gyun Han | Vice President, Incheon Business Center | 2005 | 21 | 51 | ||||||||||
Yong-Seok Yoon | Vice President, Business Strategy Team | 2005 | 12 | 48 | ||||||||||
Byoung-Seon Jeon | Vice President, CEO Support Team | 2005 | 5 | 44 | ||||||||||
Kie-You Song | Vice President, Financial Planning Team | 2005 | 15 | 45 | ||||||||||
Gil-Joo Lee | Vice President, Media Relations Team | 2005 | 29 | 49 | ||||||||||
Jong-Jin Chae | Vice President, Bizmeka Team | 2005 | 19 | 43 |
(1) | All of our executive officers beneficially own less than one percent of the issued shares of KT Corporation in the aggregate. |
(2) | Currently on sabbatical. |
64
Item 6.B. | Compensation |
Item 6.C. | Board Practices |
65
• | engaging independent auditors; | |
• | evaluating performance of independent auditors; | |
• | approving services to be provided by the independent auditors; | |
• | reviewing annual financial statements; | |
• | reviewing audit results and reports; | |
• | reviewing and evaluating our system of controls and policies; and | |
• | examining improprieties or suspected improprieties. |
66
NYSE Corporate Governance Standards | KT Corporation’s Corporate Governance Practice | |
Director independence Independent directors must comprise a majority of the board. | The Securities and Exchange Act of Korea requires that our board of directors must comprise no less than a majority of outside directors. Our outside directors must meet the criteria for outside directorship set forth under the Securities and Exchange Act of Korea. The majority of our board of directors is independent (as defined in accordance with the New York Stock Exchange’s standards), and 8 out of 12 directors are outside directors. | |
Nomination/ Corporate Governance Committee Listed companies must have a nomination/corporate governance committee composed entirely of independent directors. | We have not established a separate nomination/corporate governance committee. However, we maintain an Outside Director Recommendation Committee composed of four outside directors and one standing director. | |
Compensation Committee Listed companies must have a compensation committee composed entirely of independent directors. | We maintain an Evaluation and Compensation Committee composed of five outside directors. | |
Executive Session Listed companies must hold meetings solely attended by non-management directors to more effectively check and balance management directors. | Our outside directors hold meetings solely attended by outside directors in accordance with operation guidelines of our board of directors. | |
Audit Committee Listed companies must have an audit committee that is composed of more than three directors and satisfy the requirements of Rule 10A-3 under the Exchange Act. | We maintain an Audit Committee comprised of four outside directors who meet the applicable independence criteria set forth under Rule 10A-3 under the Exchange Act. | |
Shareholder Approval of Equity Compensation Plan Listed companies must allow its shareholders to exercise their voting rights with respect to any material revision to the company’s equity compensation plan. | We currently have two equity compensation plans: one providing for the grant of stock options to officers and directors; and an Employee Stock Ownership Program. All material matters related to the granting stock options are provided in our articles of incorporation, and any amendments to the articles of incorporation are subject to shareholders’ approval. Matters related to the Employee Stock Ownership Program are not subject to shareholders’ approval under Korean law. | |
Corporate Governance Guidelines Listed companies must adopt and disclose corporate governance guidelines. | We currently do not have a corporate governance guideline setting forth our practices with respect to relevant corporate governance matters. |
67
NYSE Corporate Governance Standards | KT Corporation’s Corporate Governance Practice | |
Code of Business Conduct and Ethics Listed companies must adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for or executive officers. | We have adopted a Code of Ethics for all directors, officers and employees. A copy of our Code of Ethics is available on our website at www.kt.co.kr. |
Item 6.D. | Employees |
The Voluntary Early Retirement Programs |
Labor Relations |
68
Employee Stock Ownership and Benefits |
Employee Training |
Item 6.E. | Share Ownership |
Number of | ||||
Common Shares | ||||
Shareholders | Owned | |||
Yong-Kyung Lee | 6,195 | |||
Woo-Sik Kim | 500 | |||
Sang-Hoon Lee | 1,731 | |||
Jeong-Soo Suh | 3,040 | |||
Thae-Surn Khwarg | 250 |
69
Exercise Period | Number of | Number of | Number of | |||||||||||||||||||||||||
Exercise | Granted | Exercised | Exercisable | |||||||||||||||||||||||||
Directors | Grant Date | From | To | Price | Options | Options | Options | |||||||||||||||||||||
Yong-Kyung Lee | December 26, 2002 | 12/27/2004 | 12/26/2009 | W | 70,000 | 300,000 | 0 | 300,000 | ||||||||||||||||||||
Sung-Deuk Park | September 19, 2003 | 9/17/2005 | 9/16/2010 | W | 57,000 | 5,200 | 0 | 5,200 | ||||||||||||||||||||
Kook-Hyun Moon | September 19, 2003 | 9/17/2005 | 9/16/2010 | W | 57,000 | 5,200 | 0 | 5,200 | ||||||||||||||||||||
Stuart B. Solomon | September 19, 2003 | 9/17/2005 | 9/16/2010 | W | 57,000 | 5,200 | 0 | 5,200 | ||||||||||||||||||||
Do-Hwan Kim | September 19, 2003 | 9/17/2005 | 9/16/2010 | W | 57,000 | 5,200 | 0 | 5,200 | ||||||||||||||||||||
Jong-Sang Kim | September 19, 2003 | 9/17/2005 | 9/16/2010 | W | 57,000 | 5,200 | 0 | 5,200 | ||||||||||||||||||||
Sang-Hoon Lee | December 12, 2003 | 12/13/2005 | 12/12/2010 | W | 65,000 | 60,000 | 0 | 60,000 | ||||||||||||||||||||
Woo-Sik Kim | December 12, 2003 | 12/13/2005 | 12/12/2010 | W | 65,000 | 60,000 | 0 | 60,000 | ||||||||||||||||||||
Jeong-Ro Yoon | February 4, 2005 | 2/5/2007 | 2/4/2012 | W | 54,600 | 5,400 | 0 | 5,400 | ||||||||||||||||||||
Kon-Sik Kim | February 4, 2005 | 2/5/2007 | 2/4/2012 | W | 54,600 | 5,400 | 0 | 5,400 | ||||||||||||||||||||
Hi-Chang Roh | February 4, 2005 | 2/5/2007 | 2/4/2012 | W | 54,600 | 60,000 | 0 | 60,000 | ||||||||||||||||||||
Jeong-Soo Suh | April 28, 2005 | 4/29/2007 | 4/28/2012 | W | 50,400 | 60,000 | 0 | 60,000 | ||||||||||||||||||||
Thae-Surn Khwarg | April 28, 2005 | 4/29/2007 | 4/28/2012 | W | 50,400 | 5,700 | 0 | 5,700 |
Number of | Percent | ||||||||
Shareholders | Shares | of Class | |||||||
Employee stock ownership association | 16,173,934 | 5.68 | % | ||||||
National Pension Corporation | 10,654,638 | 3.74 | |||||||
Directors as a group | 11,716 | 0.00 | (3) | ||||||
Public | 183,918,694 | 64.57 | |||||||
KT Corporation (held in the form of treasury stock)(1)(2) | 74,090,418 | 26.01 | |||||||
Total issued shares | 284,849,400 | 100.00 | % | ||||||
(1) | Includes 1,259,170 shares of treasury stock owned by our treasury stock fund. |
(2) | Includes shares of treasury stock reserved for delivery upon conversion of the convertible bonds issued in January 2002 and May 2002. |
(3) | Less than 0.01%. |
70
Investigation by the Fair Trade Commission |
Dispute with the Fair Trade Commission |
71
Proceedings by the Ministry of Information and Communication |
Retirement Benefits Disputes |
Dispute in the Philippines |
Interruption and Slowdown of Internet Services |
72
Miscellaneous |
Dividend per | Dividend per | |||||||||||||||
Common | Common | |||||||||||||||
Stock to | Stock to | Average Dividend | Total Amount of | |||||||||||||
Year Ended December 31, | Government | Public | per Share | Dividend Declared | ||||||||||||
(In Won) | (In Won) | (In Won) | (In billions of Won) | |||||||||||||
2000 | 450 | 600 | 511 | 159.27 | ||||||||||||
2001 | 720 | 720 | 720 | 224.05 | ||||||||||||
2002 | — | 860 | 860 | 212.89 | ||||||||||||
2003 | — | 2,000 | 2,000 | 421.52 | ||||||||||||
2004 | — | 3,000 | 3,000 | 421.52 |
73
Common Stock |
Price | |||||||||||||
Average Daily | |||||||||||||
High | Low | Trading Volume | |||||||||||
(Number of shares) | |||||||||||||
(In Won) | |||||||||||||
1999 | 179,000 | 33,550 | 977,499 | ||||||||||
First quarter | 45,000 | 33,550 | 789,344 | ||||||||||
Second quarter | 79,000 | 41,800 | 1,025,689 | ||||||||||
Third quarter | 91,500 | 72,200 | 730,069 | ||||||||||
Fourth quarter | 179,000 | 74,300 | 1,355,593 | ||||||||||
2000 | 169,000 | 58,000 | 941,178 | ||||||||||
First quarter | 169,000 | 94,000 | 1,366,174 | ||||||||||
Second quarter | 102,500 | 73,000 | 1,173,388 | ||||||||||
Third quarter | 96,900 | 58,000 | 510,957 | ||||||||||
Fourth quarter | 73,000 | 59,000 | 696,727 | ||||||||||
2001 | 81,900 | 40,500 | 716,042 | ||||||||||
First quarter | 81,900 | 55,600 | 738,074 | ||||||||||
Second quarter | 63,000 | 51,100 | 729,157 | ||||||||||
Third quarter | 54,600 | 40,500 | 606,358 | ||||||||||
Fourth quarter | 56,800 | 44,800 | 788,673 | ||||||||||
2002 | 65,000 | 41,350 | 1,261,121 | ||||||||||
First quarter | 65,000 | 44,300 | 1,772,568 | ||||||||||
Second quarter | 63,200 | 46,650 | 1,334,419 | ||||||||||
Third quarter | 56,300 | 41,350 | 932,334 | ||||||||||
Fourth quarter | 55,000 | 48,100 | 1,031,093 |
74
Price | ||||||||||||||
Average Daily | ||||||||||||||
High | Low | Trading Volume | ||||||||||||
(Number of shares) | ||||||||||||||
(In Won) | ||||||||||||||
2003 | 53,600 | 41,900 | 867,991 | |||||||||||
First quarter | 53,600 | 41,900 | 760,406 | |||||||||||
Second quarter | 50,400 | 44,200 | 899,265 | |||||||||||
Third quarter | 46,900 | 42,650 | 875,808 | |||||||||||
Fourth quarter | 51,400 | 43,950 | 936,020 | |||||||||||
2004 | 47,550 | 34,200 | 577,620 | |||||||||||
First quarter | 47,550 | 42,250 | 776,735 | |||||||||||
Second quarter | 42,150 | 35,900 | 591,403 | |||||||||||
Third quarter | 38,700 | 34,200 | 372,460 | |||||||||||
Fourth quarter | 43,900 | 35,600 | 584,547 | |||||||||||
2005 (through June 27) | 43,250 | 37,600 | 459,453 | |||||||||||
First quarter | 43,200 | 39,400 | 464,673 | |||||||||||
January | 43,200 | 40,400 | 419,409 | |||||||||||
February | 42,400 | 40,700 | 478,941 | |||||||||||
March | 41,950 | 39,400 | 497,065 | |||||||||||
Second quarter (through June 27) | 43,250 | 37,600 | 454,065 | |||||||||||
April | 39,400 | 37,600 | 572,227 | |||||||||||
May | 40,700 | 38,150 | 343,638 | |||||||||||
June (through June 27) | 43,250 | 40,750 | 451,607 |
Source: | Stock Market Division of the Korea Exchange. |
ADSs |
Price | ||||||||||||||
Average Daily | ||||||||||||||
High | Low | Trading Volume | ||||||||||||
(Number of ADSs) | ||||||||||||||
(In US$) | ||||||||||||||
1999 (from May 25) | 74.75 | 27.56 | 575,160 | |||||||||||
Second quarter (from May 25) | 40.00 | 27.56 | 1,419,844 | |||||||||||
Third quarter | 44.25 | 31.75 | 440,850 | |||||||||||
Fourth quarter | 74.75 | 31.50 | 388,502 | |||||||||||
2000 | 74.50 | 26.88 | 467,352 | |||||||||||
First quarter | 74.50 | 41.13 | 582,749 | |||||||||||
Second quarter | 48.88 | 32.13 | 493,857 | |||||||||||
Third quarter | 49.88 | 30.75 | 353,878 | |||||||||||
Fourth quarter | 37.88 | 26.88 | 438,925 | |||||||||||
December | 35.19 | 26.88 | 384,170 |
75
Price | ||||||||||||||
Average Daily | ||||||||||||||
High | Low | Trading Volume | ||||||||||||
(Number of ADSs) | ||||||||||||||
(In US$) | ||||||||||||||
2001 | 39.88 | 16.39 | 1,085,253 | |||||||||||
First quarter | 39.88 | 22.50 | 541,265 | |||||||||||
Second quarter | 27.75 | 20.35 | 889,440 | |||||||||||
Third quarter | 21.87 | 16.39 | 1,235,822 | |||||||||||
Fourth quarter | 24.94 | 18.10 | 1,666,189 | |||||||||||
2002 | 24.64 | 18.12 | 1,084,210 | |||||||||||
First quarter | 24.49 | 18.12 | 1,620,290 | |||||||||||
Second quarter | 24.64 | 21.45 | 1,100,248 | |||||||||||
Third quarter | 22.76 | 19.42 | 900,939 | |||||||||||
Fourth quarter | 22.60 | 19.43 | 749,067 | |||||||||||
2003 | 22.58 | 16.85 | 878,552 | |||||||||||
First quarter | 22.58 | 16.85 | 904,731 | |||||||||||
Second quarter | 20.43 | 17.53 | 873,013 | |||||||||||
Third quarter | 20.35 | 18.15 | 801,345 | |||||||||||
Fourth quarter | 21.57 | 18.50 | 936,258 | |||||||||||
2004 | 22.73 | 16.57 | 671,995 | |||||||||||
First quarter | 20.35 | 18.60 | 924,169 | |||||||||||
Second quarter | 19.21 | 16.57 | 840,529 | |||||||||||
Third quarter | 18.34 | 16.70 | 479,480 | |||||||||||
Fourth quarter | 22.73 | 17.89 | 454.298 | |||||||||||
2005 (through June 27) | 23.21 | 19.75 | 488,019 | |||||||||||
First quarter | 23.21 | 20.98 | 466,382 | |||||||||||
January | 22.45 | 21.05 | 428,990 | |||||||||||
February | 23.21 | 21.70 | 467,905 | |||||||||||
March | 23.20 | 20.98 | 499,059 | |||||||||||
Second quarter (through June 27) | 22.01 | 19.75 | 509,656 | |||||||||||
April | 21.52 | 19.82 | 678,676 | |||||||||||
May | 20.95 | 19.75 | 434,924 | |||||||||||
June (through June 27) | 22.01 | 21.05 | 405,442 |
Source: | New York Stock Exchange. |
Item 9.B. | Plan of Distribution |
Item 9.C. | Markets |
76
Period Average | ||||||||||||||||||||||||
Dividend | Price | |||||||||||||||||||||||
Yield(1)(2) | Earnings | |||||||||||||||||||||||
Year | Opening | High | Low | Closing | (Percent) | Ratio(2)(3) | ||||||||||||||||||
1979 | 131.28 | 131.28 | 104.38 | 118.97 | 17.8 | 3.8 | ||||||||||||||||||
1980 | 100.00 | 119.36 | 100.00 | 106.87 | 20.9 | 2.6 | ||||||||||||||||||
1981 | 97.95 | 165.95 | 93.14 | 131.37 | 13.2 | 3.1 | ||||||||||||||||||
1982 | 123.60 | 134.49 | 106.00 | 127.31 | 10.5 | 3.4 | ||||||||||||||||||
1983 | 122.52 | 134.46 | 115.59 | 121.21 | 6.9 | 3.8 | ||||||||||||||||||
1984 | 116.73 | 142.46 | 114.37 | 142.46 | 5.1 | 4.5 | ||||||||||||||||||
1985 | 139.53 | 163.37 | 131.40 | 163.37 | 5.3 | 5.2 | ||||||||||||||||||
1986 | 161.40 | 279.67 | 153.85 | 272.61 | 4.3 | 7.6 | ||||||||||||||||||
1987 | 264.82 | 525.11 | 264.82 | 525.11 | 2.6 | 10.9 | ||||||||||||||||||
1988 | 532.04 | 922.56 | 527.89 | 907.20 | 2.4 | 11.2 | ||||||||||||||||||
1989 | 919.61 | 1,007.77 | 844.75 | 909.72 | 2.0 | 13.9 | ||||||||||||||||||
1990 | 908.59 | 928.82 | 566.27 | 696.11 | 2.2 | 12.8 | ||||||||||||||||||
1991 | 679.75 | 763.10 | 586.51 | 610.92 | 2.6 | 11.2 | ||||||||||||||||||
1992 | 624.23 | 691.48 | 459.07 | 678.44 | 2.2 | 10.9 | ||||||||||||||||||
1993 | 697.41 | 874.10 | 605.93 | 866.18 | 1.6 | 12.7 | ||||||||||||||||||
1994 | 879.32 | 1,138.75 | 855.37 | 1,027.37 | 1.2 | 16.2 | ||||||||||||||||||
1995 | 1,013.57 | 1,016.77 | 847.09 | 882.94 | 1.2 | 16.4 | ||||||||||||||||||
1996 | 888.85 | 986.84 | 651.22 | 651.22 | 1.3 | 17.8 | ||||||||||||||||||
1997 | 653.79 | 792.29 | 350.68 | 376.31 | 1.5 | 17.0 | ||||||||||||||||||
1998 | 385.49 | 579.86 | 280.00 | 562.46 | 1.9 | 10.8 | ||||||||||||||||||
1999 | 587.57 | 1,028.07 | 498.42 | 1,028.07 | 1.1 | 13.5 | ||||||||||||||||||
2000 | 1,059.04 | 1,059.04 | 500.60 | 504.62 | 1.6 | 18.6 | ||||||||||||||||||
2001 | 520.95 | 704.50 | 468.76 | 693.70 | 2.0 | 14.2 | ||||||||||||||||||
2002 | 724.95 | 937.61 | 584.04 | 627.55 | 1.4 | 17.8 | ||||||||||||||||||
2003 | 635.17 | 822.16 | 515.24 | 810.71 | 2.2 | 10.9 | ||||||||||||||||||
2004 | 821.26 | 936.06 | 719.59 | 895.92 | 2.1 | 15.8 | ||||||||||||||||||
2005 (through June 27) | 896.00 | 1,023.34 | 866.17 | 999.11 | 2.5 | — |
77
Source: | The Stock Market Division of the Korea Exchange |
(1) | Dividend yields are based on daily figures. Before 1983, dividend yields were calculated at the end of each month. Dividend yields after January 3, 1984 include cash dividends only. |
(2) | Starting in April 2000, dividend yield and price earnings ratio are calculated based on KOSPI 200, an index of 200 equity securities listed on the Stock Market Division of the Korea Exchange. Starting in April 2000, excludes classified companies, companies which did not submit annual reports to the Stock Market Division of the Korea Exchange, and companies which received qualified opinion from external auditors. |
(3) | The price earnings ratio is based on figures for companies that record a profit in the preceding year. |
Previous Days’ Closing Price | Rounded Down To | |||
Less than W5,000 | W | 5 | ||
W5,000 to less than W10,000 | W | 10 | ||
W10,000 to less than W50,000 | W | 50 | ||
W50,000 to less than W100,000 | W | 100 | ||
W100,000 to less than W500,000 | W | 500 | ||
W500,000 or more | W | 1,000 |
78
Market Capitalization | ||||||||||||||||||||||||
on the Last Day of Each Period | Average Daily Trading Volume, | |||||||||||||||||||||||
Value | ||||||||||||||||||||||||
Number of | ||||||||||||||||||||||||
Listed | (Millions of | (Thousands of | Thousands | (Millions of | (Thousands of | |||||||||||||||||||
Year | Companies | Won) | Dollars)(1) | of Shares | Won) | Dollars)(1) | ||||||||||||||||||
1979 | 355 | 2,609,414 | 5,391,351 | 5,382 | 4,579 | 4,641 | ||||||||||||||||||
1980 | 352 | 2,526,553 | 3,828,691 | 5,654 | 3,897 | 5,905 | ||||||||||||||||||
1981 | 343 | 2,959,057 | 4,224,207 | 10,565 | 8,708 | 12,433 | ||||||||||||||||||
1982 | 334 | 3,000,494 | 4,407,711 | 9,704 | 6,667 | 8,904 | ||||||||||||||||||
1983 | 328 | 3,489,654 | 4,386,743 | 9,325 | 5,941 | 7,468 | ||||||||||||||||||
1984 | 336 | 5,148,460 | 6,222,456 | 14,847 | 10,642 | 12,862 | ||||||||||||||||||
1985 | 342 | 6,570,404 | 7,380,818 | 18,925 | 12,315 | 13,834 | ||||||||||||||||||
1986 | 355 | 11,994,233 | 13,924,115 | 31,755 | 32,870 | 38,159 | ||||||||||||||||||
1987 | 389 | 26,172,174 | 33,033,162 | 20,353 | 70,185 | 88,584 | ||||||||||||||||||
1988 | 502 | 64,543,685 | 94,348,318 | 10,367 | 198,364 | 289,963 | ||||||||||||||||||
1989 | 626 | 95,476,774 | 140,489,660 | 11,757 | 280,967 | 414,431 | ||||||||||||||||||
1990 | 669 | 79,019,676 | 110,301,055 | 10,866 | 183,692 | 256,500 | ||||||||||||||||||
1991 | 686 | 73,117,833 | 96,182,364 | 14,022 | 214,263 | 281,850 | ||||||||||||||||||
1992 | 688 | 84,711,982 | 107,502,515 | 24,028 | 308,246 | 391,175 | ||||||||||||||||||
1993 | 693 | 112,665,260 | 139,419,948 | 35,130 | 574,048 | 676,954 | ||||||||||||||||||
1994 | 699 | 151,217,231 | 191,729,721 | 36,862 | 776,257 | 984,223 | ||||||||||||||||||
1995 | 721 | 141,151,399 | 182,201,367 | 26,130 | 487,762 | 629,614 | ||||||||||||||||||
1996 | 760 | 117,369,988 | 139,031,021 | 26,571 | 486,834 | 575,733 | ||||||||||||||||||
1997 | 776 | 70,988,897 | 50,161,742 | 41,525 | 555,759 | 392,707 | ||||||||||||||||||
1998 | 748 | 137,798,451 | 114,090,455 | 97,716 | 660,429 | 471,432 | ||||||||||||||||||
1999 | 725 | 349,503,966 | 305,137,040 | 278,551 | 3,481,620 | 3,039,654 | ||||||||||||||||||
2000 | 704 | 188,041,490 | 150,162,898 | 306,163 | 2,602,211 | 2,078,028 | ||||||||||||||||||
2001 | 689 | 255,850,070 | 194,784,979 | 473,241 | 1,997,420 | 1,506,685 | ||||||||||||||||||
2002 | 683 | 258,680,756 | 216,071,436 | 857,245 | 3,041,595 | 2,540,590 | ||||||||||||||||||
2003 | 684 | 355,362,626 | 298,123,294 | 385,852 | 2,026,774 | 1,700,314 | ||||||||||||||||||
2004 | 683 | 412,588,139 | 395,275,090 | 372,895 | 2,232,109 | 2,138,445 | ||||||||||||||||||
2005 (through June 27) | 679 | 460,342,240 | 454,703,912 | 439,159 | 2,456,361 | 2,426,475 |
(1) | Converted at the Concentration Base Rate of The Bank of Korea or the Market Average Exchange Rate as announced by the Seoul Money Brokerage Services Limited, as the case may be, at the end of the periods indicated. |
79
80
81
• | publicly offered pursuant to the Securities and Exchange Act; | |
• | issued to members of our employee stock ownership association; | |
• | represented by depositary receipts; |
82
• | issued upon exercise of stock options granted to our officers and employees; | |
• | issued through an offering to public investors, the amount of which is no more than 10% of the issued Shares; | |
• | issued in order to satisfy specific needs such as strategic alliance, inducement of foreign funds or new technology, improvement of financial structure or other capital raising requirement; or | |
• | issued to domestic or foreign financial institutions when necessary for raising funds in emergency cases. |
• | as necessary; | |
• | at the request of holders of an aggregate of 3.0% or more of our issued Common Shares; |
83
• | at the request of shareholders holding an aggregate of 1.5% or more of our issued Shares for at least six months; or | |
• | at the request of our audit committee. |
• | amending our articles of incorporation; | |
• | removing a director; | |
• | effecting any dissolution, merger or consolidation of us; | |
• | transferring the whole or any significant part of our business; | |
• | effecting our acquisition of all of the business of any other company or our acquisition of a part of the business of any other company which will significantly affect our business; or | |
• | issuing any new Shares at a price lower than their par value. |
84
85
86
87
• | odd-lot trading of shares; | |
• | acquisition of shares (“Converted Shares”) by exercise of warrant, conversion right under convertible bonds or withdrawal right under depositary receipts issued outside of Korea by a Korean company; | |
• | acquisition of shares as a result of inheritance, donation, bequest or exercise of shareholders’ rights, including preemptive rights or rights to participate in free distributions and receive dividends; and | |
• | over-the-counter transactions between foreigners of a class of shares for which the ceiling on aggregate acquisition by foreigners, as explained below, has been reached or exceeded. |
88
89
• | a resident of Korea; | |
• | a corporation organized under Korean law; or | |
• | engaged in a trade or business in Korea through a permanent establishment or a fixed base. |
90
Convertible Notes or Bonds |
Tax on Interest |
Tax on Capital Gains |
Inheritance Tax and Gift Tax |
Shares or ADSs |
Dividends on Shares of Common Stock or ADSs |
91
Capital Gains |
Inheritance Tax and Gift Tax |
92
Securities Transaction Tax |
• | a dealer in securities or currencies; | |
• | a trader in securities that elects to use a mark-to-market method of accounting for your securities holdings; | |
• | a bank; | |
• | a life insurance company; | |
• | a tax-exempt organization; | |
• | a person that holds convertible notes, bonds, shares of common stock or ADSs that are a hedge or that are hedged against interest rate or currency risks; | |
• | a person that holds convertible notes, bonds, shares of common stock or ADSs as part of a straddle or conversion transaction for tax purposes; |
93
• | a person whose functional currency for tax purposes is not the U.S. dollar; or | |
• | a person that owns or is deemed to own 10% or more of any class of our stock. |
• | a citizen or resident of the United States; | |
• | a U.S. domestic corporation; or | |
• | subject to U.S. federal income tax on a net income basis with respect to income from the convertible note, bond, warrant, share of common stock or ADS. |
Convertible Notes |
Stated Interest |
Premium |
Market Discount |
94
Conversion |
Adjustment of the Conversion Price |
Sale, Exchange or other Disposition |
Foreign Tax Credit Considerations |
95
The Bonds |
Stated Interest |
Original Issue Discount |
(i) multiplying the “adjusted issue price” (as defined below) of the bond at the beginning of the accrual period by a fraction, the numerator of which is the annual yield to maturity (defined below) of the bond and the denominator of which is the number of accrual periods in a year; and | |
(ii) subtracting from that product the amount payable as stated interest allocable to that accrual period. |
96
Premium |
Market Discount |
Sale, Exchange and Retirement of the Bonds |
97
Foreign Tax Credit Considerations |
The Shares of Common Stock and ADSs |
Dividends |
98
Sales and Other Dispositions |
Foreign Tax Credit Considerations |
U.S. Information Reporting and Backup Withholding Rules |
99
Item 11. | Quantitative and Qualitative Disclosures About Market Risk |
Contract Amount | Fixed Amount | |||||||||||||
Bank | (In millions) | (In billions) | Receiving Interest Rate | Paying Interest Rate | Terminal Date | |||||||||
J.P. Morgan | $50 | W | 59.8 | 4.30% per year in Dollars | 6.17% per year in Won | January 3, 2005 | ||||||||
J.P. Morgan | $150 | W | 179.8 | 3-month LIBOR plus 0.80% in Dollars | 3-month LIBOR plus 2.64% in Won | June 24, 2006 |
100
Contract | Fixed Receiving | Variable Paying | ||||||||||||||
Amount | Amount | Interest Rate | Interest Rate | |||||||||||||
Bank | (In millions) | (In billions) | (1 year) | (6 months) | Terminal Date | |||||||||||
J.P. Morgan | $ | 50 | W | 55 to 60 | 4.3% (US$ | ) | 6-month LIBOR plus 4.55% W | January 3, 2005 | ||||||||
J.P. Morgan(1) | $ | 100 | W | 116 | 5.9% (US$ | ) | 6-month LIBOR plus 1.87% W | June 24, 2014 | ||||||||
5.5% (Won | ) | |||||||||||||||
J.P. Morgan(2) | $ | 200 | W | 231 | 5.5% (Won | ) | 6-month LIBOR plus 0.69% W | June 24, 2014 | ||||||||
5.9% minus contingent spread (US$) | ||||||||||||||||
Merrill Lynch | $ | 100 | W | 116 | 5.0% (Won | ) | 5.9% minus contingent spread (US$) | June 24, 2014 | ||||||||
Merrill Lynch | $ | 50 | W | 53 | 4.7% (Won | ) | 5.9% minus contingent spread (US$) | June 24, 2014 | ||||||||
Citibank | $ | 25 | W | 28 to 30 | 4.3% (US$ | ) | 6-month LIBOR plus 4.45% W | January 3, 2005 | ||||||||
UBS Bank | $ | 25 | W | 28 to 30 | 4.3% (US$ | ) | 6-month LIBOR plus 4.45% W | January 3, 2005 | ||||||||
Deutsche bank | $ | 50 | W | 55 to 60 | 4.3% (US$ | ) | 6-month LIBOR plus 4.57% W | January 3, 2005 | ||||||||
Deutsche bank | $ | 50 | W | 53 | 4.7% (Won | ) | 5.9% minus contingent spread (US$) | June 24, 2014 | ||||||||
Shinhan bank | $ | 50 | W | 55 to 60 | 4.3% (US$ | ) | 6-month LIBOR plus 4.45% W | January 3, 2005 |
(1) | The interest will be received at 5.9% (US$) and paid at 6-month LIBOR plus 1.87% (Won) every six months over the first five years. Then, the interest will be received at 5.9% (US$) every six months and paid at 5.5% (Won) per year over the following five years. |
(2) | The interest will be received at 5.9%-contingent spread (US$) and paid at 6-month LIBOR plus 0.69% (Won) every six months over the first five years. Then, the interest will be received at 5.9%-contingent spread (US$) every six months and paid at 5.5% (Won) per year over the following five years. |
101
Fixed Amount | ||||||||||||||||||||
Nominal | (In millions of | |||||||||||||||||||
Premium | Dollars and | Fixed Interest Rate | ||||||||||||||||||
Bank | (In millions) | billions of Won) | (1 year) | Variable Interest Rate | Terminal Date | |||||||||||||||
J.P. Morgan | $ | 1.6 | US$150 | 7.50% | 6-month LIBOR plus 4.32% | June 1, 2006 | ||||||||||||||
J.P. Morgan | $ | 0.5 | US$200 | 7.63% | 6-month LIBOR plus 4.61% | April 15, 2007 | ||||||||||||||
Citibank | — | W110 | 5.29% | 3-month LIBOR plus 1.47% | April 30, 2008 | |||||||||||||||
Shinhan Bank | — | W180 | 6.35% | 3-month LIBOR plus 2.47% plus contingent spread | September 30, 2007 | |||||||||||||||
Shinhan Bank | — | W58 | 4.70% | 6-month LIBOR plus 0.69% | June 24, 2009 | |||||||||||||||
UBS | — | W58 | 4.70% | 6-month LIBOR plus 0.69% | June 24, 2009 | |||||||||||||||
UBS | — | W58 | 4.64% | 6-month LIBOR plus 0.69% | June 24, 2009 | |||||||||||||||
BNP Paribas | — | W110 | 5.29% | 3-month LIBOR plus 1.54% | April 30, 2008 | |||||||||||||||
CSFB | — | W58 | 4.64% | 6-month LIBOR plus 0.69% | June 24, 2009 |
Swaption Premium | Fixed Interest Rate | Variable Interest | ||||||||||||||||||
Bank | (In billions) | (1 year) | Rate (3 months) | Exercise Date | Type | |||||||||||||||
Citibank | W | 1.9 | 7.9% | 91-day certified deposit rate | April 25, 2005 | Selling |
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Maturities | |||||||||||||||||||||||||||||||||||||||||
December 31, 2004 | December 31, 2003 | ||||||||||||||||||||||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | Thereafter | Total(1) | Fair Value | Total | Fair Value | ||||||||||||||||||||||||||||||||
(In Won millions except rates) | |||||||||||||||||||||||||||||||||||||||||
Local currency: | |||||||||||||||||||||||||||||||||||||||||
Fixed rate | 2,892,880 | 813,874 | 1,050,560 | 840,000 | 990,000 | 1,890,033 | 8,477,347 | 8,776,448 | 8,442,367 | 8,333,449 | |||||||||||||||||||||||||||||||
Average weighted rate(2) | 5.17 | % | 5.30 | % | 4.62 | % | 4.46 | % | 5.36 | % | 5.31 | % | 4.85 | % | — | 5.41 | % | — | |||||||||||||||||||||||
Variable rate | 239,693 | 55,431 | 34,135 | 16,642 | 3,752 | — | 349,653 | 351,403 | 310,638 | 299,222 | |||||||||||||||||||||||||||||||
Average weighted rate(2) | 4.40 | % | 4.28 | % | 4.51 | % | 4.26 | % | — | — | 3.97 | % | — | 4.07 | % | — | |||||||||||||||||||||||||
Sub-total | 3,132,573 | 869,305 | 1,084,695 | 856,642 | 993,752 | 1,890,033 | 8,827,000 | 9,127,851 | 8,753,005 | 8,632,671 | |||||||||||||||||||||||||||||||
Foreign currency: | |||||||||||||||||||||||||||||||||||||||||
Fixed rate | 1,780,968 | 203,595 | 223,572 | 0 | 0 | 730,660 | 2,938,795 | 2,909,679 | 2,660,429 | 2,525,139 | |||||||||||||||||||||||||||||||
Average weighted rate(2) | 5.69 | % | 5.13 | % | 5.97 | % | 5.97 | % | 5.97 | % | 5.97 | % | 5.17 | % | — | 2.37 | % | — | |||||||||||||||||||||||
Variable rate | 238,556 | 159,701 | 2,088 | 1,044 | 1,044 | 1,044 | 403,477 | 393,600 | 461,994 | 446,792 | |||||||||||||||||||||||||||||||
Average weighted rate(2) | 3.61 | % | 6.32 | % | 6.78 | % | 6.78 | % | 6.78 | % | — | 3.13 | % | — | 1.87 | % | — | ||||||||||||||||||||||||
Subtotal | 2,019,524 | 363,296 | 225,660 | 1,044 | 1,044 | 731,704 | 3,342,272 | 3,303,279 | 3,122,423 | 2,971,931 | |||||||||||||||||||||||||||||||
Total | 5,152,097 | 1,232,601 | 1,310,355 | 857,686 | 994,796 | 2,621,737 | 12,169,272 | 12,431,130 | 11,875,428 | 11,604,602 | |||||||||||||||||||||||||||||||
(1) | Includes: (1) the then outstanding amount of Won 1,179 billion of convertible notes due 2007, of which Won 1,164 billion was repaid on January 4, 2005 upon election by noteholders to exercise their option to redeem the notes, (2) the then outstanding amount of Won 522 billion of bonds due 2005 issued to Microsoft Corporation, which we repaid on January 4, 2005 upon maturity, and (3) the then outstanding amount of Won 1,323 billion of convertible bonds due 2005 issued to domestic investors, which we repaid, together with accrued interest, on May 25, 2005 upon maturity. |
(2) | Weighted average rates of the portfolio at the period end. |
Item 12. | Description of Securities Other than Equity Securities |
103
104
• | we do not timely request that the rights be distributed to you or we request that the rights not be distributed to you; | |
• | we fail to deliver satisfactory documents to the depositary bank; or | |
• | the depositary bank determines that it is not reasonably practicable to distribute the rights. |
• | we do not request that the property be distributed to you or if we ask that the property not be distributed to you; | |
• | we do not deliver satisfactory documents to the depositary bank; or | |
• | the depositary bank determines that all or a portion of the distribution to you is not reasonably practicable. |
105
• | the common stock is duly authorized, validly issued, fully paid, non-assessable and legally obtained; | |
• | all preemptive (and similar) rights, if any, with respect to such common stock has been validly waived or exercised; |
106
• | you are duly authorized to deposit the common stock; | |
• | the common stock presented for deposit is free and clear of any lien, encumbrance, security interest, charge, mortgage or adverse claim, and is not, and the ADSs issuable upon such deposit will not be, “restricted securities” (as defined in the deposit agreement); and | |
• | the common stock presented for deposit has not been stripped of any rights or entitlements. |
• | temporary delays that may arise because (1) the transfer books for the common stock or ADSs are closed, or (2) the common stock is immobilized on account of a shareholders’ meeting or a payment of dividends; | |
• | obligations to pay fees, taxes and similar charges; and | |
• | restrictions imposed because of laws or regulations applicable to ADSs or the withdrawal of securities on deposit. |
107
Service | Fees | |
Issuance of ADSs | Up to 5¢ per ADS issued | |
Cancellation of ADSs | Up to 5¢ per ADS cancelled | |
Distributions (other than cash or stock dividends); Sale or exercise of rights; or other corporate action involving distributions to shareholders (including any distribution in the form of common stock, non-voting preferred stock or delivery of ADSs upon exercise of rights) | Up to 2¢ per ADS held |
• | fees for the transfer and registration of common stock charged by the registrar and transfer agent for the common stock in Korea (that is, upon deposit and withdrawal of common stock); | |
• | expenses incurred for converting foreign currency into U.S. dollars; | |
• | expenses for cable, telex and fax transmissions and for delivery of securities; | |
• | fees and expenses incurred by the depositary bank in connection with compliance with exchange control regulations and other regulatory requirements applicable to our shares, ADSs and ADRs; and | |
• | taxes and duties upon the transfer of securities (that is, when common stock is deposited or withdrawn from deposit). |
108
• | for a period of six months after termination, you will be able to request the cancellation of your ADSs and the withdrawal of the common stock represented by your ADSs and the delivery of all other property held by the depositary bank in respect of the common stock on the same terms as prior to the termination. During such six month period the depositary bank will continue to collect all distributions received on the common stock on deposit (e.g., dividends) but will not distribute any such property to you until you request the cancellation of your ADSs; and | |
• | after the expiration of such six month period, the depositary bank may sell the securities held on deposit. The depositary bank will hold the proceeds from such sale and any other funds then held for the holders of ADSs in a non-interest-bearing account. At that point, the depositary bank will have no further obligations to holders other than to account for the funds then held for the holders of ADSs still outstanding. |
• | we and the depositary bank are obligated only to take the actions specifically stated in the deposit agreement without negligence or bad faith; | |
• | the depositary bank disclaims any liability for any failure to carry out voting instructions, for any manner in which a vote is cast or for the effect of any vote, provided it acts in good faith and in accordance with the terms of the deposit agreement; | |
• | the depositary bank disclaims any liability for any failure to determine the lawfulness or practicality of any action, for the content of any document forwarded to you on our behalf or for the accuracy of any translation of such a document, for the investment risks associated with investing in common stock, for the validity or worth of the common stock, for any tax consequences that result from the ownership of ADSs, for the credit-worthiness of any third party, for allowing any rights to lapse under the terms of the deposit agreement, for the timeliness of any of our notices or for our failure to give notice; | |
• | we and the depositary bank will not be obligated to perform any act that is inconsistent with the terms of the deposit agreement; | |
• | we and the depositary bank disclaim any liability if we are prevented or forbidden from acting on account of any law or regulation, any provision of our articles of incorporation, any provision of any securities on deposit or by reason of any act of God or war or other circumstances beyond our control; | |
• | we and the depositary bank disclaim any liability by reason of any exercise of, or failure to exercise, any discretion provided for in the deposit agreement or in our articles of incorporation or in any provisions of securities on deposit; |
109
• | we and the depositary bank further disclaim any liability for any action or inaction in reliance on the advice or information received from legal counsel, accountants, any person presenting common stock for deposit, any holder of ADSs or authorized representatives of such holder, or any other person believed by either of us in good faith to be competent to give such advice or information; | |
• | we and the depositary bank also disclaim liability for the inability by a holder to benefit from any distribution, offering, right or other benefit which is made available to holders of common stock but is not, under the terms of the deposit agreement, made available to you; and | |
• | we and the depositary bank may rely without any liability upon any written notice, request or other document believed to be genuine and to have been signed or presented by the proper parties. |
• | convert the foreign currency to the extent practical and lawful and distribute the U.S. dollars to the holders for whom the conversion and distribution is lawful and practical; | |
• | distribute the foreign currency to holders for whom the distribution is lawful and practical; and | |
• | hold the foreign currency (without liability for interest) for the applicable holders. |
110
111
Item 13. | Defaults, Dividend Arrearages and Delinquencies |
Item 14. | Material Modifications to the Rights of Security Holders and Use of Proceeds |
Item 15. | Controls and Procedures |
Item 16.A. | Audit Committee Financial Expert |
Item 16.B. | Code of Ethics |
112
Item 16.C. | Principal Accountant Fees and Services |
Year Ended | |||||||||
December 31, | |||||||||
2003 | 2004 | ||||||||
(In millions) | |||||||||
Audit fees | W | 1,847 | W | 2,053 | |||||
Audit-related fees | — | — | |||||||
Tax fees | 77 | — | |||||||
Other fees | 172 | 154 | |||||||
Total fees | W | 2,096 | W | 2,207 | |||||
Item 16.D. | Exemptions from the Listing Standards for Audit Committees |
113
Item 16.E. | Purchases of Equity Securities by the Issuer and Affiliated Purchasers |
Average Price | Total Number of Shares | Maximum Number of Shares | |||||||||||||||
Total Number of | Paid per Share | Purchased as Part of | that May Yet Be Purchased | ||||||||||||||
Period | Shares Purchased | (In Won) | Publicly Announced Plans | Under the Plans | |||||||||||||
January 1 to January 31 | 0 | W | — | 0 | 0 | ||||||||||||
February 1 to February 29 | 0 | — | 0 | 0 | |||||||||||||
March 1 to March 31 | 0 | — | 0 | 0 | |||||||||||||
April 1 to April 30 | 0 | — | 0 | 0 | |||||||||||||
May 1 to May 31 | 0 | — | 0 | 0 | |||||||||||||
June 1 to June 30 | 0 | — | 0 | 0 | |||||||||||||
July 1 to July 31 | 0 | — | 0 | 0 | |||||||||||||
August 1 to August 31 | 0 | — | 0 | 0 | |||||||||||||
September 1 to September 30 | 0 | — | 0 | 0 | |||||||||||||
October 1 to October 31 | 0 | — | 0 | 0 | |||||||||||||
November 1 to November 30 | 0 | — | 0 | 0 | |||||||||||||
December 1 to December 31 | 0 | — | 0 | 0 | |||||||||||||
Total | 0 | W | — | 0 | 0 | ||||||||||||
114
Item 17. | Financial Statements |
Item 18. | Financial Statements |
Page | ||||
Report of Independent Registered Public Accounting Firm | F-1 | |||
Consolidated Balance Sheets as of December 31, 2003 and 2004 | F-2 | |||
Consolidated Statements of Earnings and Retained Earnings for the Years Ended December 31, 2002, 2003 and 2004 | F-4 | |||
Consolidated Statements of Cash Flows for the Years Ended December 31, 2002, 2003 and 2004 | F-5 | |||
Notes to Consolidated Financial Statements | F-7 |
Page | ||||
Report of Independent Registered Public Accounting Firm | A-1 | |||
Consolidated Balance Sheets as of December 31, 2004 and 2003 | A-2 | |||
Consolidated Statements of Income for the Years Ended December 31, 2002, 2003 and 2004 | A-4 | |||
Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2002, 2003 and 2004 | A-5 | |||
Consolidated Statements of Cash Flows for the Years Ended December 31, 2002, 2003 and 2004 | A-6 | |||
Notes to Consolidated Financial Statements as of December 31, 2003 and 2004 | A-9 |
* | Included pursuant to Rule 3-09 of Regulation S-X under the Securities Act of 1933, as amended. |
115
Item 19. | Exhibits |
1 | Articles of Incorporation of KT Corporation (English translation) | |||
2 | .1* | Form of Common Stock Certificate of KT Corporation, par value Won 5,000 per share (including translation in English) (incorporated herein by reference to Exhibit 4.3 of the Registrant’s Registration Statement (Registration No. 333-7630) on Form F-1) | ||
2 | .2* | Deposit Agreement dated as of May 25, 1999 entered into among KT Corporation, Citibank, N.A., as depositary, and all Holders and Beneficial Owners of American Depositary Shares evidenced by the American Depositary Receipts issued thereunder, including the form of American depositary receipt (incorporated herein by reference to Exhibit(a)(i) of the Registrant’s Registration Statement (Registration No. 333-13578) on Form F-6) | ||
2 | .3* | Form of Amendment No. 1 Deposit Agreement dated as of May 25, 1999 entered into among KT Corporation, Citibank, N.A., as depositary, and all Holders and Beneficial Owners of American Depositary Shares evidenced by the American Depositary Receipts issued thereunder, including the form of American depositary receipt (incorporated herein by reference to Exhibit(a)(ii) of the Registrant’s Registration Statement (Registration No. 333-13578) on Form F-6) | ||
2 | .4* | Letter from Citibank, N.A., as depositary, to the Registrant relating to the pre-release of the American depositary receipts (incorporated herein by reference to the Registrant’s Registration Statement (Registration No. 333-10330) on Form F-6) | ||
7 | .1 | Computation of ratio of earnings to fixed charges | ||
8 | .1 | List of subsidiaries of KT Corporation | ||
12 | .1 | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
12 | .2 | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
13 | .1 | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
15 | .1 | Consent of KPMG Samjong Accounting Corp. with respect to the financial statements of KT Corporation | ||
15 | .2 | Consent of Deloitte HanaAnjin LLC with respect to the financial statements of KT Freetel Co., Ltd. | ||
15 | .3 | The Telecommunications Basic Law (English translation) | ||
15 | .4 | Enforcement Decree of the Telecommunications Basic Law (English translation) | ||
15 | .5 | The Telecommunications Business Law (English translation) | ||
15 | .6 | Enforcement Decree of the Telecommunications Business Act (English translation) |
* | Filed previously as indicated. |
116
F-1
2004 | |||||||||||||||
Assets | 2003 | 2004 | (Note 3) | ||||||||||||
(In millions of Won and U.S. dollars) | |||||||||||||||
Current assets: | |||||||||||||||
Cash and cash equivalents (notes 4 and 5) | W | 760,868 | W | 1,755,929 | $ | 1,696.4 | |||||||||
Short-term financial instruments (note 5) | 60,899 | 984,122 | 950.8 | ||||||||||||
Current portion of investment securities (note 8): | |||||||||||||||
Trading securities | 52,397 | 6,186 | 6.0 | ||||||||||||
Available-for-sale securities | 286,757 | 257,803 | 249.1 | ||||||||||||
Held-to-maturity securities | 5,712 | 1,660 | 1.6 | ||||||||||||
Notes and accounts receivable — trade, less allowance for doubtful accounts of W646,273 in 2003 and W702,635 in 2004 (note 2) | 2,647,379 | 2,793,143 | 2,698.4 | ||||||||||||
Accounts receivable — other | 323,042 | 365,162 | 352.8 | ||||||||||||
Inventories (note 6) | 364,833 | 374,319 | 361.6 | ||||||||||||
Other current assets (note 7) | 230,044 | 270,653 | 261.5 | ||||||||||||
Total current assets | 4,731,931 | 6,808,977 | 6,578.2 | ||||||||||||
Investment securities: | |||||||||||||||
Available-for-sale securities (note 8) | 260,642 | 218,757 | 211.3 | ||||||||||||
Held-to-maturity securities (note 8) | 111,409 | 94,404 | 91.2 | ||||||||||||
Equity securities of affiliates (note 9) | 140,790 | 54,061 | 52.2 | ||||||||||||
Total investment securities | 512,841 | 367,222 | 354.7 | ||||||||||||
Property, plant and equipment (note 10): | |||||||||||||||
Land | 1,154,955 | 1,167,683 | 1,128.1 | ||||||||||||
Buildings and structures | 4,282,494 | 4,555,427 | 4,401.0 | ||||||||||||
Machinery and equipment | 34,731,446 | 35,624,899 | 34,416.9 | ||||||||||||
Vehicles | 82,911 | 89,316 | 86.3 | ||||||||||||
Tools, furniture and fixtures | 2,005,812 | 2,114,653 | 2,042.9 | ||||||||||||
Construction in progress | 750,267 | 487,461 | 470.9 | ||||||||||||
43,007,885 | 44,039,439 | 42,546.1 | |||||||||||||
Less accumulated depreciation | (26,633,942 | ) | (28,317,984 | ) | (27,357.8 | ) | |||||||||
Net property, plant and equipment | 16,373,943 | 15,721,455 | 15,188.3 | ||||||||||||
Other assets (notes 5, 11 and 26) | 3,937,960 | 3,575,578 | 3,454.3 | ||||||||||||
W | 25,556,675 | W | 26,473,232 | $ | 25,575.5 | ||||||||||
F-2
2004 | |||||||||||||||
Liabilities and Stockholders’ Equity | 2003 | 2004 | (Note 3) | ||||||||||||
(In millions of Won and U.S. dollars, | |||||||||||||||
except share data) | |||||||||||||||
Current liabilities: | |||||||||||||||
Notes and accounts payable — trade | W | 1,022,805 | W | 853,381 | $ | 824.4 | |||||||||
Short-term borrowings (note 13) | 631,689 | 438,592 | 423.8 | ||||||||||||
Current portion of long-term debt (note 15) | 2,172,510 | 4,756,067 | 4,594.8 | ||||||||||||
Accounts payable — other | 1,233,422 | 1,123,323 | 1,085.2 | ||||||||||||
Advance receipts from customers | 103,139 | 125,989 | 121.7 | ||||||||||||
Accrued expenses | 252,841 | 288,488 | 278.7 | ||||||||||||
Withholdings | 147,233 | 187,579 | 181.2 | ||||||||||||
Income taxes payable | 219,348 | 284,102 | 274.5 | ||||||||||||
Other current liabilities (note 14 and 23) | 132,614 | 276,969 | 267.5 | ||||||||||||
Total current liabilities | 5,915,601 | 8,334,490 | 8,051.8 | ||||||||||||
Long-term debt, excluding current portion (note 15) | 9,049,748 | 6,985,071 | 6,748.2 | ||||||||||||
Refundable deposits for telephone installation (note 16) | 1,227,355 | 1,086,635 | 1,049.8 | ||||||||||||
Accrual for retirement and severance benefits, net (note 17) | 245,878 | 314,789 | 304.1 | ||||||||||||
Long-term accounts payable — other (note 12) | 572,606 | 554,024 | 535.2 | ||||||||||||
Other long-term liabilities (note 18) | 148,867 | 171,843 | 166.0 | ||||||||||||
Total liabilities | 17,160,055 | 17,446,852 | 16,855.1 | ||||||||||||
Stockholders’ equity (note 19): | |||||||||||||||
Common stock of W5,000 par value: | |||||||||||||||
Authorized — 1,000,000,000 shares Issued — 284,849,400 shares in 2003 and 2004 | 1,560,998 | 1,560,998 | 1,508.1 | ||||||||||||
Capital surplus (note 20) | 1,308,612 | 1,291,617 | 1,247.8 | ||||||||||||
Retained earnings: | |||||||||||||||
Appropriated (note 21) | 8,025,854 | 5,431,862 | 5,247.7 | ||||||||||||
Unappropriated (deficit) | (342,554 | ) | 2,901,378 | 2,803.0 | |||||||||||
7,683,300 | 8,333,240 | 8,050.7 | |||||||||||||
Capital adjustments: | |||||||||||||||
Treasury stock (note 22) | (3,962,598 | ) | (3,962,568 | ) | (3,828.2 | ) | |||||||||
Loss on retirement of treasury stock (note 22) | (16,391 | ) | (16,388 | ) | (15.8 | ) | |||||||||
Foreign-based operations translation adjustment | (5,859 | ) | (2,847 | ) | (2.7 | ) | |||||||||
Unrealized gains (losses) on available-for-sale securities (note 8) | (24,799 | ) | 7,797 | 7.5 | |||||||||||
Unrealized losses on equity securities of affiliates (note 9) | (2,691 | ) | (6,732 | ) | (6.5 | ) | |||||||||
Stock options (note 29) | 6,745 | 11,686 | 11.3 | ||||||||||||
(4,005,593 | ) | (3,969,052 | ) | (3,834.4 | ) | ||||||||||
Minority interest in consolidated subsidiaries | 1,849,303 | 1,809,577 | 1,748.2 | ||||||||||||
Total stockholders’ equity | 8,396,620 | 9,026,380 | 8,720.4 | ||||||||||||
Commitments and contingencies (note 23) | — | — | — | ||||||||||||
W | 25,556,675 | W | 26,473,232 | $ | 25,575.5 | ||||||||||
F-3
2004 | ||||||||||||||||||
2002 | 2003 | 2004 | (Note 3) | |||||||||||||||
(In millions of Won and U.S. dollars, except earnings per share) | ||||||||||||||||||
Operating revenues (note 24) | W | 16,437,422 | W | 16,067,779 | W | 17,068,371 | $ | 16,489.6 | ||||||||||
Operating expenses (note 25) | 14,055,619 | 14,245,343 | 14,587,839 | 14,093.2 | ||||||||||||||
Operating income | 2,381,803 | 1,822,436 | 2,480,532 | 2,396.4 | ||||||||||||||
Other income (expense): | ||||||||||||||||||
Interest income | 123,118 | 115,454 | 116,725 | 112.8 | ||||||||||||||
Interest expense | (650,460 | ) | (705,540 | ) | (678,514 | ) | (655.5 | ) | ||||||||||
Equity in losses of affiliates, net (note 9) | (17,009 | ) | (30,270 | ) | (79,350 | ) | (76.7 | ) | ||||||||||
Foreign currency transaction and translation gain (loss), net (note 15) | 99,845 | (27,074 | ) | 542,566 | 524.2 | |||||||||||||
Loss on disposition of property, plant and equipment, net | (116,106 | ) | (122,966 | ) | (103,513 | ) | (100.0 | ) | ||||||||||
Gain (loss) on disposition of available-for-sale securities, net (note 8) | 1,176,868 | 772,901 | (15,115 | ) | (14.6 | ) | ||||||||||||
Impairment loss on available-for-sale securities (note 8) | (3,339 | ) | (43,993 | ) | (5,831 | ) | (5.6 | ) | ||||||||||
Impairment loss on held-to-maturity securities (note 8) | — | — | (42,078 | ) | (40.7 | ) | ||||||||||||
Contributions received for losses on universal telecommunications services (note 33) | 113,908 | 28,539 | 80,310 | 77.6 | ||||||||||||||
Prior year’s additional income tax refund (payment) (note 26) | 6,354 | (53,992 | ) | (943 | ) | (0.9 | ) | |||||||||||
Contribution payments for research and development and donations (note 32) | (145,405 | ) | (182,983 | ) | (146,779 | ) | (141.8 | ) | ||||||||||
Derivatives transaction and valuation loss, net (note 23) | (7,618 | ) | (151 | ) | (146,937 | ) | (142.0 | ) | ||||||||||
Other, net | 43,247 | 8,699 | 7,963 | 7.7 | ||||||||||||||
623,403 | (241,376 | ) | (471,496 | ) | (455.5 | ) | ||||||||||||
Earnings before income taxes and minority interest | 3,005,206 | 1,581,060 | 2,009,036 | 1,940.9 | ||||||||||||||
Income taxes (note 26) | 741,354 | 523,631 | 577,889 | 558.3 | ||||||||||||||
Earnings before minority interest | 2,263,852 | 1,057,429 | 1,431,147 | 1,382.6 | ||||||||||||||
Minority interest in earnings of consolidated subsidiaries, net | (316,918 | ) | (235,695 | ) | (148,931 | ) | (143.9 | ) | ||||||||||
Net earnings | W | 1,946,934 | W | 821,734 | W | 1,282,216 | $ | 1,238.7 | ||||||||||
Retained earnings at beginning of year | 6,718,943 | 8,274,482 | 7,683,300 | 7,422.8 | ||||||||||||||
Cumulative effect of accounting change (note 2) | — | (1,530 | ) | — | — | |||||||||||||
Retirement of treasury stock (notes 19 and 22) | (167,341 | ) | (1,198,499 | ) | — | — | ||||||||||||
Dividends (notes 2 and 27) | (224,054 | ) | (212,887 | ) | (632,276 | ) | (610.8 | ) | ||||||||||
Retained earnings at end of year | W | 8,274,482 | W | 7,683,300 | W | 8,333,240 | $ | 8,050.7 | ||||||||||
Basic earnings per share of common stock in Won and U.S. dollars (note 28) | W | 7,504 | W | 3,802 | W | 6,084 | $ | 5.88 | ||||||||||
Diluted earnings per share of common stock in Won and U.S. dollars (note 28) | W | 6,601 | W | 3,313 | W | 5,697 | $ | 5.50 | ||||||||||
F-4
2004 | |||||||||||||||||||
2002 | 2003 | 2004 | (Note 3) | ||||||||||||||||
(In millions of Won and U.S. dollars) | |||||||||||||||||||
Cash flows from operating activities: | |||||||||||||||||||
Net earnings | W | 1,946,934 | W | 821,734 | W | 1,282,216 | $ | 1,238.7 | |||||||||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||||||||||||||
Depreciation | 3,440,145 | 3,393,175 | 3,403,639 | 3,288.2 | |||||||||||||||
Amortization | 356,949 | 364,051 | 393,849 | 380.5 | |||||||||||||||
Provision for doubtful accounts | 194,288 | 363,774 | 287,073 | 277.3 | |||||||||||||||
Provision for retirement and severance benefits | 275,007 | 1,067,076 | 281,453 | 271.9 | |||||||||||||||
Equity in losses of affiliates | 17,009 | 30,270 | 79,350 | 76.7 | |||||||||||||||
Loss on disposition of property, plant and equipment | 116,106 | 122,966 | 103,513 | 100.0 | |||||||||||||||
Loss (gain) on foreign currency translations, net | (101,077 | ) | 27,555 | (546,335 | ) | (527.8 | ) | ||||||||||||
Loss (gain) on disposition of available-for-sale securities, net | (1,176,868 | ) | (772,901 | ) | 15,115 | 14.6 | |||||||||||||
Impairment loss on available-for-sale securities | 3,339 | 43,993 | 5,831 | 5.6 | |||||||||||||||
Impairment loss on held-to-maturity securities | — | — | 42,078 | 40.7 | |||||||||||||||
Deferred income tax expense | 149,032 | 46,294 | 106,964 | 103.3 | |||||||||||||||
Minority interest in earnings of consolidated subsidiaries | 316,918 | 235,695 | 148,931 | 143.9 | |||||||||||||||
Changes in operating assets and liabilities: | |||||||||||||||||||
Notes and accounts receivable — trade | (725,904 | ) | (742,487 | ) | (361,316 | ) | (349.1 | ) | |||||||||||
Accounts receivable — other | — | (387,518 | ) | (93,936 | ) | (90.7 | ) | ||||||||||||
Inventories | (275,813 | ) | (197,478 | ) | (15,564 | ) | (15.0 | ) | |||||||||||
Other asset (long-term accounts receivable — trade) | (175,358 | ) | 126,900 | (266,813 | ) | (257.8 | ) | ||||||||||||
Notes and accounts payable — trade | 125,313 | (143,425 | ) | (150,771 | ) | (145.7 | ) | ||||||||||||
Accounts payable — other | 378,531 | 60,928 | (107,901 | ) | (104.2 | ) | |||||||||||||
Advance receipts from customers | 4,415 | (25,359 | ) | 22,850 | 22.1 | ||||||||||||||
Accrued expenses | 8,702 | (5,792 | ) | 35,647 | 34.4 | ||||||||||||||
Income taxes payable | 269,886 | (240,025 | ) | (540 | ) | (0.5 | ) | ||||||||||||
Withholdings | (123,085 | ) | (23,451 | ) | 40,346 | 39.0 | |||||||||||||
Payment of retirement and severance benefits | (42,942 | ) | (1,020,940 | ) | (93,178 | ) | (90.0 | ) | |||||||||||
Severance benefits insurance deposit | (325,376 | ) | (180,801 | ) | (119,568 | ) | (115.5 | ) | |||||||||||
Other, net | 170,709 | 226,166 | 226,434 | 218.8 | |||||||||||||||
Net cash provided by operating activities | W | 4,826,860 | W | 3,190,400 | W | 4,719,367 | $ | 4,559.4 | |||||||||||
F-5
2004 | ||||||||||||||||||
2002 | 2003 | 2004 | (Note 3) | |||||||||||||||
(In millions of Won and U.S. dollars) | ||||||||||||||||||
Cash flows from investing activities: | ||||||||||||||||||
Purchases of property, plant and equipment | W | (3,232,346 | ) | W | (3,209,376 | ) | W | (2,971,376 | ) | $ | (2,870.6 | ) | ||||||
Proceeds from sale of property, plant and equipment | 52,966 | 253,137 | 109,469 | 105.7 | ||||||||||||||
Decrease in accounts receivable — other | 8,918 | 215,021 | — | — | ||||||||||||||
Decrease (increase) in short-term financial instruments | (125,921 | ) | 758,916 | (923,223 | ) | (891.9 | ) | |||||||||||
Purchases of available-for-sale securities | (235,393 | ) | (315,553 | ) | (499,370 | ) | (482.4 | ) | ||||||||||
Purchases of held-to-maturity securities | (392 | ) | (11,412 | ) | (3,182 | ) | (3.1 | ) | ||||||||||
Purchases of equity securities of affiliates | (6,180 | ) | (83,890 | ) | — | — | ||||||||||||
Proceeds from sale of available-for-sale securities | 294,694 | 210,121 | 589,977 | 570.0 | ||||||||||||||
Proceeds from maturity of held-to-maturity securities | 9,994 | 218 | 12,992 | 12.5 | ||||||||||||||
Decrease in other current assets | 173,110 | 560,208 | 184,753 | 178.5 | ||||||||||||||
Decrease (increase) in other assets | (1,004,353 | ) | 141,738 | (117,851 | ) | (113.8 | ) | |||||||||||
Net cash used in investing activities | (4,064,903 | ) | (1,480,872 | ) | (3,617,811 | ) | (3,495.1 | ) | ||||||||||
Cash flows from financing activities: | ||||||||||||||||||
Payment of dividends | (224,955 | ) | (213,308 | ) | (683,208 | ) | (660.0 | ) | ||||||||||
Proceeds from sale of accounts receivable | 470,000 | 512,000 | — | — | ||||||||||||||
Proceeds from short-term borrowings, net | (15,656 | ) | (484,696 | ) | (193,097 | ) | (186.6 | ) | ||||||||||
Repayment of long-term debt | (2,064,527 | ) | (1,989,381 | ) | (2,178,028 | ) | (2,104.2 | ) | ||||||||||
Proceeds from issuance of long-term debt | 5,558,966 | 1,285,653 | 3,235,976 | 3,126.2 | ||||||||||||||
Decrease in refundable deposits for telephone installation | (750,394 | ) | (306,211 | ) | (140,720 | ) | (135.9 | ) | ||||||||||
Increase (decrease) in other long-term liabilities | 12,893 | (2,781 | ) | 3,905 | 3.8 | |||||||||||||
Reacquisition of treasury stock | (3,401,186 | ) | (412,247 | ) | — | — | ||||||||||||
Proceeds from sale of treasury stock | — | 39,312 | — | — | ||||||||||||||
Reacquisition of treasury stock in consolidated subsidiaries | — | (69,747 | ) | (151,308 | ) | (146.2 | ) | |||||||||||
Acquisition of additional equity interest in consolidated subsidiaries | (449,935 | ) | (426,052 | ) | (609 | ) | (0.6 | ) | ||||||||||
Other, net | 20,543 | 2,247 | 594 | 0.6 | ||||||||||||||
Net cash used in financing activities | (844,251 | ) | (2,065,211 | ) | (106,495 | ) | (102.9 | ) | ||||||||||
Net increase (decrease) in cash and cash equivalents from change of subsidiaries in consolidated financial statements | (22 | ) | 29,862 | — | — | |||||||||||||
Net increase (decrease) in cash and cash equivalents | (82,316 | ) | (325,821 | ) | 995,061 | 961.4 | ||||||||||||
Cash and cash equivalents at beginning of year | 1,169,005 | 1,086,689 | 760,868 | 735.0 | ||||||||||||||
Cash and cash equivalents at end of year | W | 1,086,689 | W | 760,868 | W | 1,755,929 | $ | 1,696.4 | ||||||||||
F-6
(1) | Organization and Description of Business |
(2) | Summary of Significant Accounting Policies and Basis of Presenting Consolidated Financial Statements |
(a) | Basis of Presenting Consolidated Financial Statements |
F-7
F-8
Percentage | ||||||||||||||||||||||
Year of | Ownership (%) | |||||||||||||||||||||
Year of | Obtaining | |||||||||||||||||||||
Subsidiary | Establishment | Control | 2002 | 2003 | 2004 | Primary Business | ||||||||||||||||
KT Freetel Co., Ltd. (“KTF”) | 1997 | 1997 | 40.3 | 46.9 | 48.7 | PCS business | ||||||||||||||||
KT Hitel Co., Ltd. (“KTH”) | 1991 | 1992 | 65.9 | 65.9 | 65.9 | Data communication | ||||||||||||||||
KT Submarine Co., Ltd. (“KTSC”) | 1995 | 1995 | 36.9 | 36.9 | 36.9 | Submarine cable construction and maintenance | ||||||||||||||||
KT Powertel Co., Ltd. (“KTP”) | 1985 | 1985 | 45.4 | 44.8 | 44.8 | Trunk radio system business | ||||||||||||||||
KT Networks Corporation (“KTN”) | 1986 | 1986 | 100.0 | 100.0 | 100.0 | Group telephone management | ||||||||||||||||
KT Linkus Co., Ltd. | 1988 | 1988 | 93.8 | 93.8 | 93.8 | Public telephone maintenance | ||||||||||||||||
Korea Telecom America, Inc. | 1993 | 1993 | 100.0 | 100.0 | 100.0 | Foreign telecommunication business | ||||||||||||||||
Korea Telecom Philippines, Inc. | 1994 | 1994 | 100.0 | 100.0 | 100.0 | Foreign telecommunication business | ||||||||||||||||
New Telephone Company Inc. (“NTC”) | 1993 | 1998 | 72.5 | 72.5 | 72.5 | Foreign telecommunication business | ||||||||||||||||
Korea Telecom Japan Co., Ltd. | 1999 | 1999 | 100.0 | 100.0 | 100.0 | Foreign telecommunication business | ||||||||||||||||
KT ICOM Co., Ltd. (“KTICOM”)* | 2001 | 2001 | 87.3 | — | — | IMT-2000 service | ||||||||||||||||
KTF Technologies Inc. (“KTFT”)** | 2001 | 2002 | 57.4 | 57.4 | 70.8 | PCS handset development | ||||||||||||||||
KT Commerce Inc. (“KTC”)*** | 2002 | 2002 | 100.0 | 100.0 | 100.0 | B2C, B2B service | ||||||||||||||||
KT Rental Corp. (“KTR”)**** | 1999 | 2003 | 48.8 | 98.8 | — | Rental service | ||||||||||||||||
KT China Co., Ltd. (“KTCC”) | 2003 | 2003 | — | 100.0 | 100.0 | Foreign telecommunication business |
* | The ownership percentage in KTICOM represents the ownership of this entity by KTF. |
** | The 70.8% ownership percentage in KTFT represents the ownership of this entity by KTF. |
*** | The 100.0% ownership percentage in KTC represents the ownership of this entity by KT (19.0%) and KTH (81.0%). |
**** | The 98.8% ownership percentage in KTR represents the ownership of this entity by KTN. |
F-9
Subsidiary | Millions | |||
KTSC | W | 60,540 | ||
NTC | 12,526 | |||
W | 73,066 | |||
Millions | ||||||||
Balance Sheet Items | 2003 | 2004 | ||||||
Notes and accounts receivable — trade | W | 113,890 | W | 208,815 | ||||
Accounts receivable — other | 19,179 | 16,713 | ||||||
Convertible notes | 332,375 | 347,814 | ||||||
Accounts payable — other | 188,054 | 193,794 | ||||||
Key money deposits | 48,895 | 41,599 |
F-10
Millions | ||||||||||
Transaction Parties | Balance Sheet Items | 2003 | 2004 | |||||||
KT KDB | Trade notes and accounts receivable | W | 4,079 | W | 54,664 | |||||
KT Other | Trade notes and accounts receivable | 1,526 | 1,120 | |||||||
KT Infotech | Accounts payable | 19,348 | 23,374 | |||||||
KT eNtoB | Accounts payable | 16,462 | 16,669 | |||||||
KT KOID | Accounts payable | 13,169 | 14,757 | |||||||
KT KTRD | Accounts payable | 12,664 | 6,633 | |||||||
KT KOIS | Accounts payable | 8,852 | 9,538 | |||||||
KT Other | Accounts payable | 1,178 | 1,963 |
Millions | ||||||||||||
2002 | 2003 | 2004 | ||||||||||
Operating revenues | W | 597,113 | W | 695,685 | W | 891,233 | ||||||
Operating expenses | 749,590 | 835,728 | 1,124,463 | |||||||||
Contributions received for losses on universal telecommunications services | 40,052 | 44,250 | 25,557 | |||||||||
Other income | 10,471 | 10,103 | 10,307 |
Millions | ||||||||||||||
Transaction Parties | Income Statement Items | 2002 | 2003 | 2004 | ||||||||||
KT KDB | Sales | W | 36,733 | W | 47,337 | W | 131,685 | |||||||
KT KOID | Sales | 8,609 | 8,942 | 10,676 | ||||||||||
KT KOIS | Sales | 5,936 | 6,480 | 7,934 | ||||||||||
KT Other | Sales | 2,109 | 1,367 | 1,872 | ||||||||||
KT KOID | Purchases | 83,153 | 96,944 | 102,624 | ||||||||||
KT KTRD | Purchases | 40,984 | 66,361 | 74,058 | ||||||||||
KT KOIS | Purchases | 50,670 | 66,148 | 71,778 | ||||||||||
KT Infotech | Purchases | 49,972 | 59,097 | 43,499 | ||||||||||
KT NtoB | Purchases | 654 | 33,101 | 86,406 | ||||||||||
KT Other | Purchases | 2,290 | 7,069 | 7,321 |
(b) | Cash Equivalents |
F-11
(c) | Financial Instruments |
(d) | Allowance for Doubtful Accounts |
Millions | ||||||||||||
2002 | 2003 | 2004 | ||||||||||
Balance at beginning of year | W | 330,345 | W | 430,066 | W | 646,273 | ||||||
Increase due to the changes of consolidated subsidiaries | 483 | 65 | — | |||||||||
Provision | 194,288 | 363,774 | 287,073 | |||||||||
Write-offs | (95,050 | ) | (147,632 | ) | (230,711 | ) | ||||||
Balance at end of year | W | 430,066 | W | 646,273 | W | 702,635 | ||||||
(e) | Inventories |
(f) | Investments in Securities |
F-12
(g) | Investment Securities Under the Equity Method of Accounting |
F-13
(h) | Property, Plant and Equipment |
Estimated Useful Lives | |||||
(Years) | |||||
Buildings and structures | 5-60 | ||||
Machinery and equipment: | |||||
Underground access to cable tunnels, and concrete and steel telephone poles | 20-40 | ||||
Other | 3-15 | ||||
Vehicles | 3-10 | ||||
Tools, furniture and fixtures: | |||||
Steel safe boxes | 20 | ||||
Tools, computer equipment, furniture and fixtures | 2-8 |
F-14
(i) | Contributions Received for Capital Expenditures |
(j) | Intangible Assets |
(i) Goodwill |
(ii) Other Intangible Assets |
(iii) Research and Development Costs |
F-15
(k) | Advertising Costs |
(l) | Valuation of Receivables at Present Value |
(m) | Convertible Notes and Bonds with Warrants |
(n) | Retirement and Severance Benefits |
(o) | Customer Call Bonus Program |
F-16
(p) | Contingent Liabilities |
(q) | Revenue Recognition |
(r) | Foreign Currency Translation |
(s) | Derivatives |
F-17
(t) | Leases |
• | Ownership of the leased property shall be transferred to the lessee at the end of the lease term without additional payment or for a contract price. | |
• | The lease has a bargain purchase option. | |
• | The lease term is equal to 75% or more of the estimated economic useful life of the leased property. | |
• | The present value at the beginning of the lease term of the minimum lease payments equals or exceeds 90% of the fair value of the leased property. |
(u) | Income Taxes |
(v) | Dividends Payable |
(w) | Stock Options |
F-18
(x) | Earnings Per Share |
(y) | Use of Estimates |
(z) | Minority Interest in Consolidated Subsidiaries |
(aa) Foreign Currency Translation of Foreign Subsidiaries |
(ab) Accounting for the Disposition of an Equity Interest in a Consolidated Subsidiary |
(ac) Application of the Statements of Korea Financial Accounting Standards |
(ad) Recent Changes in the Statements of Korea Financial Accounting Standards |
F-19
(ae) Fair Value of Financial Instruments |
(ii) | Investment Securities |
(iii) | Loans to Employees |
(iv) | Long-term debt |
(v) | Interest rate swap, interest rate swaption, currency swap, interest currency swap, currency forward and currency option |
F-20
2003 | |||||||||
Carrying | |||||||||
Amount | Fair Value | ||||||||
(Millions) | |||||||||
Cash and cash equivalents | 760,868 | 760,868 | |||||||
Short-term financial instruments | 60,899 | 60,899 | |||||||
Notes and accounts receivable — trade | 2,647,379 | 2,647,379 | |||||||
Accounts receivable — other | 323,042 | 323,042 | |||||||
Trading securities | 52,397 | 52,397 | |||||||
Available-for-sale securities: | |||||||||
• Practicable to estimate fair value | 339,640 | 339,640 | |||||||
• Not practicable | 207,759 | N/A | |||||||
Held-to-maturity securities | 117,121 | 117,205 | |||||||
Interest rate swap | 2,998 | 2,998 | |||||||
Interest rate swaption | 989 | 989 | |||||||
Interest currency swap | 5,083 | 5,083 | |||||||
Loans to employees | 684,711 | 572,083 | |||||||
Notes and accounts payable — trade | 1,022,805 | 1,022,805 | |||||||
Short-term borrowings | 631,689 | 631,689 | |||||||
Accrued expenses | 252,841 | 252,841 | |||||||
Interest rate swap | 16,077 | 16,077 | |||||||
Currency swap | 3,554 | 3,554 | |||||||
Long-term debt, including current portion | 11,222,258 | 10,972,913 |
F-21
2004 | |||||||||
Carrying | |||||||||
Amount | Fair Value | ||||||||
(Millions) | |||||||||
Cash and cash equivalents | 1,755,929 | 1,755,929 | |||||||
Short-term financial instruments | 984,122 | 984,122 | |||||||
Notes and accounts receivable — trade | 2,793,143 | 2,793,143 | |||||||
Accounts receivable — other | 365,162 | 365,162 | |||||||
Trading securities | 6,186 | 6,186 | |||||||
Available-for-sale securities: | |||||||||
• Practicable to estimate fair value | 279,842 | 279,842 | |||||||
• Not practicable | 196,718 | N/A | |||||||
Held-to-maturity securities | 96,064 | 96,207 | |||||||
Interest rate swap | 2,102 | 2,102 | |||||||
Interest rate swaption | 353 | 353 | |||||||
Currency forward | 206 | 206 | |||||||
Loans to employees | 611,366 | 542,417 | |||||||
Notes and accounts payable — trade | 853,381 | 853,381 | |||||||
Short-term borrowings | 438,592 | 438,592 | |||||||
Accrued expenses | 288,488 | 288,488 | |||||||
Interest rate swap | 7,278 | 7,278 | |||||||
Currency swap | 40,799 | 40,799 | |||||||
Interest currency swap | 99,615 | 99,615 | |||||||
Currency forward | 10,025 | 10,025 | |||||||
Currency option | 1,349 | 1,349 | |||||||
Long-term debt, including current portion | 11,741,138 | 11,992,538 |
F-22
Unaudited 2003 | ||||||||||||||||||||||||
Stockholders’ | ||||||||||||||||||||||||
Percentage | Carrying | Total | Equity | Net Income | ||||||||||||||||||||
Ownership | Amount | Assets | (Deficit) | Revenues | (Loss) | |||||||||||||||||||
(Millions) | ||||||||||||||||||||||||
Intelsat Ltd. | 0.7 | W | 6,222 | 6,046,679 | 2,794,525 | 1,135,715 | 215,894 | |||||||||||||||||
Inmarsat Venture plc | 2.3 | 15,015 | 1,653,212 | 1,110,008 | 552,025 | 195,729 | ||||||||||||||||||
Korea Software Financial Cooperative | 1.4 | 1,000 | 101,779 | 96,305 | 6,542 | 3,260 | ||||||||||||||||||
Polytech Adventure Town, Inc. | 6.7 | 200 | 1,425 | 1,405 | 18 | (148 | ) | |||||||||||||||||
Real Telecom Corporation | 6.5 | 721 | 38,260 | 9,265 | 18,595 | (9,563 | ) | |||||||||||||||||
KT Internal Venture Fund No. 1 | 89.3 | 3,303 | 12,481 | 12,410 | 5,230 | 5,131 | ||||||||||||||||||
KT Internal Venture Fund No. 2 | 90.0 | 3,000 | 3,302 | 3,301 | 25 | 10 | ||||||||||||||||||
Korea Information Certificate Authority, Inc. | 9.4 | 2,000 | 25,363 | 18,067 | 15,062 | (26 | ) | |||||||||||||||||
Mirae Asset Securities Co., Ltd | 9.6 | 11,960 | 880,615 | 214,304 | 225,222 | 31,174 | ||||||||||||||||||
Korea Telecom Venture Fund No. 190.0 | 18,000 | 24,046 | 23,737 | 1,136 | 697 | |||||||||||||||||||
Kookmin Credit Information, Inc. | 13.0 | 1,202 | 6,457 | 3,378 | 8,481 | (5,894 | ) | |||||||||||||||||
Korea Information Technology Fund | 33.3 | 100,000 | 309,459 | 309,459 | — | 9,459 | ||||||||||||||||||
On Game Network Inc. | 19.5 | 1,061 | 9,146 | 6,749 | 11,681 | 380 | ||||||||||||||||||
Other | — | 44,075 | - - - - - - - Not available - - - - - - - - | |||||||||||||||||||||
W | 207,759 | |||||||||||||||||||||||
F-23
Unaudited 2004 | ||||||||||||||||||||||||
Stockholders’ | Net | |||||||||||||||||||||||
Percentage | Carrying | Total | Equity | Income | ||||||||||||||||||||
Ownership | Amount | Assets | (Deficit) | Revenues | (Loss) | |||||||||||||||||||
(Millions) | ||||||||||||||||||||||||
Intelsat Ltd. | 0.7 | 6,222 | 4,977,479 | 2,406,816 | 1,089,629 | (40,373 | ) | |||||||||||||||||
Inmarsat Group holdings., Ltd. | 2.3 | 653 | 2,278,094 | 38,099 | 501,755 | 11,899 | ||||||||||||||||||
Korea Software Financial Cooperative | 1.4 | 1,000 | 106,060 | 101,205 | 6,249 | 3,457 | ||||||||||||||||||
Polytech Adventure Town, Inc. | 6.7 | 200 | 2,910 | 2,610 | 984 | (160 | ) | |||||||||||||||||
Real Telecom Corporation | 6.5 | 721 | 26,977 | (3,338 | ) | 9,419 | (12,778 | ) | ||||||||||||||||
KT Internal Venture Fund No. 1 | 89.3 | 3,303 | 4,101 | 4,101 | 51 | 17 | ||||||||||||||||||
KT Internal Venture Fund No. 2 | 94.3 | 5,000 | 5,374 | 5,374 | 64 | 64 | ||||||||||||||||||
Korea Information Certificate Authority, Inc. | 9.4 | 2,000 | 20,224 | 13,213 | 15,015 | (2,980 | ) | |||||||||||||||||
Mirae Asset Securities Co., Ltd | 4.4 | 5,000 | 896,905 | 238,554 | 197,726 | 25,723 | ||||||||||||||||||
Korea Telecom Venture Fund No. 1 | 90.0 | 18,000 | 21,170 | 20,876 | 2,866 | (1,277 | ) | |||||||||||||||||
Kookmin Credit Information, Inc. | 13.0 | 1,202 | 5,003 | (214 | ) | 8,268 | (2,305 | ) | ||||||||||||||||
Korea Information Technology Fund | 33.3 | 100,000 | 310,448 | 310,448 | 11,090 | 10,010 | ||||||||||||||||||
On Game Network Inc. | 19.5 | 1,061 | 19,556 | 13,565 | 17,007 | 1,401 | ||||||||||||||||||
Other | — | 52,356 | - - - - - - - Not available - - - - - - - - | |||||||||||||||||||||
W | 196,718 | |||||||||||||||||||||||
(3) | Basis of Translating Consolidated Financial Statements |
(4) | Cash and Cash Equivalents |
Millions | ||||||||
2003 | 2004 | |||||||
Cash on hand | W | 380 | W | 65 | ||||
Checking accounts | 3,919 | 5,751 | ||||||
Passbook accounts | 17,859 | 22,290 | ||||||
Cash in transit | 541,918 | 424,884 | ||||||
Time deposits | 196,792 | 1,302,939 | ||||||
W | 760,868 | W | 1,755,929 | |||||
F-24
(5) | Restricted Deposits |
Millions | ||||||||
2003 | 2004 | |||||||
Cash and cash equivalents | W | 1,038 | W | — | ||||
Short-term financial instruments | 3,127 | 5,800 | ||||||
Long-term financial instruments | 61 | 92 | ||||||
W | 4,226 | W | 5,892 | |||||
(6) | Inventories |
Millions | ||||||||
2003 | 2004 | |||||||
PCS handsets | W | 225,809 | W | 282,652 | ||||
Valuation allowance | — | (21,471 | ) | |||||
Construction and repair materials | 72,924 | 29,331 | ||||||
Other | 66,100 | 83,807 | ||||||
W | 364,833 | W | 374,319 | |||||
(7) | Other Current Assets |
Millions | ||||||||
2003 | 2004 | |||||||
Current portion of long-term loans to employees | W | 118,629 | W | 136,047 | ||||
Prepaid expenses | 28,412 | 28,203 | ||||||
Prepayments | 49,371 | 74,030 | ||||||
Accrued interest income | 8,359 | 25,098 | ||||||
Refundable deposits | 8,721 | 4,154 | ||||||
Short-term loans | 6,526 | 271 | ||||||
Receivables from derivative contracts (note 23) | 9,070 | 2,661 | ||||||
Other | 956 | 189 | ||||||
W | 230,044 | W | 270,653 | |||||
F-25
(8) | Investments in Securities |
(a) Trading securities (fair value) |
Millions | ||||||||
2003 | 2004 | |||||||
Mutual funds | W | 52,397 | W | 6,186 |
(b) Available-for-sale securities |
(i) Equity securities |
Percentage of | |||||||||||||||||
Ownership (%) | Millions | ||||||||||||||||
2003 | 2004 | 2003 | 2004 | ||||||||||||||
Current assets: | |||||||||||||||||
Knowledge Plant, Inc.* | 4.4 | 4.4 | 7,272 | 1,625 | |||||||||||||
Mobilians Co., Ltd.* | — | 12.2 | — | 4,893 | |||||||||||||
W | 7,272 | W | 6,518 | ||||||||||||||
F-26
Percentage of | |||||||||||||||||
Ownership (%) | Millions | ||||||||||||||||
2003 | 2004 | 2003 | 2004 | ||||||||||||||
Investment assets: | |||||||||||||||||
New Skies Satellites N.V. | 1.4 | — | W | 15,917 | W | — | |||||||||||
Intelsat, Ltd. | 0.7 | 0.7 | 6,222 | 6,222 | |||||||||||||
Inmarsat Ventures plc | 2.3 | — | 15,015 | — | |||||||||||||
Inmarsat Group holdings., Ltd | — | 2.3 | — | 653 | |||||||||||||
Real Telecom Corporation | 6.5 | 6.5 | 721 | 721 | |||||||||||||
Korea Software Financial Cooperative | 1.4 | 1.4 | 1,000 | 1,000 | |||||||||||||
Korea Information Certificate Authority, Inc. | 9.4 | 9.4 | 2,000 | 2,000 | |||||||||||||
KT Internal Venture Fund No. 1 | 89.3 | 89.3 | 3,303 | 3,303 | |||||||||||||
KT Internal Venture Fund No. 2 | 90.0 | 94.3 | 3,000 | 5,000 | |||||||||||||
Mirae Asset Securities Co., Ltd. | 9.6 | 4.4 | 11,960 | 5,000 | |||||||||||||
Korea Telecom Venture Fund No. 1 | 90.0 | 90.0 | 18,000 | 18,000 | |||||||||||||
Sky Life Contents fund | 22.5 | 22.5 | 4,500 | 4,500 | |||||||||||||
Korea Information Technology Fund | 33.3 | 33.3 | 100,000 | 100,000 | |||||||||||||
Kookmin Credit Information Inc. | 13.0 | 13.0 | 1,202 | 1,202 | |||||||||||||
On Game Network Inc. | 19.5 | 19.5 | 1,061 | 1,061 | |||||||||||||
GaeaSoft Corp.* | 2.1 | 2.1 | 913 | 514 | |||||||||||||
KRTnet Corporation* | 7.5 | 7.5 | 4,454 | 3,634 | |||||||||||||
Sports Toto | 6.7 | 6.7 | 13,500 | 13,500 | |||||||||||||
VACOM Wireless, INC. | 16.8 | 16.8 | 1,880 | 719 | |||||||||||||
ESTsoft Corp. | 15.0 | 15.0 | 1,650 | 1,650 | |||||||||||||
CEC Mobile | 16.7 | 16.7 | 4,456 | 4,456 | |||||||||||||
Onse Telecom | 6.4 | 8.6 | 4,605 | 6,181 | |||||||||||||
Wide Telecom, Inc* | 0.5 | 0.5 | 24 | 11 | |||||||||||||
Dalsvyaz* | 2.6 | 2.6 | 234 | 204 | |||||||||||||
Other | — | — | 13,684 | 22,078 | |||||||||||||
W | 229,301 | W | 201,609 | ||||||||||||||
* | Investments in these equity securities are recorded at fair value. All other equity securities that do not have readily determinable fair values are stated at cost. |
F-27
(ii) Debt securities |
Millions | |||||||||||||
Maturity | 2003 | 2004 | |||||||||||
Current assets: | |||||||||||||
Beneficiary certificates | 2005 | W | 216,105 | W | 251,285 | ||||||||
Equity-linked securities | — | 63,380 | — | ||||||||||
W | 279,485 | W | 251,285 | ||||||||||
Investment assets: | |||||||||||||
KTF Second Securitization Specialty Co., Ltd. | — | 19,254 | — | ||||||||||
Other | — | 12,087 | W | 17,148 | |||||||||
W | 31,341 | W | 17,148 | ||||||||||
(iii) | Changes in unrealized gains (losses) |
Millions | ||||
Beginning balance | W | (24,799 | ) | |
Realized losses on disposition of securities | 27,844 | |||
Changes in unrealized gains and losses, net | 4,752 | |||
Net balance at end of year | W | 7,797 | ||
F-28
(c) | Held-to-maturity securities |
Millions | |||||||||
2003 | 2004 | ||||||||
Current assets: | |||||||||
Government and municipal bonds | W | 5,712 | W | 1,660 | |||||
Investment assets: | |||||||||
Government and municipal bonds | 11,495 | 2,501 | |||||||
Beneficiary certificates (note 23(j)) | 99,914 | 88,667 | |||||||
Other | — | 3,236 | |||||||
W | 111,409 | W | 94,404 | ||||||
(9) | Investments in Equity Securities of Affiliated Companies |
Millions | ||||||||||||||||||||||||||
Percentage | ||||||||||||||||||||||||||
Ownership (%) | 2003 | 2004 | ||||||||||||||||||||||||
2003 | 2004 | Net Asset | Book Value | Net Asset | Book Value | |||||||||||||||||||||
Listed*: | ||||||||||||||||||||||||||
Hallim Venture Capital Corporation (“HVCC”) | 25.3 | 25.3 | W | 7,700 | W | 3,512 | W | 2,466 | W | — | ||||||||||||||||
Unlisted: | ||||||||||||||||||||||||||
Mongolian Telecommunications Co. | 40.0 | 40.0 | 4,982 | 4,982 | 8,183 | 8,183 | ||||||||||||||||||||
Korea IT Venture Partners Inc. | 28.0 | 28.0 | 9,227 | 9,227 | 9,228 | 9,228 | ||||||||||||||||||||
KBSi Co., Ltd. | 32.4 | 32.4 | 1,386 | 1,386 | 1,667 | 1,667 | ||||||||||||||||||||
Korea Telephone Directory Co., Ltd. | 34.0 | 34.0 | 8,601 | 8,601 | 8,777 | 8,777 | ||||||||||||||||||||
eNtoB Corp. | 23.8 | 23.8 | 3,420 | 3,420 | 3,803 | 3,803 | ||||||||||||||||||||
KT Infotech Corporation | 15.6 | 15.6 | 4,350 | 3,955 | 3,334 | 3,059 | ||||||||||||||||||||
Korea Telecom Realty Development and Management Co., Ltd. | 19.0 | 19.0 | 1,964 | 1,921 | 2,172 | 2,172 | ||||||||||||||||||||
Korea Digital Satellite Broadcasting Co. (“KDB”) | 29.9 | 29.9 | 40,411 | 89,885 | (2,191 | ) | — | |||||||||||||||||||
Korea Information Data Corp. | 19.0 | 19.0 | 6,864 | 6,864 | 9,138 | 9,138 | ||||||||||||||||||||
Korea Information Service Corp. | 19.0 | 19.0 | 4,552 | 4,552 | 6,007 | 6,007 | ||||||||||||||||||||
KT Instrument & Communication Corp. | 19.0 | 19.0 | 309 | 309 | 354 | 354 | ||||||||||||||||||||
Bank Town Co., Ltd. | 19.0 | 19.0 | 444 | 433 | 569 | 569 | ||||||||||||||||||||
Korea Telecom Hitel Global Co., Ltd. | 49.0 | 49.0 | 293 | 293 | — | — | ||||||||||||||||||||
Sports TOTO On-Line | 30.0 | 30.0 | 1,450 | 1,450 | 1,104 | 1,104 | ||||||||||||||||||||
W | 95,953 | W | 140,790 | W | 54,611 | W | 54,061 | |||||||||||||||||||
* | The quoted market value (based on closing KOSDAQ price) of HVCC as of December 31, 2004 is W2,990 million. |
F-29
(10) | Insurance |
(11) | Other Assets |
Millions | ||||||||
2003 | 2004 | |||||||
Frequency usage right, net (note 12) | W | 1,208,429 | W | 1,115,996 | ||||
Long-term loans to employees | 565,556 | 475,319 | ||||||
Leasehold rights and deposits | 330,747 | 313,302 | ||||||
Goodwill | 944,326 | 731,694 | ||||||
Negative goodwill | (2,071 | ) | (1,553 | ) | ||||
Other intangible assets, net | 276,714 | 338,552 | ||||||
Long-term accounts receivable — trade | 48,438 | 139,740 | ||||||
Long-term accounts receivable — other | 17,361 | 17,368 | ||||||
Deferred income tax assets (note 26) | 415,396 | 373,726 | ||||||
Other | 133,064 | 71,434 | ||||||
W | 3,937,960 | W | 3,575,578 | |||||
(12) | Frequency Usage Right |
F-30
Millions | ||||||||
2003 | 2004 | |||||||
Frequency usage right | W | 1,216,223 | W | 1,216,223 | ||||
Less: Accumulated amortization | (7,794 | ) | (100,227 | ) | ||||
W | 1,208,429 | W | 1,115,996 | |||||
Millions | ||||||||
2003 | 2004 | |||||||
Long-term accounts payable — other | W | 650,000 | W | 650,000 | ||||
Less: Present value discount | (131,239 | ) | (111,793 | ) | ||||
W | 518,761 | W | 538,207 | |||||
Year | Millions | |||
2005 | W | — | ||
2006 | — | |||
2007 | 90,000 | |||
2008 | 110,000 | |||
2009 | 130,000 | |||
2010 | 150,000 | |||
2011 | 170,000 | |||
W | 650,000 | |||
(13) | Short-term Borrowings |
Millions | ||||||||||||
Interest Rate | ||||||||||||
Per Annum (%) | 2003 | 2004 | ||||||||||
Commercial paper | 3.96 , 4.80% | W | 478,000 | W | 215,000 | |||||||
Borrowings from banks | 4.18 , 6.00% | 119,817 | 195,883 | |||||||||
Short-term borrowings in foreign currency | 0.60 , 4.71% | 33,872 | 27,709 | |||||||||
W | 631,689 | W | 438,592 | |||||||||
F-31
(14) | Other Current Liabilities |
Millions | ||||||||
2003 | 2004 | |||||||
Key money deposits | W | 100,739 | W | 104,197 | ||||
Unearned income | 4,932 | 4,002 | ||||||
Payables from interest rate swap (note 23) | 16,077 | 7,278 | ||||||
Payables from interest currency swap (note 23) | — | 99,615 | ||||||
Payables from currency swap (note 23) | 3,554 | 40,799 | ||||||
Payables from currency forward (note 23) | — | 10,025 | ||||||
Payables from currency option (note 23) | — | 1,349 | ||||||
Other | 7,312 | 9,704 | ||||||
W | 132,614 | W | 276,969 | |||||
F-32
(15) | Long-term Debt |
Millions | ||||||||||||||||||
Interest Rate | ||||||||||||||||||
Per Annum (%) | Maturity Date | 2003 | 2004 | |||||||||||||||
Local currency (Won) debt: | ||||||||||||||||||
Bonds | 4.14,9.20 | 2005,2014 | W | 6,425,001 | W | 6,850,000 | ||||||||||||
Convertible notes of KTF and KTFT | 1.00 | 2005 | 38,880 | 38,600 | ||||||||||||||
Convertible notes issued in May 2002 | 3.00 | 2005 | 1,322,563 | 1,322,530 | ||||||||||||||
Borrowings from banks | 4.90,7.25 | 2005,2007 | 90,680 | 72,223 | ||||||||||||||
Information and Telecommunication Improvement Fund | 3.53,6.85 | 2005,2009 | 173,070 | 132,764 | ||||||||||||||
8,050,194 | 8,416,117 | |||||||||||||||||
Foreign currency debt: | ||||||||||||||||||
Convertible notes issued in January 2002 (USD) | 0.25 | 2007 | W | 1,483,628 | W | 1,178,759 | ||||||||||||
Bonds with warrants (Microsoft) (USD) | 4.30 | 2005 | 598,900 | 521,900 | ||||||||||||||
Yankee bonds (USD) | 7.50,7.63 | 2006,2007 | 419,230 | 365,330 | ||||||||||||||
Bonds (USD) | Libor+0.80 | 2006 | 179,670 | 156,570 | ||||||||||||||
MTNP notes (USD) | 5.88,6.50 | 2014,2034 | — | 730,660 | ||||||||||||||
Bonds (JPY) | 2.64,3.13 | 2005,2006 | 263,666 | 142,146 | ||||||||||||||
Loans (USD) | Libor+0.45, Libor+3.50 | 2005,2009 | 248,451 | 219,198 | ||||||||||||||
3,193,545 | 3,314,563 | |||||||||||||||||
11,243,739 | 11,730,680 | |||||||||||||||||
Add: Premium on bonds | 30,997 | 52,828 | ||||||||||||||||
Less: | ||||||||||||||||||
Current portion, net of discount | 2,172,510 | 4,756,067 | ||||||||||||||||
Discount on bonds | 52,478 | 42,370 | ||||||||||||||||
W | 9,049,748 | W | 6,985,071 | |||||||||||||||
F-33
Fiscal Year Ending December 31, | Millions | |||
2005 | W | 4,713,505 | ||
2006 | 1,232,601 | |||
2007 | 1,310,355 | |||
2008 | 857,686 | |||
2009 | 994,796 | |||
Thereafter | 2,621,737 | |||
W | 11,730,680 | |||
(16) | Refundable Deposits for Telephone Installation |
F-34
(17) | Accrual for Retirement and Severance Benefits |
Millions | |||||||||||||
2002 | 2003 | 2004 | |||||||||||
Estimated severance benefits liability at beginning of year | W | 474,438 | W | 379,606 | W | 245,878 | |||||||
Provision for the year | 275,007 | 1,067,076 | 281,453 | ||||||||||
Increase due to change of consolidated subsidiaries | (1,853 | ) | 600 | — | |||||||||
Payments | (42,942 | ) | (1,020,940 | ) | (93,178 | ) | |||||||
Withdrawal from the National Pension Fund, net | 332 | 337 | 204 | ||||||||||
Payment for deposit of severance benefits insurance | (325,376 | ) | (180,801 | ) | (119,568 | ) | |||||||
Net balance at end of year | W | 379,606 | W | 245,878 | W | 314,789 | |||||||
(18) | Other Long-term Liabilities |
Millions | ||||||||
2003 | 2004 | |||||||
Accrual for customer call bonus points | W | 105,391 | W | 128,397 | ||||
Advance receipt | 17,099 | 16,390 | ||||||
Key money deposits from customers | 20,963 | 24,868 | ||||||
Other | 5,414 | 2,188 | ||||||
W | 148,867 | W | 171,843 | |||||
F-35
(19) | Stockholders’ Equity |
No. of Shares Owned | Ownership Percentage | |||||||||||||||||||||||
2002 | 2003 | 2004 | 2002 | 2003 | 2004 | |||||||||||||||||||
National Pension Corporation | 7,859,178 | 9,461,792 | 10,654,638 | 2.54 | 3.32 | 3.74 | ||||||||||||||||||
Employee Stock Ownership Associations | 17,678,198 | 16,394,226 | 16,173,934 | 5.72 | 5.76 | 5.68 | ||||||||||||||||||
Treasury stock | 76,988,771 | 74,090,974 | 74,090,418 | 24.91 | 26.01 | 26.01 | ||||||||||||||||||
Others, including private companies | 206,551,512 | 184,902,408 | 184,930,410 | 66.83 | 64.91 | 64.57 | ||||||||||||||||||
309,077,659 | 284,849,400 | 284,849,400 | 100.00 | % | 100.00 | % | 100.00 | % | ||||||||||||||||
Number of | |||||||||
Shares Issued | Millions | ||||||||
Balance at January 1, 2002 | 312,199,659 | W1,560,998 | |||||||
Retirement of treasury stock on October 9, 2002 | (3,122,000 | ) | — | ||||||
Balance at December 31, 2002 | 309,077,659 | 1,560,998 | |||||||
Retirement of treasury stock on January 6, 2003 | (15,454,659 | ) | — | ||||||
Retirement of treasury stock on June 20, 2003 | (2,937,000 | ) | — | ||||||
Retirement of treasury stock on December 9, 2003 | (5,836,600 | ) | — | ||||||
Balance at December 31, 2003 | 284,849,400 | 1,560,998 | |||||||
Retirement of treasury stock during 2004 | — | — | |||||||
Balance at December 31, 2004 | 284,849,400 | W1,560,998 | |||||||
F-36
Millions | |||||||||||||||||||||||||||||
Retained Earnings | |||||||||||||||||||||||||||||
Capital | Capital | Minority | |||||||||||||||||||||||||||
Common Stock | Surplus | Appropriated | Unappropriated | Adjustments | Interest | Total | |||||||||||||||||||||||
Balance at January 1, 2002 | W | 1,560,998 | W | 1,446,149 | W | 5,579,108 | W | 1,139,835 | W | 2,211,133 | W | 2,046,080 | W | 13,983,303 | |||||||||||||||
Net earnings | — | — | — | 1,946,934 | — | — | 1,946,934 | ||||||||||||||||||||||
Appropriations of retained earnings | — | — | 863,157 | (863,157 | ) | — | — | — | |||||||||||||||||||||
Retirement of treasury stock | — | — | — | (167,341 | ) | — | — | (167,341 | ) | ||||||||||||||||||||
Dividends | — | — | — | (224,054 | ) | — | — | (224,054 | ) | ||||||||||||||||||||
Increase in treasury stock, net | — | — | — | — | (4,021,094 | ) | — | (4,021,094 | ) | ||||||||||||||||||||
Loss on retirement of treasury stock | — | — | — | — | (6,638 | ) | — | (6,638 | ) | ||||||||||||||||||||
Increase (decrease) in unrealized gains on available-for-sale securities | — | — | — | — | (1,566,580 | ) | 1,310 | (1,565,270 | ) | ||||||||||||||||||||
Unrealized losses on equity securities of affiliate | — | — | — | — | (2,923 | ) | (178 | ) | (3,101 | ) | |||||||||||||||||||
Minority interest in earnings of consolidated subsidiaries, net | — | — | — | — | — | 316,918 | 316,918 | ||||||||||||||||||||||
Issuance of common stock of a consolidated subsidiary | — | 2,526 | — | — | — | 22,169 | 24,695 | ||||||||||||||||||||||
Changes in subsidiaries included in consolidation | — | — | — | — | — | 238 | 238 | ||||||||||||||||||||||
Goodwill of additional equity in consolidated subsidiaries acquired during 2002 | — | (217 | ) | — | — | — | (449,774 | ) | (449,991 | ) | |||||||||||||||||||
Other | — | (507 | ) | — | — | (857 | ) | (669 | ) | (2,033 | ) | ||||||||||||||||||
Balance at December 31, 2002 | W | 1,560,998 | W | 1,447,951 | W | 6,442,265 | W | 1,832,217 | W | (3,386,959 | ) | W | 1,936,094 | W | 9,832,566 | ||||||||||||||
F-37
Millions | |||||||||||||||||||||||||||||
Retained Earnings | |||||||||||||||||||||||||||||
Capital | Capital | Minority | |||||||||||||||||||||||||||
Common Stock | Surplus | Appropriated | Unappropriated | Adjustments | Interest | Total | |||||||||||||||||||||||
Balance at January 1, 2003 | W | 1,560,998 | W | 1,447,951 | W | 6,442,265 | W | 1,832,217 | W | (3,386,959 | ) | W | 1,936,094 | W | 9,832,566 | ||||||||||||||
Net earnings | — | — | — | 821,734 | — | — | 821,734 | ||||||||||||||||||||||
Appropriations of retained earnings | — | — | 1,583,589 | (1,583,589 | ) | — | — | — | |||||||||||||||||||||
Retirement of treasury stock | — | — | — | (1,198,499 | ) | — | (1,198,499 | ) | |||||||||||||||||||||
Dividends (note 27) | — | — | — | (212,887 | ) | — | — | (212,887 | ) | ||||||||||||||||||||
Cumulative effect of an accounting change (note 2(a)) | — | — | — | (1,530 | ) | — | (2,198 | ) | (3,728 | ) | |||||||||||||||||||
Increase (decrease) in unrealized gains (losses) on available-for-sale securities | — | — | — | — | (768,362 | ) | 2,541 | (765,821 | ) | ||||||||||||||||||||
Unrealized losses on equity securities of affiliate | — | — | — | — | 1,575 | 1,937 | 3,512 | ||||||||||||||||||||||
Decrease of treasury stock, net (note 22) | — | — | — | — | 149,627 | — | 149,627 | ||||||||||||||||||||||
Loss on retirement of treasury stock | — | — | — | — | �� | (9,753 | ) | — | (9,753 | ) | |||||||||||||||||||
Stock options | — | — | — | — | 6,192 | 774 | 6,966 | ||||||||||||||||||||||
Changes in translation adjustments of foreign subsidiaries | — | — | — | — | 2,087 | 160 | 2,247 | ||||||||||||||||||||||
Changes in subsidiaries included in consolidation | — | — | — | — | — | 27,379 | 27,379 | ||||||||||||||||||||||
Acquisition of additional equity in consolidated subsidiaries | — | (165,642 | ) | — | — | — | (260,410 | ) | (426,052 | ) | |||||||||||||||||||
Equity change of subsidiary from merger transaction | — | 26,181 | — | — | — | (92,958 | ) | (66,777 | ) | ||||||||||||||||||||
Minority interest in earnings of consolidated subsidiaries, net | — | — | — | — | — | 235,695 | 235,695 | ||||||||||||||||||||||
Other | — | 122 | — | — | — | 289 | 411 | ||||||||||||||||||||||
Balance at December 31, 2003 | W | 1,560,998 | W | 1,308,612 | W | 8,025,854 | W | (342,554 | ) | W | (4,005,593 | ) | W | 1,849,303 | W | 8,396,620 | |||||||||||||
Balance at January 1, 2004 | W | 1,560,998 | W | 1,308,612 | W | 8,025,854 | W | (342,554 | ) | W | (4,005,593 | ) | W | 1,849,303 | W | 8,396,620 | |||||||||||||
Net earnings | — | — | — | 1,282,216 | — | — | 1,282,216 | ||||||||||||||||||||||
Appropriations of retained earnings | — | — | (2,593,992 | ) | 2,593,992 | — | — | — | |||||||||||||||||||||
Retirement of treasury stock in consolidated subsidiaries | — | (14,784 | ) | — | — | — | (135,069 | ) | (149,853 | ) | |||||||||||||||||||
Dividends (note 27) | — | — | — | (632,276 | ) | — | — | (632,276 | ) | ||||||||||||||||||||
Dividends in consolidated subsidiaries | — | — | — | — | — | (50,037 | ) | (50,037 | ) | ||||||||||||||||||||
Increase (decrease) in unrealized gains (losses) on available-for-sale securities | — | — | — | — | 32,596 | (1,418 | ) | 31,178 | |||||||||||||||||||||
Unrealized losses on equity securities of affiliates | — | — | — | — | (4,041 | ) | (1,281 | ) | (5,322 | ) | |||||||||||||||||||
Stock options | — | — | — | — | 4,941 | 1,188 | 6,129 | ||||||||||||||||||||||
Changes in translation adjustments of foreign subsidiaries | — | — | — | — | 3,012 | (2,814 | ) | 198 | |||||||||||||||||||||
Minority interest in earnings of consolidated subsidiaries | — | — | — | — | — | 148,931 | 148,931 | ||||||||||||||||||||||
Other | — | (2,211 | ) | — | — | 33 | 774 | (1,404 | ) | ||||||||||||||||||||
Balance at December 31, 2004 | W | 1,560,998 | W | 1,291,617 | W | 5,431,862 | W | 2,901,378 | W | (3,969,052 | ) | W | 1,809,577 | W | 9,026,380 | ||||||||||||||
F-38
(20) | Capital Surplus |
Millions | ||||||||||||
2002 | 2003 | 2004 | ||||||||||
Paid-in capital in excess of par value | W | 1,440,258 | W | 1,440,258 | W | 1,440,258 | ||||||
Goodwill of additional equity in consolidated subsidiaries | (16,007 | ) | (181,649 | ) | (181,649 | ) | ||||||
Other, net | 23,700 | 50,003 | 33,008 | |||||||||
W | 1,447,951 | W | 1,308,612 | W | 1,291,617 | |||||||
(21) | Appropriated Retained Earnings |
Millions | |||||||||||||
2002 | 2003 | 2004 | |||||||||||
Involuntary reserve: | |||||||||||||
Legal reserve | W | 780,499 | W | 780,499 | W | 780,499 | |||||||
Voluntary reserve: | |||||||||||||
Reserve for business rationalization | 193,101 | 443,416 | 443,416 | ||||||||||
Reserve for technology and human resource development | 6,667 | 3,334 | — | ||||||||||
Reserve for social overhead capital | 23,333 | 3,333 | — | ||||||||||
Reserve for business expansion | 5,230,718 | 6,587,325 | 4,000,000 | ||||||||||
Reserve for redemption of telephone bonds | 207,947 | 207,947 | 207,947 | ||||||||||
W | 6,442,265 | W | 8,025,854 | W | 5,431,862 | ||||||||
F-39
(22) | Treasury Stock |
(a) | Trust fund |
(b) | Issuance to the notes holders |
(c) | Purchase and retirement of treasury stock |
(d) | Sale and contribution to Employee Stock Ownership Association |
F-40
2003 | 2004 | ||||||||||||||||
Number of | Number of | ||||||||||||||||
Shares | Millions | Shares | Millions | ||||||||||||||
Balance at beginning of year | 76,988,771 | W | 4,112,225 | 74,090,974 | W | 3,962,598 | |||||||||||
Purchase of the Company’s common stock | 23,127,274 | 1,142,537 | — | — | |||||||||||||
Issuance to convertible note holders | (2,356 | ) | (127 | ) | (556 | ) | (30 | ) | |||||||||
Purchase by trust fund, net | 8,840 | 414 | — | — | |||||||||||||
Retirement of treasury stock | (24,228,259 | ) | (1,198,499 | ) | — | — | |||||||||||
Sale and contribution to ESOA | (1,803,296 | ) | (93,952 | ) | — | — | |||||||||||
Balance at end of year | 74,090,974 | W | 3,962,598 | 74,090,418 | W | 3,962,568 | |||||||||||
(23) | Commitments and Contingencies |
(a) Legal matters |
(b) Interest rate swap |
Swaption | Fixed | |||||||||||||||||||||||
Premium | Notional | Interest Rate | Variable Interest | |||||||||||||||||||||
Bank | (Millions) | Amount | (1 Year) | Rate (3 Months) | Exercise Date | Type | ||||||||||||||||||
Citibank | W1,913 | W100,000 | 7.9 | % | 91-Day CD rate | April 25, 2005 | Selling |
F-41
(c) Interest rate swap |
Nominal | Notional | |||||||||||||||||||
Premium | Amount | Fixed | ||||||||||||||||||
Bank | (Millions) | (Millions) | Interest Rate | Variable Interest Rate | Terminal Date | |||||||||||||||
J.P. Morgan | $ | 1.6 | US$ 150 | 7.50% | 6-month LIBOR + 4.32% | June 1, 2006 | ||||||||||||||
J.P. Morgan | $ | 0.5 | US$ 200 | 7.63% | 6-month LIBOR + 4.61% | April 15, 2007 | ||||||||||||||
Citibank | — | W | 110,000 | 5.29% | 3-month LIBOR + 1.47% | April 30, 2008 | ||||||||||||||
Shinhan Bank | — | W | 180,000 | 6.35% | 3-month LIBOR + 2.47% | |||||||||||||||
+ Contingent spread | September 30, 2007 | |||||||||||||||||||
Shinhan Bank | — | W | 57,810 | 4.70% | 6-month LIBOR + 0.69% | June 24, 2009 | ||||||||||||||
UBS | — | W | 57,810 | 4.70% | 6-month LIBOR + 0.69% | June 24, 2009 | ||||||||||||||
UBS | — | W | 57,810 | 4.64% | 6-month LIBOR + 0.69% | June 24, 2009 | ||||||||||||||
BNP Paribas | — | W | 110,000 | 5.29% | 3-month LIBOR + 1.54% | April 30, 2008 | ||||||||||||||
CSFB | — | W | 57,810 | 4.64% | 6-month LIBOR + 0.69% | June 24, 2009 |
(d) Currency swap |
Receiving | Paying | |||||||||||||||
Amount | Amount | |||||||||||||||
Bank | (Millions) | (Millions) | Receiving Interest Rate | Paying Interest Rate | Terminal Date | |||||||||||
J.P. Morgan | US$ | 50 | W 59,750 | 4.30% (US$) per year | 6.17% (Won) per year | January 3, 2005 | ||||||||||
J.P. Morgan | US$ | 150 | W179,760 | 3-month LIBOR + 0.80%(US$) | 3-month LIBOR + 2.64% (Won) | June 24, 2006 |
(e) Interest currency swap |
F-42
Receiving | ||||||||||||||||
Amount | Paying Amount | Fixed Interest | ||||||||||||||
Bank | (Millions) | (Millions) | Rate (1 Year) | Variable Interest Rate (6 Months) | Terminal Date | |||||||||||
J.P. Morgan | US$ | 50 | W | 55,000,60,000 | 4.3% (US$) | 6-month LIBOR + 4.55% (Won) | January 3, 2005 | |||||||||
J.P. Morgan(*) | US$ | 100 | W | 115,620 | 5.9% (US$) | 6-month LIBOR + 1.87% (Won) | ||||||||||
5.5% (Won) | June 24, 2014 | |||||||||||||||
J.P. Morgan(**) | US$ | 200 | W | 231,240 | 5.5% (Won) | 6-month LIBOR + 0.69% (Won) 5.9%-Contingent Spread (US$) | June 24, 2014 | |||||||||
Merrill Lynch | US$ | 100 | W | 116,400 | 5.0% (Won) | 5.9%-Contingent Spread (US$) | June 24, 2014 | |||||||||
Merrill Lynch | US$ | 50 | W | 53,325 | 4.7% (Won) | 5.9%-Contingent Spread (US$) | June 24, 2014 | |||||||||
Citibank | US$ | 25 | W | 27,500,30,000 | 4.3% (US$) | 6-month LIBOR + 4.45% (Won) | January 3, 2005 | |||||||||
UBS | US$ | 25 | W | 27,500,30,000 | 4.3% (US$) | 6-month LIBOR + 4.45% (Won) | January 3, 2005 | |||||||||
Deutsche Bank | US$ | 50 | W | 55,000,60,000 | 4.3% (US$) | 6-month LIBOR + 4.57% (Won) | January 3, 2005 | |||||||||
Deutsche Bank | US$ | 50 | W | 53,325 | 4.7% (Won) | 5.9%-Contingent Spread (US$) | June 24, 2014 | |||||||||
Shinhan Bank | US$ | 50 | W | 55,000,60,000 | 4.3% (US$) | 6-month LIBOR + 4.45% (Won) | January 3, 2005 |
(*) | The interest will be received at 5.9% (US$) and paid at 6-month LIBOR + 1.87% (Won) every six months over the first five years. Then, the interest will be received at 5.9% (US$) every six months and paid at 5.5% (Won) per year over the following five years. |
(**) | The interest will be received at 5.9%-contingent spread (US$) and paid at 6-month LIBOR + 0.69% (Won) every six months over the first five years. Then, the interest will be received at 5.9%-contingent spread (US$) every six months and paid at 5.5% (Won) per year over the following five years. |
(f) | Currency Forward |
F-43
(g) | Currency option |
Contract | ||||||||||||||||
Amount | Fixed | |||||||||||||||
Bank | (millions) | Position | Exchange Rate | Terminal Date | ||||||||||||
Shinhan Bank | JPY 2,000 | JPY Call/ JPY Put | 10.30,10.85 | May 24 2005 | ||||||||||||
Shinhan Bank | JPY 2,000 | JPY Call/ JPY Put | 10.65,13.40 | April 20, 2006 |
(h) | Loans and Borrowings |
(i) | Guarantee Provided by a Third Party |
(j) | Disposal of KTF accounts receivable |
F-44
(k) | Leases |
(i) | Operating leases |
Year Ending December 31, | Millions | |||
2005 | W | 67,600 | ||
2006 | 66,819 | |||
2007 | 6,268 | |||
2008 | 5,915 | |||
2009 | 5,915 | |||
Thereafter | 31,621 | |||
W | 184,138 | |||
(ii) | Capital leases |
Year Ending December 31, | Millions | |||
2005 | W | 4,955 | ||
2006 | 4,955 | |||
2007 | 4,955 | |||
2008 | 4,782 | |||
2009 | 2,123 | |||
21,770 | ||||
Less: amount representing interest | (1,683 | ) | ||
W | 20,087 | |||
F-45
(24) | Operating Revenues |
Millions | ||||||||||||
2002 | 2003 | 2004 | ||||||||||
Internet services | W | 1,989,915 | W2,369,593 | W2,606,852 | ||||||||
Data communication services | 1,262,377 | 1,083,093 | 962,627 | |||||||||
Telephone services | 6,895,301 | 6,610,982 | 6,189,290 | |||||||||
PCS services | 4,127,323 | 4,164,286 | 4,799,586 | |||||||||
Sales of PCS handsets | 1,366,548 | 1,153,505 | 1,754,968 | |||||||||
Satellite services | 123,616 | 119,639 | 119,412 | |||||||||
Other | 672,342 | 566,681 | 635,636 | |||||||||
W | 16,437,422 | W16,067,779 | W17,068,371 | |||||||||
F-46
(25) | Operating Expenses |
Millions | ||||||||||||||
2002 | 2003 | 2004 | ||||||||||||
Cost of services: | ||||||||||||||
Salaries and wages | W | 2,065,564 | W | 1,918,479 | W | 1,870,317 | ||||||||
Provision for retirement and severance benefits, including early retirement payments (note 17) | 257,619 | 999,607 | 264,754 | |||||||||||
Employee benefits | 588,615 | 569,463 | 479,244 | |||||||||||
Communications | 33,729 | 34,549 | 30,458 | |||||||||||
Utilities | 156,853 | 176,554 | 191,657 | |||||||||||
Taxes and dues | 86,309 | 92,497 | 97,333 | |||||||||||
Rent | 149,746 | 138,677 | 183,560 | |||||||||||
Depreciation | 3,351,008 | 3,305,255 | 3,319,305 | |||||||||||
Amortization | 59,762 | 67,155 | 169,435 | |||||||||||
Repairs and maintenance | 408,953 | 444,867 | 484,108 | |||||||||||
Automobile maintenance | 24,006 | 23,811 | 24,492 | |||||||||||
Commissions and professional fees | 526,166 | 552,593 | 718,101 | |||||||||||
Entertainment | 3,256 | 2,969 | 6,060 | |||||||||||
Advertising | 113,616 | 101,503 | 111,344 | |||||||||||
Education and training | 11,484 | 15,102 | 14,140 | |||||||||||
Research and development | 116,747 | 99,130 | 102,747 | |||||||||||
Travel | 33,199 | 32,326 | 32,373 | |||||||||||
Supplies | 36,315 | 36,997 | 36,177 | |||||||||||
Cost of services (commissions for system integration service and other miscellaneous service) | 743,055 | 532,424 | 420,149 | |||||||||||
Cost of goods sold | 1,345,950 | 1,131,475 | 1,782,140 | |||||||||||
Interconnection charges | 1,187,882 | 1,077,082 | 973,429 | |||||||||||
International line usage | 173,779 | 184,326 | 194,143 | |||||||||||
Other | 47,656 | 70,495 | 72,963 | |||||||||||
11,521,269 | 11,607,336 | 11,578,429 | ||||||||||||
Less: amounts included in construction in progress | 143,538 | 119,986 | 125,600 | |||||||||||
11,377,731 | 11,487,350 | 11,452,829 | ||||||||||||
Selling, general and administrative expenses | 2,677,888 | 2,757,993 | 3,135,010 | |||||||||||
W | 14,055,619 | W | 14,245,343 | W | 14,587,839 | |||||||||
F-47
Millions | |||||||||||||
2002 | 2003 | 2004 | |||||||||||
Salaries and wages | W | 129,186 | W | 119,987 | W | 75,397 | |||||||
Compensation expenses (note 29) | 1,172 | 6,966 | 6,129 | ||||||||||
Provision for retirement and severance benefits, including early retirement payments (note 17) | 17,388 | 67,469 | 16,699 | ||||||||||
Employee benefits | 29,351 | 28,396 | 24,613 | ||||||||||
Travel | 7,107 | 5,643 | 4,969 | ||||||||||
Communications | 28,978 | 29,682 | 26,155 | ||||||||||
Utilities | 4,834 | 4,805 | 2,693 | ||||||||||
Taxes and dues | 44,597 | 47,794 | 44,290 | ||||||||||
Rent | 66,380 | 55,653 | 86,107 | ||||||||||
Depreciation | 89,137 | 87,920 | 84,334 | ||||||||||
Amortization | 297,187 | 296,896 | 224,414 | ||||||||||
Repairs and maintenance | 12,109 | 5,683 | 4,299 | ||||||||||
Automobile maintenance | 2,410 | 1,871 | 1,856 | ||||||||||
Commissions and professional fees | 268,755 | 282,253 | 343,625 | ||||||||||
Commissions to sales agent | 631,964 | 565,082 | 940,039 | ||||||||||
Entertainment | 1,051 | 1,576 | 1,843 | ||||||||||
Advertising | 213,399 | 182,466 | 182,918 | ||||||||||
Education and training | 49,824 | 44,152 | 36,232 | ||||||||||
Research and development | 128,808 | 145,495 | 162,460 | ||||||||||
Supplies | 9,913 | 10,099 | 2,632 | ||||||||||
Promotion | 406,833 | 376,834 | 537,927 | ||||||||||
Provision for doubtful accounts | 194,288 | 363,774 | 287,073 | ||||||||||
Other | 43,217 | 27,497 | 38,306 | ||||||||||
W | 2,677,888 | W | 2,757,993 | W | 3,135,010 | ||||||||
(26) | Income Taxes |
Taxable Earnings | 2002-2004 | 2005 and Thereafter | ||||||
Up to W100 million | 16.5% | 14.3% | ||||||
Over W100 million | 29.7% | 27.5% |
F-48
Millions | |||||||||||||
2002 | 2003 | 2004 | |||||||||||
Current income tax expense | W | 592,322 | W | 477,337 | W | 470,925 | |||||||
Deferred income tax expense | 149,032 | 46,294 | 106,964 | ||||||||||
Income taxes for the year | W | 741,354 | W | 523,631 | W | 577,889 | |||||||
Millions | |||||||||||||
2002 | 2003 | 2004 | |||||||||||
Provision for income taxes at normal tax rate | W | 892,546 | W | 469,575 | W | 596,684 | |||||||
Tax effect of prior years income tax additional payment (refund) | (1,887 | ) | 16,036 | 280 | |||||||||
Tax effect of permanent differences, net | 56,955 | 85,689 | 39,024 | ||||||||||
Utilization of loss carryforwards | (44,744 | ) | (40,273 | ) | (32,628 | ) | |||||||
Investment tax credits | (161,516 | ) | (174,952 | ) | (206,344 | ) | |||||||
Effect of tax rate change | — | 33,974 | 6,535 | ||||||||||
Impairment of deferred tax asset | — | 133,582 | 174,338 | ||||||||||
Income taxes for the year | W | 741,354 | W | 523,631 | W | 577,889 | |||||||
F-49
Millions | ||||||||||
2003 | 2004 | |||||||||
Deferred income tax assets: | ||||||||||
Retirement and severance benefits | W | 9,309 | W | 8,357 | ||||||
Allowance for doubtful accounts | 161,473 | 149,093 | ||||||||
Refundable deposits for telephone installation | 20,022 | 18,157 | ||||||||
Equity in losses of affiliates | 221,957 | 352,926 | ||||||||
Investment securities | 50,469 | 36,669 | ||||||||
Tax credit carryforwards | 25,816 | 61,526 | ||||||||
Loss carryforwards | — | 22,283 | ||||||||
Other, net | 90,355 | 107,347 | ||||||||
Total deferred income tax assets | 579,401 | 756,358 | ||||||||
Deferred income tax liabilities: | ||||||||||
Accumulated depreciation | W | 28,166 | W | 64,708 | ||||||
Accrued interest income | 2,257 | 10,004 | ||||||||
Total deferred income tax liabilities | 30,423 | 74,712 | ||||||||
Write-off | 133,582 | 307,920 | ||||||||
Deferred income tax asset, net | W | 415,396 | W | 373,726 | ||||||
F-50
(27) | Dividends |
(a) | Interim dividends |
Rate | Millions | |||||||||||||||
2003 | 2004 | 2003 | 2004 | |||||||||||||
Dividends paid | — | 20.0 | % | W | — | 210,759 | ||||||||||
Rate | Millions | |||||||||||||||||||||||
2002 | 2003 | 2004 | 2002 | 2003 | 2004 | |||||||||||||||||||
Dividends proposed | 17.2 | % | 40.0 | % | 40.0 | % | W | 212,887 | W | 421,517 | W | 421,518 | ||||||||||||
(28) | Earnings Per Share |
(a) | Basic earnings per share |
Millions | ||||||||||||
(Except Number of Shares | ||||||||||||
and Earnings per Share) | ||||||||||||
2002 | 2003 | 2004 | ||||||||||
Net earnings | W | 1,946,934 | W | 821,734 | W | 1,282,216 | ||||||
Weighted-average number of shares of common stock (in thousands) | 259,450 | 216,106 | 210,759 | |||||||||
Basic earnings per share (in Won) | W | 7,504 | W | 3,802 | W | 6,084 | ||||||
F-51
(b) | Diluted earnings per share |
Millions | |||||||||||||
(Except Number of Shares | |||||||||||||
and Earnings per Share) | |||||||||||||
2002 | 2003 | 2004 | |||||||||||
Net earnings | W | 1,946,934 | W | 821,734 | W | 1,282,216 | |||||||
Adjustments: | |||||||||||||
Interest expense on convertible notes | 34,070 | 51,373 | 46,662 | ||||||||||
Net earnings available for common and common equivalent shares | 1,981,004 | 873,107 | 1,328,878 | ||||||||||
Weighted-average number of common and common equivalent shares (in thousands) | 300,097 | 263,556 | 233,270 | ||||||||||
Diluted earnings per share (in Won) | W | 6,601 | W | 3,313 | W | 5,697 | |||||||
No. of Potentially | ||||||||
Dilutive Shares | ||||||||
(Thousands) | ||||||||
2003 | 2004 | |||||||
Convertible notes (note 15) | 45,770 | 22,511 | ||||||
Stock options (note 29) | 616 | 512 |
(29) | Stock Options |
1st Grant | 2nd Grant | 3rd Grant | ||||||||||
Grant date | 2002.12.26 | 2003. 9.16 | 2003.12.12 | |||||||||
Exercise price (in Won) | 70,000 | 57,000 | 65,000 | |||||||||
Number of shares | 371,632 | 34,200 | 106,141 | |||||||||
Exercise period | 2004.12.27,2009.12.26 | 2005.9.17,2010.9.16 | 2005.12.13,2010.12.12 | |||||||||
Valuation method | Fair value (Black-Scholes model) | Fair value (Black-Scholes model) | Fair value (Black-Scholes model) |
F-52
1st Grant | 2nd Grant | 3rd Grant | ||||||||||
Risk free interest rate | 5.46% | 4.45% | 5.09% | |||||||||
Expected option life | 4.5 years to 5.5 years | 4.5 years | 4.5 years to 5.5 years | |||||||||
Expected volatility | 49.07% , 49.90% | 34.49% | 31.26% , 33.90% | |||||||||
Expected dividend yield ratio | 1.10% | 1.57% | 1.57% | |||||||||
Fair value per option (in Won) | W22,364 | W12,443 | W10,926 | |||||||||
Total compensation cost (in millions) | W8,311 | W426 | W1,160 |
Millions | |||||
Adjusted total cost of compensation | |||||
Total cost of compensation before adjustment | W | 12,215 | |||
Cost of compensation — forfeited | (2,318 | ) | |||
9,897 | |||||
Accumulated cost recognized in prior periods | (5,479 | ) | |||
Cost recognized for the year | |||||
Cost of compensation — forfeited | 1,167 | ||||
Cost of compensation for the year | (4,887 | ) | |||
(3,720 | ) | ||||
Cost to be recognized in future years | W | 698 | |||
F-53
(30) | Segment Information |
F-54
2002 | |||||||||||||||||||||
Wireline | Reconciling | ||||||||||||||||||||
Communications | PCS Services | Miscellaneous | Adjustments | Consolidated | |||||||||||||||||
(Millions) | |||||||||||||||||||||
Operating revenues: | |||||||||||||||||||||
External customers | W | 11,291,130 | W | 4,806,875 | W | 339,417 | W | — | W | 16,437,422 | |||||||||||
Intersegment | 455,113 | 552,334 | 358,745 | (1,366,192 | ) | — | |||||||||||||||
11,746,243 | 5,359,209 | 698,162 | (1,366,192 | ) | 16,437,422 | ||||||||||||||||
Operating expenses: | |||||||||||||||||||||
Depreciation and amortization | 2,714,437 | 728,845 | 62,713 | 291,099 | 3,797,094 | ||||||||||||||||
Other | 7,200,342 | 3,841,340 | 626,417 | (1,409,574 | ) | 10,258,525 | |||||||||||||||
9,914,779 | 4,570,185 | 689,130 | (1,118,475 | ) | 14,055,619 | ||||||||||||||||
Operating income (loss) | 1,831,464 | 789,024 | 9,032 | (247,717 | ) | 2,381,803 | |||||||||||||||
Interest income | 53,890 | 57,976 | 12,280 | (1,028 | ) | 123,118 | |||||||||||||||
Interest expense | (425,482 | ) | (216,092 | ) | (9,914 | ) | 1,028 | (650,460 | ) | ||||||||||||
Other income (expenses), net | 1,155,746 | (19,710 | ) | (22,779 | ) | (279,430 | ) | 833,827 | |||||||||||||
Earnings (loss) before income taxes | 2,615,618 | 611,198 | (11,381 | ) | (527,147 | ) | 2,688,288 | ||||||||||||||
Income taxes | 651,801 | 79,921 | 11,129 | (1,497 | ) | 741,354 | |||||||||||||||
Net earnings (loss) | W | 1,963,817 | W | 531,277 | W | (22,510 | ) | W | (525,650 | ) | W | 1,946,934 | |||||||||
Total assets | W | 21,761,117 | W | 8,909,766 | W | 893,828 | W | (2,514,565 | ) | W | 29,050,146 | ||||||||||
Capital expenditures | W | 2,145,210 | W | 1,034,693 | W | 56,722 | W | (4,279 | ) | W | 3,232,346 | ||||||||||
F-55
2003 | |||||||||||||||||||||
Wireline | Reconciling | ||||||||||||||||||||
Communications | PCS Services | Miscellaneous | Adjustments | Consolidated | |||||||||||||||||
(Millions) | |||||||||||||||||||||
Operating revenues: | |||||||||||||||||||||
External customers | W | 11,090,939 | W | 4,520,348 | W | 456,492 | W | — | W | 16,067,779 | |||||||||||
Intersegment | 483,610 | 566,999 | 462,716 | (1,513,325 | ) | — | |||||||||||||||
11,574,549 | 5,087,347 | 919,208 | (1,513,325 | ) | 16,067,779 | ||||||||||||||||
Operating expenses: | |||||||||||||||||||||
Depreciation and amortization | 2,514,299 | 849,500 | 101,874 | 291,553 | 3,757,226 | ||||||||||||||||
Other | 7,817,106 | 3,459,638 | 775,515 | (1,564,142 | ) | 10,488,117 | |||||||||||||||
10,331,405 | 4,309,138 | 877,389 | (1,272,589 | ) | 14,245,343 | ||||||||||||||||
Operating income (loss) | 1,243,144 | 778,209 | 41,819 | (240,736 | ) | 1,822,436 | |||||||||||||||
Interest income | 78,670 | 34,842 | 12,046 | (10,104 | ) | 115,454 | |||||||||||||||
Interest expense | (432,200 | ) | (272,992 | ) | (10,452 | ) | 10,104 | (705,540 | ) | ||||||||||||
Other income (expenses), net | 400,055 | (76,937 | ) | (55,685 | ) | (154,418 | ) | 113,015 | |||||||||||||
Earnings (loss) before income taxes | 1,289,669 | 463,122 | (12,272 | ) | (395,154 | ) | 1,345,365 | ||||||||||||||
Income taxes | 459,603 | 51,657 | 11,671 | 700 | 523,631 | ||||||||||||||||
Net earnings (loss) | W | 830,066 | W | 411,465 | W | (23,943 | ) | W | (395,854 | ) | W | 821,734 | |||||||||
Total assets | W | 19,573,181 | W | 7,591,888 | W | 1,229,309 | W | (2,837,703 | ) | W | 25,556,675 | ||||||||||
Capital expenditures | W | 2,083,370 | W | 953,377 | W | 186,830 | W | (14,201 | ) | W | 3,209,376 | ||||||||||
F-56
2004 | |||||||||||||||||||||
Wireline | Reconciling | ||||||||||||||||||||
Communications | PCS Services | Miscellaneous | Adjustments | Consolidated | |||||||||||||||||
(Millions) | |||||||||||||||||||||
Operating revenues: | |||||||||||||||||||||
External customers | W | 11,315,054 | W | 5,206,380 | W | 546,937 | W | — | W | 17,068,371 | |||||||||||
Intersegment | 535,765 | 634,890 | 724,857 | (1,895,512 | ) | — | |||||||||||||||
11,850,819 | 5,841,270 | 1,271,794 | (1,895,512 | ) | 17,068,371 | ||||||||||||||||
Operating expenses: | |||||||||||||||||||||
Depreciation and amortization | 2,361,257 | 1,090,645 | 135,583 | 210,003 | 3,797,488 | ||||||||||||||||
Other | 7,362,443 | 4,211,186 | 1,136,658 | (1,919,936 | ) | 10,790,351 | |||||||||||||||
9,723,700 | 5,301,831 | 1,272,241 | (1,709,933 | ) | 14,587,839 | ||||||||||||||||
Operating income (loss) | 2,127,119 | 539,439 | (447 | ) | (185,579 | ) | 2,480,532 | ||||||||||||||
Interest income | 102,398 | 12,691 | 21,056 | (19,420 | ) | 116,725 | |||||||||||||||
Interest expense | (450,740 | ) | (220,606 | ) | (26,588 | ) | 19,420 | (678,514 | ) | ||||||||||||
Other income (expenses), net | 20,748 | (22,914 | ) | (27,902 | ) | (28,570 | ) | (58,638 | ) | ||||||||||||
Earnings (loss) before income taxes | 1,799,525 | 308,610 | (33,881 | ) | (214,149 | ) | 1,860,105 | ||||||||||||||
Income taxes | 544,003 | 24,709 | 9,209 | (32 | ) | 577,889 | |||||||||||||||
Net earnings (loss) | W | 1,255,522 | W | 283,901 | W | (43,090 | ) | W | (214,117 | ) | W | 1,282,216 | |||||||||
Total assets | W | 20,114,036 | W | 7,960,430 | W | 1,285,758 | W | (2,886,992 | ) | W | 26,473,232 | ||||||||||
Capital expenditures | W | 1,818,507 | W | 945,623 | W | 210,482 | W | (3,236 | ) | W | 2,971,376 | ||||||||||
Millions | ||||||||
2003 | 2004 | |||||||
Change in unrealized gains (losses) on available-for-sale securities | W | (13,045 | ) | W | 4,752 | |||
Change in unrealized gains (losses) due to the sales of available-for-sale securities | (781,406 | ) | 27,844 | |||||
Available-for-sale securities transferred to treasury stock | 730,704 | — | ||||||
Exchange on available-for-sale securities | — | 18,798 | ||||||
Construction in progress transferred to property, plant and equipment | 2,473,599 | 2,585,478 |
F-57
Millions | ||||||||
(Except per Share Data) | ||||||||
2003 | 2004 | |||||||
Operating revenues | W | 3,977,336 | W | 4,187,416 | ||||
Operating income | 491,410 | 430,921 | ||||||
Net earnings | 82,516 | 383,998 | ||||||
Basic earnings per share | 382 | 1,822 |
F-58
(a) | Companies Included in Consolidation |
Percentage of Ownership | Carrying Value (Millions) | ||||||||||||||||||||
December 31, | December 31, | ||||||||||||||||||||
Entity | 2002 | 2003 | 2004 | 2003 | 2004 | ||||||||||||||||
Listed: | |||||||||||||||||||||
KTF | 40.3 | 46.9 | 48.7 | 1,712,126 | (*) | 1,678,164 | |||||||||||||||
KTSC | 36.9 | 36.9 | 38.9 | 23,311 | 22,710 | ||||||||||||||||
Unlisted: | |||||||||||||||||||||
KTP | 45.4 | 44.8 | 44.8 | 39,148 | 43,313 |
(*) | As discussed at Note 36(d), for the year ended December 31, 2003, the Company recognized an impairment loss amounting to W789,603 million relating to KTF due to the significant decrease of the quoted market value of KTF. |
Millions | |||||||||
2003 | 2004 | ||||||||
Current assets | W | 1,314,125 | W | 1,808,900 | |||||
Other assets | 6,628,830 | 6,558,844 | |||||||
Total assets | 7,942,955 | 8,367,744 | |||||||
Current liabilities | 2,464,485 | 2,516,174 | |||||||
Other liabilities | 2,175,495 | 2,479,817 | |||||||
Total liabilities | 4,639,980 | 4,995,991 | |||||||
Net assets | W | 3,302,975 | W | 3,371,753 | |||||
Millions | ||||||||||||
2002 | 2003 | 2004 | ||||||||||
Operating revenues | W | 5,589,271 | W | 5,414,326 | W | 6,352,211 | ||||||
Operating income | 791,933 | 779,982 | 542,599 | |||||||||
Net earnings | W | 538,529 | W | 423,943 | W | 298,232 |
F-59
Millions | ||||||||||||
2002 | 2003 | 2004 | ||||||||||
Cash flows from operating activities | W | 1,853,459 | W | 1,016,529 | W | 1,105,929 | ||||||
Cash flows from investing activities | (1,426,192 | ) | (173,047 | ) | (1,010,857 | ) | ||||||
Cash flows from financing activities | (590,395 | ) | (1,344,627 | ) | (87,174 | ) | ||||||
Net increase (decrease) in cash and cash equivalents | (163,128 | ) | (155,051 | ) | 7,898 | |||||||
Cash and cash equivalents at beginning of year | 363,708 | 200,580 | 45,529 | |||||||||
Cash and cash equivalents at end of year | W | 200,580 | W | 45,529 | W | 53,427 | ||||||
(b) | Debt and Equity Securities |
• | Debt securities that the enterprise has the positive intent and ability to hold to maturity are classified as held-to-maturity securities and reported at amortized cost. | |
• | Debt and equity securities that are bought and held principally for the purpose of selling in the short term are classified as trading securities and reported at fair value, with unrealized gains and losses included in earnings. | |
• | Debt and equity securities not classified as either held-to-maturity securities or trading securities are classified as available-for-sale securities and reported at fair value, with unrealized gains and losses excluded from earnings and reported in a separate component of stockholders’ equity until realized. |
F-60
2003 | |||||||||||||||||
Gross | Gross | ||||||||||||||||
Cost or | Unrealized | Unrealized | |||||||||||||||
Amortized | Holding | Holding | |||||||||||||||
Cost | Gains | Losses | Fair Value | ||||||||||||||
(Millions) | |||||||||||||||||
Equity securities | |||||||||||||||||
(available-for-sale) | W14,523 | W3,170 | W481 | W17,212 | |||||||||||||
Debt securities | |||||||||||||||||
(available-for-sale) | 669,838 | 11,010 | 12,594 | 668,254 | |||||||||||||
Debt securities | |||||||||||||||||
(held-to-maturity) | 12,068 | — | — | 12,068 | |||||||||||||
W696,429 | W14,180 | W13,075 | W697,534 | ||||||||||||||
2004 | |||||||||||||||||
Gross | Gross | ||||||||||||||||
Cost or | Unrealized | Unrealized | |||||||||||||||
Amortized | Holding | Holding | |||||||||||||||
Cost | Gains | Losses | Fair Value | ||||||||||||||
(Millions) | |||||||||||||||||
Equity securities | |||||||||||||||||
(available-for-sale) | W1,776 | W— | W511 | W1,265 | |||||||||||||
Debt securities | |||||||||||||||||
(available-for-sale) | 581,721 | 26,184 | — | 607,905 | |||||||||||||
Debt securities | 13,297 | — | — | 13,297 | |||||||||||||
(held-to-maturity) | |||||||||||||||||
W596,794 | W26,184 | W511 | W622,467 | ||||||||||||||
F-61
2003 | ||||||||||||||||||||||||
Less than | ||||||||||||||||||||||||
12 Months | 12 Months or More | Total | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
Value | Losses | Value | Losses | Value | Losses | |||||||||||||||||||
(Millions) | ||||||||||||||||||||||||
Equity-linked notes | W | — | W | — | W | 116,248 | W | 12,594 | W | 116,248 | W | 12,594 | ||||||||||||
Common stock | — | — | 1,295 | 481 | 1,295 | 481 | ||||||||||||||||||
Total temporarily impaired securities | W | — | W | — | W | 117,543 | W | 13,075 | W | 117,543 | W | 13,075 | ||||||||||||
Common stock | W | — | W | — | W | 1,265 | W | 511 | W | 1,265 | W | 511 | ||||||||||||
Total temporarily impaired securities | W | — | W | — | W | 1,265 | W | 511 | W | 1,265 | W | 511 | ||||||||||||
(c) | Business Combinations |
(d) | Goodwill Impairment including Investor-level Goodwill |
F-62
Millions | ||||||||||||
PCS Service | Miscellaneous | Total | ||||||||||
Balance as of January 1, 2003 | W755,644 | W14 | W755,658 | |||||||||
Goodwill acquired during the period | — | — | — | |||||||||
Impairment loss | (755,644 | ) | — | (755,644 | ) | |||||||
Balance as of December 31, 2003 | W— | W14 | W14 | |||||||||
Balance as of January 1, 2004 | W— | W14 | W14 | |||||||||
Goodwill acquired during the period | — | — | — | |||||||||
Impairment loss | — | — | — | |||||||||
Balance as of December 31, 2004 | W— | W14 | W14 | |||||||||
(e) | Additional Equity Investments in and Transactions of Subsidiaries |
(f) | Depreciation |
F-63
Estimated Useful Lives | ||||||
Buildings and structures | 5-60 years | |||||
Underground access to cable tunnels, and concrete and steel telephone poles | 10-40 years | |||||
Machinery and equipment | 8-10 years | |||||
Vehicles | 3-5 years | |||||
Tools, furniture and fixtures: | ||||||
Steel safe boxes | 20 years | |||||
Tools, computer equipment, furniture and fixtures | 2-8 years |
(g) | Special Depreciation |
(h) | Interest Capitalization |
F-64
Millions | ||||||||||||
2002 | 2003 | 2004 | ||||||||||
Total interest costs incurred | W | 488,970 | W | 443,078 | W | 467,365 | ||||||
Less amounts charged to expense | 461,117 | 421,609 | 455,211 | |||||||||
Interest capitalized | W | 27,853 | W | 21,469 | W | 12,154 | ||||||
(i) | Intangible Assets |
2003 | ||||||||||||
Gross Carrying | Accumulated | |||||||||||
Amortized intangible assets: | Amount | Amortization | Net Amount | |||||||||
(Millions) | ||||||||||||
Internal-use software | W | 284,523 | W | 107,028 | W | 177,495 | ||||||
Buildings and facility utilization rights | 103,443 | 41,630 | 61,813 | |||||||||
Purchased consumer data | 946 | 128 | 818 | |||||||||
Other | 16,231 | 6,254 | 9,977 | |||||||||
Total | W | 405,143 | W | 155,040 | W | 250,103 | ||||||
2004 | ||||||||||||
Gross Carrying | Accumulated | |||||||||||
Amortized intangible assets: | Amount | Amortization | Net Amount | |||||||||
(Millions) | ||||||||||||
Internal-use software | W | 386,343 | W150,795 | W235,548 | ||||||||
Buildings and facility utilization rights | 111,796 | 46,920 | 64,876 | |||||||||
Purchased consumer data | 954 | 137 | 817 | |||||||||
Other | 16,572 | 6,422 | 10,150 | |||||||||
Total | W | 515,665 | W204,274 | W311,391 | ||||||||
F-65
Amortization expense: | ||||||||||||
For the year ended December 31, 2003 | W | 47,489 million | ||||||||||
For the year ended December 31, 2004 | W | 66,547 million |
For Years Ended December 31, | Millions | |||
2005 | 64,399 | |||
2006 | 60,082 | |||
2007 | 42,869 | |||
2008 | 22,630 | |||
2009 | 15,800 |
(j) | Bonds with Stock Warrants |
(k) | Revenue Recognition |
(l) | Foreign Currency Transactions |
F-66
(m) | Equity-Linked Securities |
(n) | Convertible Notes |
F-67
(o) | Income Taxes |
(p) | Minority Interest in Consolidated Subsidiaries |
(q) | Other |
(r) | Comprehensive Income |
F-68
Millions | ||||||||||||||||||
As of and for the Years Ended December 31, | ||||||||||||||||||
2004 | ||||||||||||||||||
2002 | 2003 | 2004 | (Note 3) | |||||||||||||||
Net earnings as adjusted in accordance with U.S. GAAP | W | 1,556,262 | W395,443 | W1,404,616 | $ | 1,357.0 | ||||||||||||
Other comprehensive income, net of taxes: | ||||||||||||||||||
Foreign currency translation adjustments | (1,339 | ) | 2,087 | 3,012 | 2.9 | |||||||||||||
Unrealized gains (losses) on investments: | ||||||||||||||||||
Unrealized holding gains (losses) net of tax of, W(54,057) million, W6,215 million and W3,842 million in 2002, 2003 and 2004, respectively | (127,952 | ) | 10,276 | 10,128 | 9.8 | |||||||||||||
Less: reclassification adjustment, net of tax of, (W396,319) million, (W226,842) million and W1,997 million in 2002, 2003 and 2004, respectively | (938,090 | ) | (536,936 | ) | 4,257 | 4.1 | ||||||||||||
Comprehensive income (loss) as adjusted in accordance with U.S. GAAP | W | 488,881 | W(129,130 | ) | W1,422,013 | $ | 1,373.8 | |||||||||||
Accumulated other comprehensive income (loss) balances: | ||||||||||||||||||
Foreign currency translation adjustments | W | (7,946 | ) | W(5,859 | ) | W(2,847 | ) | $ | (2.7 | ) | ||||||||
Unrealized gains on investments | 527,840 | 1,180 | 15,565 | 15.0 | ||||||||||||||
W | 519,894 | W(4,679 | ) | W12,718 | $ | 12.3 | ||||||||||||
(s) | Statement of Cash Flows |
(t) | Recent Changes in U.S. GAAP |
F-69
(u) | Impact on Reconciliation of Adoption of Statement of Korean Accounting Standards |
F-70
(v) | U.S. GAAP Reconciliations |
Millions | ||||||||||||||||||
Years Ended December 31, | ||||||||||||||||||
2004 | ||||||||||||||||||
2002 | 2003 | 2004 | (Note 3) | |||||||||||||||
Net earnings in accordance with Korean GAAP | W | 1,946,934 | W | 821,734 | W | 1,282,216 | $ | 1,238.7 | ||||||||||
Adjustments: | ||||||||||||||||||
Intangible assets | 7,424 | 10,264 | 3,767 | 3.6 | ||||||||||||||
Special depreciation | (189 | ) | — | — | — | |||||||||||||
Depreciation | (85,008 | ) | (135,905 | ) | (71,534 | ) | (69.1 | ) | ||||||||||
Equity in earnings of equity method affiliates | ||||||||||||||||||
Reversal of goodwill amortization | 130,113 | 130,113 | 130,113 | 125.7 | ||||||||||||||
Different useful life of intangibles | 7,807 | 7,807 | 22,682 | 21.9 | ||||||||||||||
Additional acquisitions of equity investees | (12,506 | ) | (40,591 | ) | (48,631 | ) | (47.0 | ) | ||||||||||
Impairment loss relating to equity investee | (663,345 | ) | (789,503 | ) | — | — | ||||||||||||
Goodwill impairment | (12,947 | ) | — | — | — | |||||||||||||
U.S. GAAP adjustments of equity method affiliates | 24,528 | 33,171 | (4,737 | ) | (4.6 | ) | ||||||||||||
Interest capitalization (including related depreciation), net | 24,608 | 54,089 | 27,487 | 26.6 | ||||||||||||||
Capitalized foreign exchange transactions, net | 5,879 | 5,859 | 2,133 | 2.1 | ||||||||||||||
Foreign currency translation of convertible notes | 139,730 | (6,426 | ) | (130,247 | ) | (125.8 | ) | |||||||||||
Service installation fees | (17,528 | ) | 20,729 | 8,059 | 7.8 | |||||||||||||
Reversal of gain on disposition of investment | (25,256 | ) | (17,628 | ) | — | — | ||||||||||||
Equity-linked securities | (25,095 | ) | 3,613 | 21,482 | 20.8 | |||||||||||||
Convertible notes of KTF | (14,427 | ) | (9,810 | ) | 1,106 | 1.1 | ||||||||||||
Bonds with stock warrants | (7,435 | ) | (6,043 | ) | (6,376 | ) | (6.2 | ) | ||||||||||
Deferred income tax — methodology difference | — | 133,582 | 172,982 | 167.1 | ||||||||||||||
Deferred income tax effects of U.S. GAAP adjustments | 132,975 | 180,388 | (5,886 | ) | (5.7 | ) | ||||||||||||
(390,672 | ) | (426,291 | ) | 122,400 | 118.3 | |||||||||||||
Net earnings as adjusted in accordance with U.S. GAAP | W | 1,556,262 | W | 395,443 | W | 1,404,616 | $ | 1,357.0 | ||||||||||
F-71
Millions, Except per Share Data | ||||||||||||||||
Years Ended December 31, | ||||||||||||||||
2004 | ||||||||||||||||
2002 | 2003 | 2004 | (Note 3) | |||||||||||||
Net earnings as adjusted in accordance with U.S. GAAP | W | 1,556,262 | W | 395,443 | W | 1,404,616 | $ | 1,357.0 | ||||||||
Basic earnings per share in accordance with U.S. GAAP | W | 5,997 | W | 1,830 | W | 6,663 | $ | 6.44 | ||||||||
Diluted earnings per share in accordance with U.S. GAAP | W | 4,972 | W | 1,655 | W | 6,215 | $ | 6.00 | ||||||||
Dividend per share in accordance with U.S. GAAP | W | 720 | W | 860 | W | 3,000 | $ | 2.90 | ||||||||
Millions, Except per Share Data | ||||||||||||||||
Years Ended December 31, | ||||||||||||||||
2004 | ||||||||||||||||
2002 | 2003 | 2004 | (Note 3) | |||||||||||||
Net earnings available to common shareholders | W | 1,556,262 | W | 395,443 | W | 1,404,616 | $ | 1,357.0 | ||||||||
Dilutive effect of convertible notes | (64,161 | ) | 3,431 | 45,452 | 43.9 | |||||||||||
1,492,101 | 398,874 | 1,450,068 | 1,400.9 | |||||||||||||
Weighted average outstanding shares of common stock | 259.5 | 216.1 | 210.8 | |||||||||||||
Dilutive effect of convertible notes | 40.6 | 25.2 | 22.5 | |||||||||||||
Common stock and common stock equivalents | 300.1 | 241.3 | 233.3 | |||||||||||||
Basic earnings per share in accordance with U.S. GAAP | W | 5,997 | W | 1,830 | W | 6,663 | $ | 6.44 | ||||||||
Diluted earnings per share in accordance with U.S. GAAP | W | 4,972 | W | 1,653 | W | 6,215 | $ | 6.00 | ||||||||
F-72
Millions | ||||||||||||||
Years Ended December 31, | ||||||||||||||
2004 | ||||||||||||||
2003 | 2004 | (Note 3) | ||||||||||||
Stockholders’ equity in accordance with Korean GAAP | W | 8,396,620 | W | 9,026,380 | $ | 8,720.4 | ||||||||
Adjustments: | ||||||||||||||
Intangible assets | (5,701 | ) | (1,934 | ) | (1.9 | ) | ||||||||
Depreciation | (16,474 | ) | (88,008 | ) | (85.0 | ) | ||||||||
Equity in earnings of equity method affiliates: | ||||||||||||||
Reversal of goodwill amortization | 260,226 | 390,339 | 377.1 | |||||||||||
Different useful life of intangibles | 96,449 | 119,131 | 115.1 | |||||||||||
Additional acquisitions of equity investees | 352,650 | 304,972 | 294.6 | |||||||||||
Impairment loss relating to equity investee | (1,452,848 | ) | (1,452,848 | ) | (1,403.6 | ) | ||||||||
Goodwill impairment | (12,947 | ) | (12,947 | ) | (12.5 | ) | ||||||||
U.S. GAAP adjustments of equity method affiliates | 46,129 | 46,517 | 44.9 | |||||||||||
Interest capitalization, net | (55,629 | ) | (28,142 | ) | (27.2 | ) | ||||||||
Capitalized foreign exchange transactions, net | (5,280 | ) | (3,147 | ) | (3.0 | ) | ||||||||
Foreign currency translation of convertible notes | 133,304 | 3,057 | 3.0 | |||||||||||
Deferred service installation fees | (521,897 | ) | (513,838 | ) | (496.4 | ) | ||||||||
Bonds with stock warrants | 6,376 | — | — | |||||||||||
Deferred tax effects of U.S. GAAP adjustments | 385,303 | 379,417 | 366.5 | |||||||||||
Deferred tax-methodology difference | 133,582 | 306,564 | 296.1 | |||||||||||
Deferred income taxes on investment securities | (65 | ) | (5,904 | ) | (5.7 | ) | ||||||||
Minority interests | (1,849,303 | ) | (1,809,577 | ) | (1,748.2 | ) | ||||||||
(2,506,125 | ) | (2,366,348 | ) | (2,286.2 | ) | |||||||||
Stockholders’ equity as adjusted in accordance with U.S. GAAP | W | 5,890,495 | W | 6,660,032 | $ | 6,434.2 | ||||||||
F-73
(w) | Condensed Consolidated U.S. GAAP Financial Information |
Millions | ||||||||||||||
2004 | ||||||||||||||
2003 | 2004 | (Note 3) | ||||||||||||
ASSETS | ||||||||||||||
Current assets | ||||||||||||||
Notes and accounts receivable — trade | W | 1,878,179 | W | 1,682,923 | $ | 1,625.9 | ||||||||
Other current assets | 1,845,458 | 4,089,151 | 3,950.5 | |||||||||||
Total current assets | 3,723,637 | 5,772,074 | 5,576.4 | |||||||||||
Investments | 2,501,212 | 1,957,154 | 1,890.8 | |||||||||||
Property, plant and equipment, net | 11,515,315 | 10,846,328 | 10,478.5 | |||||||||||
Other assets | 1,791,955 | 1,808,176 | 1,746.8 | |||||||||||
W | 19,532,119 | W | 20,383,732 | $ | 19,692.5 | |||||||||
Millions | ||||||||||||||
2004 | ||||||||||||||
2003 | 2004 | (Note 3) | ||||||||||||
LIABILITIES | ||||||||||||||
Current liabilities | ||||||||||||||
Notes and accounts payable — trade | W | 925,567 | W | 745,341 | $ | 720.1 | ||||||||
Other current liabilities | 2,897,098 | 5,789,425 | 5,593.1 | |||||||||||
Total current liabilities | 3,822,665 | 6,534,766 | 6,313.2 | |||||||||||
Long-term debt, excluding current portion | 7,669,463 | 5,160,254 | 4,985.3 | |||||||||||
Other long-term liabilities | 2,059,782 | 1,947,202 | 1,881.2 | |||||||||||
Total liabilities | 13,551,910 | 13,642,222 | 13,179.7 | |||||||||||
Minority interest in consolidated subsidiaries | 89,714 | 81,478 | 78.6 | |||||||||||
Stockholders’ equity | 5,890,495 | 6,660,032 | 6,434.2 | |||||||||||
W | 9,532,119 | W | 20,383,732 | $ | 19,692.5 | |||||||||
F-74
Millions | ||||||||||||||||
Years Ended December 31, | ||||||||||||||||
2004 | ||||||||||||||||
2002 | 2003 | 2004 | (Note 3) | |||||||||||||
Operating revenues | W | 11,507,729 | W | 11,776,189 | W | 12,240,151 | $ | 11,825.1 | ||||||||
Cost of services | 8,862,201 | 9,467,818 | 8,932,097 | 8,629.2 | ||||||||||||
Gross profit | 2,645,528 | 2,308,371 | 3,308,054 | 3,195.9 | ||||||||||||
Selling, general and administration expenses | 813,124 | 1,166,197 | 1,306,068 | 1,261.8 | ||||||||||||
Other operating income (expense), net | 27,676 | 24,486 | (58,339 | ) | (56.3 | ) | ||||||||||
Operating income | 1,860,080 | 1,166,660 | 1,943,647 | 1,877.8 | ||||||||||||
Gain on disposition of available-for-sale securities | 1,151,353 | 752,117 | 5,821 | 5.6 | ||||||||||||
Impairment loss of equity method affiliates | (663,345 | ) | (789,503 | ) | (37,030 | ) | (35.8 | ) | ||||||||
Foreign currency translation gain, net | 236,047 | 3,674 | 395,542 | 382.1 | ||||||||||||
Other expense, net | (511,453 | ) | (519,959 | ) | (518,190 | ) | (500.6 | ) | ||||||||
Earnings before income tax and minority interest | 2,072,682 | 612,989 | 1,789,790 | 1,729.1 | ||||||||||||
Income tax | 519,642 | 217,568 | 386,934 | 373.8 | ||||||||||||
Earnings before minority interest | 1,553,040 | 395,421 | 1,402,856 | 1,355.3 | ||||||||||||
Minority interest in losses of consolidated subsidiaries | 3,222 | 22 | 1,760 | 1.7 | ||||||||||||
Net earnings | W | 1,556,262 | W | 395,443 | W | 1,404,616 | $ | 1,357.0 | ||||||||
Millions | ||||||||||||||||
2004 | ||||||||||||||||
2002 | 2003 | 2004 | (Note 3) | |||||||||||||
Beginning of year | W | 11,189,176 | W | 7,270,245 | W | 5,890,495 | $ | 5,690.7 | ||||||||
Net earnings | 1,556,262 | 395,443 | 1,404,616 | 1,357.0 | ||||||||||||
Foreign currency translation adjustments | (1,339 | ) | 2,087 | 3,012 | 2.9 | |||||||||||
Unrealized earning (losses) on investments, net of tax | (1,066,042 | ) | (526,660 | ) | 14,385 | 13.9 | ||||||||||
Treasury stock | (4,188,435 | ) | (1,048,872 | ) | 30 | — | ||||||||||
Dividends | (224,054 | ) | (212,887 | ) | (632,276 | ) | (610.8 | ) | ||||||||
Other, net of tax of W5,182 million and W(4,019) million in 2003 and 2004, respectively | 4,677 | 11,139 | (20,230 | ) | (19.5 | ) | ||||||||||
End of year | W | 7,270,245 | W | 5,890,495 | W | 6,660,032 | $ | 6,434.2 | ||||||||
F-75
Millions | |||||||||||||||||||
2004 | |||||||||||||||||||
2002 | 2003 | 2004 | (Note 3) | ||||||||||||||||
Cash flows from operating activities: | |||||||||||||||||||
Net earnings | W | 1,556,262 | W | 395,443 | W | 1,404,616 | $ | 1,357.0 | |||||||||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||||||||||||||
Depreciation and amortization | 2,772,281 | 2,683,464 | 2,505,800 | 2,420.8 | |||||||||||||||
Provision for doubtful accounts | 170,250 | 305,652 | 249,884 | 241.4 | |||||||||||||||
Loss on disposition of property, plant and equipment | 84,696 | 52,326 | 89,456 | 86.4 | |||||||||||||||
Equity in losses (gains) of affiliates including intangible assets amortization | (51,519 | ) | 5,000 | 19,531 | 18.9 | ||||||||||||||
Deferred income tax expense (benefit) | 22,220 | (240,922 | ) | (107,417 | ) | (103.8 | ) | ||||||||||||
Gain on disposition of available-for-sale securities | (1,151,353 | ) | (752,117 | ) | (5,821 | ) | (5.6 | ) | |||||||||||
Impairment losses of equity method affiliates | 663,345 | 789,503 | 37,030 | 35.8 | |||||||||||||||
Foreign currency translation gain, net | (236,047 | ) | (3,674 | ) | (395,542 | ) | (382.1 | ) | |||||||||||
Changes in assets and liabilities: | |||||||||||||||||||
Notes and accounts receivable — trade | (334,046 | ) | (287,510 | ) | 34,128 | 33.0 | |||||||||||||
Inventories | (174,806 | ) | (151,198 | ) | 57,850 | 55.9 | |||||||||||||
Notes and accounts payable — trade | (1,130 | ) | 46,684 | (133,327 | ) | (128.8 | ) | ||||||||||||
Advance receipts from customers | 7,500 | (21,897 | ) | 11,077 | 10.7 | ||||||||||||||
Income taxes payable | 237,475 | (229,368 | ) | 72,917 | 70.4 | ||||||||||||||
Prepaid expenses | (2,275 | ) | (3,612 | ) | (8,924 | ) | (8.6 | ) | |||||||||||
Withholdings | (109,025 | ) | 2,657 | (11,219 | ) | (10.8 | ) | ||||||||||||
Accrued expenses | (15,056 | ) | (52,181 | ) | 2,899 | 2.8 | |||||||||||||
Accounts payable-other | 341,357 | 154,646 | (37,091 | ) | (35.8 | ) | |||||||||||||
Refundable deposits of telephone installation | (749,546 | ) | (307,026 | ) | (140,720 | ) | (135.9 | ) | |||||||||||
Retirement and severance benefits | 223,875 | 43,464 | 183,138 | 176.9 | |||||||||||||||
Other, net | (281,057 | ) | (255,463 | ) | (214,827 | ) | (207.6 | ) | |||||||||||
Net cash provided by operating activities | 2,973,401 | 2,173,871 | 3,613,438 | 3,491.0 | |||||||||||||||
F-76
Millions | ||||||||||||||||||
2004 | ||||||||||||||||||
2002 | 2003 | 2004 | (Note 3) | |||||||||||||||
Cash flows from investing activities: | ||||||||||||||||||
Additions to property, plant and equipment | (2,187,075 | ) | (2,219,902 | ) | (1,966,224 | ) | (1,899.5 | ) | ||||||||||
Proceeds from sale of property, plant and equipment | 45,605 | 115,914 | 106,487 | 102.9 | ||||||||||||||
Decrease (increase) in short-term financial instruments | (71,720 | ) | 198,724 | (911,223 | ) | (880.3 | ) | |||||||||||
Proceeds from the sale of available-for-sale securities | 306,552 | 166,281 | 577,616 | 558.0 | ||||||||||||||
Proceeds from the sale of equity security of affiliates | 553,921 | 18,401 | 46,877 | 45.3 | ||||||||||||||
Proceeds from maturity on held-to-maturity securities | 9,994 | 218 | 17,985 | 17.4 | ||||||||||||||
Purchases of available-for-sale securities | (540,331 | ) | (312,881 | ) | (492,696 | ) | (476.0 | ) | ||||||||||
Purchases of equity security of affiliates | — | (483,886 | ) | — | — | |||||||||||||
Purchases of held-to-maturity securities | (392 | ) | (11,412 | ) | (3,075 | ) | (3.0 | ) | ||||||||||
Decrease (increase) in accounts receivable — other | (27,149 | ) | 527,954 | (865 | ) | (0.8 | ) | |||||||||||
Other, net | (728,116 | ) | 346,670 | 18,164 | 17.5 | |||||||||||||
Net cash used in investing activities | (2,638,711 | ) | (1,653,919 | ) | (2,606,954 | ) | (2,518.5 | ) | ||||||||||
Cash flows from financing activities: | ||||||||||||||||||
Payment of dividends | (224,955 | ) | (213,308 | ) | (633,171 | ) | (611.7 | ) | ||||||||||
Increase (decrease) in short-term borrowings, net | 81,702 | (237,621 | ) | (211,410 | ) | (204.2 | ) | |||||||||||
Repayments of long-term debt | (1,391,816 | ) | (1,150,639 | ) | (1,117,240 | ) | (1,079.4 | ) | ||||||||||
Proceeds from long-term debt | 4,675,158 | 1,282,661 | 1,944,080 | 1,878.2 | ||||||||||||||
Acquisition of treasury stock | (3,401,186 | ) | (412,247 | ) | — | — | ||||||||||||
Other, net | 7,219 | 40,432 | (1,580 | ) | (1.5 | ) | ||||||||||||
Net cash used in financing activities | (253,878 | ) | (690,722 | ) | (19,321 | ) | (18.6 | ) | ||||||||||
Increase (decrease) in cash and cash equivalents | 80,812 | (170,770 | ) | 987,163 | 953.9 | |||||||||||||
Cash and cash equivalents at beginning of year | 805,297 | 886,109 | 715,339 | 691.1 | ||||||||||||||
Cash and cash equivalents at end of year | W | 886,109 | W | 715,339 | W | 1,702,502 | $ | 1,645.0 | ||||||||||
Supplemental schedule | ||||||||||||||||||
Interest payment | 391,728 | 437,195 | 454,983 | 439.6 | ||||||||||||||
Income tax payment | 288,316 | 670,674 | 419,596 | 405.4 | ||||||||||||||
Non-cash investing and financing activities* | W | 786,666 | W | 730,704 | W | — | $ | — | ||||||||||
* | The Company financed W786,666 million and W730,704 million of its purchase of treasury stock in 2002 and in 2003, respectively, through the transfer of shares of SK Telecom which the Company previously held as available-for-sale securities. |
(x) | Additional U.S. GAAP Disclosures |
F-77
Millions | |||||||||||||||||
2004 | |||||||||||||||||
2002 | 2003 | 2004 | (Note 3) | ||||||||||||||
Current income tax expense | W497,422 | W | 458,490 | W | 494,351 | $ | 477.6 | ||||||||||
Deferred income net expense (benefit) | 22,220 | (240,922 | ) | (107,417 | ) | (103.8 | ) | ||||||||||
Income tax expense | W519,642 | W | 217,568 | W | 386,934 | $ | 373.8 | ||||||||||
Millions | ||||||||||||||||
2004 | ||||||||||||||||
2002 | 2003 | 2004 | (Note 3) | |||||||||||||
Provision for income taxes at statutory tax rates | W | 615,587 | W | 182,058 | W | 531,078 | $ | 513.1 | ||||||||
Prior years income tax additional payment (refund) | (6,354 | ) | 61,928 | 2,105 | 2.0 | |||||||||||
Nondeductible expenses | 60,990 | 66,748 | 29,698 | 28.7 | ||||||||||||
Nontaxable income | (9,251 | ) | (5,945 | ) | (1,844 | ) | (1.8 | ) | ||||||||
Investment tax credits | (141,330 | ) | (152,041 | ) | (174,968 | ) | (169.0 | ) | ||||||||
Effect of tax rate change | — | 64,820 | 865 | 0.8 | ||||||||||||
Actual provision for income taxes | W | 519,642 | W | 217,568 | W | 386,934 | $ | 373.8 | ||||||||
F-78
Millions | ||||||||||||||
Years Ended December 31, | ||||||||||||||
2004 | ||||||||||||||
2003 | 2004 | (Note 3) | ||||||||||||
Deferred tax assets | ||||||||||||||
Accrual for retirement and severance benefits | W | 3,207 | W | 2,076 | $ | 2.0 | ||||||||
Allowance for doubtful accounts | 122,880 | 129,825 | 125.4 | |||||||||||
Refundable deposits for telephone installation | 20,022 | 18,157 | 17.5 | |||||||||||
Investment securities | 27,417 | 20,481 | 19.8 | |||||||||||
Inventories | 479 | 5,444 | 5.3 | |||||||||||
Intangible assets | 1,568 | 532 | 0.5 | |||||||||||
Unearned income | 143,522 | 141,305 | 136.5 | |||||||||||
Equity securities of affiliates | 488,375 | 553,182 | 534.4 | |||||||||||
Tax credit carryforwards | — | 34,393 | 33.2 | |||||||||||
Other | 24,762 | 69,571 | 67.2 | |||||||||||
Total deferred tax assets | 832,232 | 974,966 | 941.8 | |||||||||||
Deferred tax liabilities | ||||||||||||||
Investment securities | (65 | ) | (5,904 | ) | (5.7 | ) | ||||||||
Property, plant and equipment | (8,732 | ) | (32,634 | ) | (31.5 | ) | ||||||||
Accrued interest income | (2,171 | ) | (9,567 | ) | (9.2 | ) | ||||||||
Total deferred tax liabilities | (10,968 | ) | (48,105 | ) | (46.4 | ) | ||||||||
Net deferred tax assets | W | 821,264 | W | 926,861 | $ | 895.4 | ||||||||
F-79
Millions | ||||||||||||
Years Ended December 31, | ||||||||||||
2004 | ||||||||||||
2003 | 2004 | (Note 3) | ||||||||||
Gross property, plant and equipment | W | 34,695,320 | W | 34,774,357 | $ | 33,595.2 | ||||||
Accumulated depreciation | 23,180,005 | 23,928,029 | 23,116.7 | |||||||||
Net property, plant and equipment | W | 11,515,315 | W | 10,846,328 | $ | 10,478.5 | ||||||
For Years Ended December 31, | Millions | |||
2005 | W1,573 | |||
2006 | 1,719 | |||
2007 | 2,716 | |||
2008 | 5,049 | |||
2009 | 6,821 | |||
2010-2014 | 129,827 |
F-80
A-1
Translation into | ||||||||||||||
Korean Won | U.S. Dollars (Note 2) | |||||||||||||
2003 | 2004 | 2004 | ||||||||||||
(In thousands) | ||||||||||||||
(In millions) | ||||||||||||||
ASSETS | ||||||||||||||
CURRENT ASSETS: | ||||||||||||||
Cash and cash equivalents (Note 18) | W20,424 | W30,941 | $ | 29,892 | ||||||||||
Short-term investment securities (Note 6) | 7,788 | 6,551 | 6,329 | |||||||||||
Trade accounts and notes receivable, net of allowance for doubtful accounts of W163,016 million in 2003 and W140,561 million in 2004, and net of discount on present value of W5,145 million in 2004 (Notes 2, 4, 18 and 20) | 831,487 | 1,185,079 | 1,144,893 | |||||||||||
Accounts receivable-other, net of allowance for doubtful accounts of W4,714 million in 2003 and W2,577 million in 2004 (Notes 2 and 20) | 67,549 | 97,658 | 94,346 | |||||||||||
Prepaid expenses | 13,490 | 11,320 | 10,936 | |||||||||||
Inventories, net of allowance of W1,681 million in 2004 | 192,165 | 257,802 | 249,060 | |||||||||||
Short-term loans (Note 5) | 7,915 | 20,196 | 19,511 | |||||||||||
Other current assets | 18,950 | 31,437 | 30,371 | |||||||||||
1,159,768 | 1,640,984 | 1,585,338 | ||||||||||||
NON-CURRENT ASSETS: | ||||||||||||||
Long-term financial instruments (Note 3) | 52 | 25 | 24 | |||||||||||
Long-term investment securities (Note 7) | 175,779 | 144,967 | 140,051 | |||||||||||
Investment securities using the equity method (Note 8) | 3,178 | — | — | |||||||||||
Long–term trade accounts and notes receivable, net of discount on present value of W6,336 million in 2004 (Note 2) | — | 83,046 | 80,230 | |||||||||||
Long-term loans (Notes 5 and 18) | 51,191 | 37,879 | 36,595 | |||||||||||
Guarantee deposits, net of allowance for doubtful accounts of W4,989 million in 2003 and W2,012 million 2004 | 239,111 | 210,030 | 202,908 | |||||||||||
Deferred income tax assets (Note 17) | 97,464 | 114,444 | 110,563 | |||||||||||
Property and equipment, net (Notes 9 and 11) | 4,685,914 | 4,613,488 | 4,457,046 | |||||||||||
Intangibles (Note 10) | 1,239,633 | 1,153,903 | 1,114,774 | |||||||||||
Other non-current assets | 8,752 | 11,292 | 10,909 | |||||||||||
6,501,074 | 6,369,074 | 6,013,025 | ||||||||||||
Total Assets | W7,660,842 | W8,010,058 | $ | 7,738,438 | ||||||||||
A-2
Translation into | |||||||||||||||
Korean Won | U.S. Dollars (Note 2) | ||||||||||||||
2003 | 2004 | 2004 | |||||||||||||
(In thousands) | |||||||||||||||
(In millions) | |||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||||||
CURRENT LIABILITIES: | |||||||||||||||
Short-term borrowings (Note 12) | W | 293,339 | W | 326,286 | $ | 315,222 | |||||||||
Trade accounts and notes payable (Notes 18 and 20) | 209,323 | 202,663 | 195,791 | ||||||||||||
Current portion of long-term debt, net of discount on debentures of W 4,997 million in 2003 and W565 million in 2004 and addition of accrued interest of W 17,013 million in 2004 (Notes 12 and 13) | 1,050,812 | 1,036,370 | 1,001,227 | ||||||||||||
Accounts payable-other (Notes 18 and 20) | 584,177 | 517,754 | 500,197 | ||||||||||||
Accrued expenses | 113,445 | 145,661 | 140,721 | ||||||||||||
Withholdings | 75,037 | 124,586 | 120,361 | ||||||||||||
Income tax payable | 34,342 | 26,214 | 25,325 | ||||||||||||
Other current liabilities | 16,495 | 28,422 | 27,458 | ||||||||||||
2,376,970 | 2,407,956 | 2,326,302 | |||||||||||||
LONG-TERM LIABILITIES: | |||||||||||||||
Debentures, net (Note 13) | 1,579,953 | 1,819,182 | 1,757,494 | ||||||||||||
Long-term accounts payable-other, net (Note 15) | 518,761 | 538,207 | 519,957 | ||||||||||||
Accrued severance indemnities, net (Note 2) | 32,740 | 37,517 | 36,245 | ||||||||||||
Other long-term liabilities | 9,380 | 17,047 | 16,469 | ||||||||||||
2,140,834 | 2,411,953 | 2,330,165 | |||||||||||||
Total Liabilities | 4,517,804 | 4,819,909 | 4,656,467 | ||||||||||||
SHAREHOLDERS’ EQUITY: | |||||||||||||||
Common stock (Note 16) | 955,702 | 955,702 | 923,294 | ||||||||||||
Capital surplus | 1,327,625 | 1,324,536 | 1,279,621 | ||||||||||||
Retained earnings | 945,501 | 985,573 | 952,152 | ||||||||||||
Capital adjustments: | — | ||||||||||||||
Treasury stock (Note 16) | (97,587 | ) | (93,798 | ) | (90,617 | ) | |||||||||
Loss on disposal of treasury stock | (1,535 | ) | — | — | |||||||||||
Gain on valuation of available-for-sale securities (Notes 6 and 7) | 7,377 | 5,031 | 4,860 | ||||||||||||
Stock compensation (Note 16) | 2,655 | 5,064 | 4,893 | ||||||||||||
Minority interests | 3,300 | 8,041 | 7,768 | ||||||||||||
Total Shareholders’ Equity | 3,143,038 | 3,190,149 | 3,081,971 | ||||||||||||
Total Liabilities and Shareholders’ Equity | W | 7,660,842 | W | 8,010,058 | $ | 7,738,438 | |||||||||
A-3
Translation into | |||||||||||||||||
Korean Won | U.S. Dollars (Note 2) | ||||||||||||||||
2002 | 2003 | 2004 | 2004 | ||||||||||||||
(In thousands, except | |||||||||||||||||
(In millions, except per share amounts) | per share amounts) | ||||||||||||||||
OPERATING REVENUE (Notes 19, 20 and 22) | W | 5,320,028 | W | 5,123,612 | W | 5,942,892 | $ | 5,741,370 | |||||||||
OPERATING EXPENSES (Notes 19 and 20) | 4,475,837 | 4,341,960 | 5,402,745 | 5,219,539 | |||||||||||||
OPERATING INCOME | 844,191 | 781,652 | 540,147 | 521,831 | |||||||||||||
OTHER INCOME (EXPENSES), NET: | |||||||||||||||||
Interest income | 17,950 | 24,502 | 12,832 | 12,397 | |||||||||||||
Rental income | 11,526 | 11,074 | 10,560 | 10,202 | |||||||||||||
Gain on foreign currency transactions, net | 1,083 | 565 | 8,409 | 8,124 | |||||||||||||
Gain (loss) on foreign currency translation, net | 2,182 | (28,111 | ) | 18,857 | 18,218 | ||||||||||||
Interest expense | (216,092 | ) | (274,885 | ) | (222,688 | ) | (215,137 | ) | |||||||||
Loss on disposal of trade accounts and notes receivable (Note 4) | (15,147 | ) | (10,222 | ) | (12,186 | ) | (11,773 | ) | |||||||||
Loss on valuation of inventories | (2,155 | ) | (975 | ) | — | — | |||||||||||
Loss on valuation using the equity method of accounting (Note 8) | (122 | ) | (2,257 | ) | (1,042 | ) | (1,007 | ) | |||||||||
Gain (loss) on disposal of short-term investment securities, net | — | (1,746 | ) | 423 | 409 | ||||||||||||
Loss on disposal of long-term investment securities, net | (36 | ) | (2,773 | ) | (3,541 | ) | (3,421 | ) | |||||||||
Loss on disposal of property and equipment, net | (45,606 | ) | (70,559 | ) | (14,053 | ) | (13,576 | ) | |||||||||
Impairment loss on investment securities (Note 7) | (2,774 | ) | (2,280 | ) | (45,856 | ) | (44,301 | ) | |||||||||
Recovery of impairment loss on investment securities | — | 3,579 | — | — | |||||||||||||
Loss on valuation of currency options (Note 14) | — | (1,349 | ) | (1,303 | ) | ||||||||||||
Other, net | 17,443 | 28,092 | 25,075 | 24,225 | |||||||||||||
(231,748 | ) | (325,996 | ) | (224,559 | ) | (22,922 | ) | ||||||||||
ORDINARY INCOME | 612,443 | 455,656 | 315,588 | 304,888 | |||||||||||||
EXTRAORDINARY ITEM | — | — | — | — | |||||||||||||
INCOME BEFORE INCOME TAX | 612,443 | 455,656 | 315,588 | 304,888 | |||||||||||||
INCOME TAX EXPENSE (Note 17) | (80,280 | ) | (50,702 | ) | (25,566 | ) | (24,699 | ) | |||||||||
MINORITY INTERESTS IN NET LOSS (INCOME) OF CONSOLIDATED SUBSIDIARIES | — | 1,075 | (2,159 | ) | (2,086 | ) | |||||||||||
NET INCOME | W | 532,163 | W | 406,029 | W | 287,863 | $ | 278,103 | |||||||||
EARNINGS PER SHARE (Note 2) | W | 2,904 | W | 2,167 | W | 1,566 | $ | 1.513 | |||||||||
DILUTED EARNINGS PER SHARE (Note 2) | W | 2,894 | W | 2,105 | W | 1,535 | $ | 1.483 | |||||||||
A-4
Korean Won | ||||||||||||||||||||||||
Common | Capital | Retained | Capital | Minority | ||||||||||||||||||||
Stock | Surplus | Earnings | Adjustments | Interests | Total | |||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Balance at December 31, 2001 | W | 920,290 | W | 1,132,834 | W | 10,481 | W | (31,609 | ) | W | — | W | 2,031,996 | |||||||||||
Net income for 2002 | — | — | 532,163 | — | — | 532,163 | ||||||||||||||||||
Effect of changes in consolidated subsidiaries | — | (3,265 | ) | — | 2,104 | 235,842 | 234,681 | |||||||||||||||||
Compensation expense resulting from with stock options | — | — | — | 1,064 | — | 1,064 | ||||||||||||||||||
Loss on valuation of investment securities using the equity method | — | (295 | ) | — | — | — | (295 | ) | ||||||||||||||||
Gain on valuation of available-for-sale securities | — | — | — | 698 | — | 698 | ||||||||||||||||||
Purchase of treasury stock | — | — | — | (1 | ) | — | (1 | ) | ||||||||||||||||
Balance at December 31, 2002 | 920,290 | 1,129,274 | 542,644 | (27,744 | ) | 235,842 | 2,800,306 | |||||||||||||||||
Net income for 2003 | — | — | 406,029 | — | (1,075 | ) | 404,954 | |||||||||||||||||
Merger | 35,412 | 192,654 | — | — | — | 228,066 | ||||||||||||||||||
Effect of changes in consolidated subsidiaries | — | 3,561 | (16 | ) | (1,614 | ) | (231,467 | ) | (229,536 | ) | ||||||||||||||
Amortization of organization cost | — | — | (3,156 | ) | — | — | (3,156 | ) | ||||||||||||||||
Compensation expense resulting from with stock options | — | — | — | 1,591 | — | 1,591 | ||||||||||||||||||
Gain on valuation of investment securities using the equity method | — | 2,136 | — | — | — | 2,136 | ||||||||||||||||||
Gain on valuation of available-for-sale securities | 5,266 | — | 5,266 | |||||||||||||||||||||
Purchase of treasury stock | — | — | — | (66,589 | ) | (66,589 | ) | |||||||||||||||||
Balance at December 31, 2003 | W | 955,702 | W | 1,327,625 | W | 945,501 | W | (89,090 | ) | W | 3,300 | W | 3,143,038 | |||||||||||
Net income for 2004 | — | — | 287,863 | — | — | 287,863 | ||||||||||||||||||
Effect of changes in consolidated subsidiaries | — | (953 | ) | (2,266 | ) | — | 2,582 | (637 | ) | |||||||||||||||
Retirement of treasury stock | — | (149,853 | ) | 149,853 | — | |||||||||||||||||||
Dividends | — | (94,137 | ) | — | — | (94,137 | ) | |||||||||||||||||
Loss on disposal of treasury stock | — | (1,535 | ) | 1,535 | — | — | ||||||||||||||||||
Compensation expense resulting from with stock options | — | — | — | 2,409 | — | 2,409 | ||||||||||||||||||
Gain on valuation of investment securities using the equity method | — | (2,136 | ) | — | — | — | (2,136 | ) | ||||||||||||||||
Gain on valuation of available-for-sale securities | — | — | — | (2,346 | ) | — | (2,346 | ) | ||||||||||||||||
Effect of changes in minority interests | — | — | — | — | 2,159 | 2,159 | ||||||||||||||||||
Purchase of treasury stock | — | — | — | (146,064 | ) | — | (146,064 | ) | ||||||||||||||||
Balance at December 31, 2004 | W | 955,702 | W | 1,324,536 | W | 985,573 | W | (83,703 | ) | W | 8,041 | W | 3,190,149 | |||||||||||
Translation into U.S. Dollars (In thousands) (Note 2) | $923,294 | $1,279,621 | $952,152 | $(80,864 | ) | $7,768 | $3,081,971 | |||||||||||||||||
A-5
Translation into | |||||||||||||||||
U.S. Dollars | |||||||||||||||||
Korean Won | (Note 2) | ||||||||||||||||
2002 | 2003 | 2004 | 2004 | ||||||||||||||
(In thousands) | |||||||||||||||||
(In millions) | |||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||||||||
Net income | W532,163 | W406,029 | W287,863 | $ | 278,103 | ||||||||||||
Addition of expenses not involving cash outflows: | |||||||||||||||||
Loss on disposal of property and equipment, net | 45,606 | 70,559 | 14,053 | 13,576 | |||||||||||||
Depreciation | 723,667 | 839,430 | 997,110 | 963,298 | |||||||||||||
Amortization of intangibles | 1,832 | 19,287 | 110,692 | 106,938 | |||||||||||||
Long-term accrued interest | — | 7,420 | 7,643 | 7,384 | |||||||||||||
Amortization of discounts on debentures | 33,452 | 11,883 | 12,789 | 12,355 | |||||||||||||
Amortization of discounts on long-term payable-other | — | 14,722 | 20,015 | 19,336 | |||||||||||||
Provision for severance indemnities | 15,100 | 12,311 | 12,670 | 12,240 | |||||||||||||
Loss on disposal of trade accounts and notes receivable | 15,147 | 10,222 | 12,186 | 11,773 | |||||||||||||
Loss on valuation using the equity method of accounting | 122 | 2,257 | 1,042 | 1,007 | |||||||||||||
Loss on disposal of short-term investment securities, net | — | 1,746 | — | — | |||||||||||||
Loss on disposal of long-term investment securities, net | 36 | 2,773 | 3,541 | 3,421 | |||||||||||||
Loss on valuation of inventories | 2,155 | 975 | — | — | |||||||||||||
Loss on foreign currency translation, net | — | 28,111 | — | — | |||||||||||||
Stock compensation | 1,064 | 4,560 | 2,409 | 2,327 | |||||||||||||
Impairment loss on investment securities | 2,774 | 2,280 | 45,856 | 44,301 | |||||||||||||
Bad debt expense | 23,555 | 52,488 | 25,485 | 24,621 | |||||||||||||
Loss on valuation of currency options | — | — | 1,349 | 1,303 | |||||||||||||
Minority interest in net income of consolidated subsidiaries | — | — | 2,159 | 2,086 | |||||||||||||
Other | 2,161 | 1,617 | 5,172 | 4,997 | |||||||||||||
866,671 | 1,082,641 | 1,274,171 | 79,635 | ||||||||||||||
Deduction of revenues not involving cash inflows: | |||||||||||||||||
Gain on foreign currency translation, net | 2,182 | — | 19,023 | 18,378 | |||||||||||||
Gain on disposal of short-term investment securities, net | — | — | 423 | 409 | |||||||||||||
Recovery of impairment loss in investment securities | — | 3,579 | — | — | |||||||||||||
Minority interest in net loss of consolidated subsidiaries | — | 1,075 | — | — | |||||||||||||
Other | 3 | 676 | 2,974 | 2,873 | |||||||||||||
2,185 | 5,330 | 22,420 | 2,873 | ||||||||||||||
Changes in assets and liabilities resulting from operations: | |||||||||||||||||
Increase in trade accounts and notes receivable | (396,750 | ) | (433,633 | ) | (388,636 | ) | (375,457 | ) | |||||||||
Decrease (Increase) in accounts receivable-other | 27,537 | (3,991 | ) | (19,815 | ) | (19,143 | ) | ||||||||||
Decrease (Increase) in prepaid expenses | (1,908 | ) | 14,504 | 9,123 | 8,814 | ||||||||||||
Increase in inventories | (88,072 | ) | (32,229 | ) | (68,182 | ) | (65,870 | ) | |||||||||
Decrease (Increase) in other current assets | (23,173 | ) | 34,534 | (18,686 | ) | (18,052 | ) | ||||||||||
Payment of severance indemnities | (9,487 | ) | (13,873 | ) | (8,219 | ) | (7,940 | ) | |||||||||
Increase (Decrease) in trade accounts and notes payable | 168,328 | (199,829 | ) | (32,619 | ) | (31,513 | ) | ||||||||||
Increase (Decrease) in accounts payable-other | 334,530 | (151,212 | ) | (82,732 | ) | (79,927 | ) | ||||||||||
Increase in accrued expenses | 29,083 | 28,838 | 32,439 | 31,339 | |||||||||||||
Increase (Decrease) in withholdings | (10,308 | ) | (29,529 | ) | 49,549 | 47,869 | |||||||||||
Increase (Decrease) in income tax payable | 40,804 | (9,101 | ) | (8,883 | ) | (8,582 | ) | ||||||||||
Increase (Decrease) in other current liabilities | (19,509 | ) | (6,303 | ) | 11,764 | 11,365 | |||||||||||
Increase in long-term trade accounts and notes receivable | — | — | (83,046 | ) | (80,230 | ) | |||||||||||
Decrease in National Pension | 325 | 337 | 144 | 139 | |||||||||||||
Increase in deferred income tax assets | (2,025 | ) | (20,919 | ) | (18,378 | ) | (17,755 | ) | |||||||||
Increase in other long-term liabilities | 4,165 | 4,028 | 6,561 | 6,339 | |||||||||||||
53,540 | (818,378 | ) | (619,616 | ) | (11,416 | ) | |||||||||||
Net cash provided by operating activities | 1,450,189 | 664,962 | 919,998 | 888,802 | |||||||||||||
A-6
Translation into | |||||||||||||||||
U.S. Dollars | |||||||||||||||||
Korean Won | (Note 2) | ||||||||||||||||
2002 | 2003 | 2004 | 2004 | ||||||||||||||
(In thousands) | |||||||||||||||||
(In millions) | |||||||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||||||||
Cash inflows from investing activities | |||||||||||||||||
Proceeds from sale of short-term investment securities | W | — | W | 417,249 | W | 100,437 | $ | 97,031 | |||||||||
Collection of short-term loans | 33,170 | 24,432 | 22,844 | 22,069 | |||||||||||||
Proceeds from sale of long-term investment securities | 5,101 | 23,145 | 19,147 | 18,498 | |||||||||||||
Withdrawal of guarantee deposits | 25,439 | 48,750 | 60,530 | 58,477 | |||||||||||||
Withdrawal of short-term financial instruments | 2,500 | 370,000 | — | — | |||||||||||||
Proceeds from disposal of property and equipment | 6,553 | 137,114 | 2,927 | 2,828 | |||||||||||||
Proceeds from disposal of intangibles | 4 | 100 | 236 | 228 | |||||||||||||
Other | 169 | 93 | 27 | 26 | |||||||||||||
72,936 | 1,020,883 | 206,148 | 3,082 | ||||||||||||||
Cash outflow from investing activities | |||||||||||||||||
Purchase of short-term financial instruments | — | (35,000 | ) | (520 | ) | (502 | ) | ||||||||||
Purchase of short-term investment securities | — | (35,684 | ) | (100,000 | ) | (96,609 | ) | ||||||||||
Purchase of long-term investment securities | (1,354,787 | ) | (2,614 | ) | (7,943 | ) | (7,674 | ) | |||||||||
Payment of guarantee deposits | (34,307 | ) | (46,131 | ) | (32,763 | ) | (31,652 | ) | |||||||||
Acquisition of property and equipment | (1,014,278 | ) | (935,326 | ) | (955,119 | ) | (922,731 | ) | |||||||||
Increase in intangibles | (3,443 | ) | (31,205 | ) | (23,318 | ) | (22,527 | ) | |||||||||
Extension of long-term loans | (34,537 | ) | (32,152 | ) | (22,156 | ) | (21,405 | ) | |||||||||
Other | (382 | ) | (5 | ) | (781 | ) | (755 | ) | |||||||||
(2,441,734 | ) | (1,118,117 | ) | (1,142,600 | ) | (1,097,691 | ) | ||||||||||
Net cash used in investing activities | (2,368,798 | ) | (97,234 | ) | (936,452 | ) | (904,698 | ) | |||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||||||||
Cash inflows from financing activities | |||||||||||||||||
Proceeds from sale of trade accounts and notes receivable | 470,000 | 512,000 | — | — | |||||||||||||
Proceeds from short-term borrowings | 1,295,000 | 3,876,831 | 5,775,000 | 5,579,171 | |||||||||||||
Proceeds from issuance of debentures | 1,111,208 | — | 1,275,396 | 1,232,148 | |||||||||||||
Proceeds from long-term debt | 100,000 | — | — | — | |||||||||||||
Increase from merger | — | 314,610 | — | — | |||||||||||||
Other | — | — | 13,361 | 12,908 | |||||||||||||
2,976,208 | 4,703,441 | 7,063,757 | 12,908 | ||||||||||||||
Cash outflows from financing activities | |||||||||||||||||
Repayment of short-term borrowings | (1,415,000 | ) | (4,130,000 | ) | (5,741,052 | ) | (5,546,374 | ) | |||||||||
Repayment of debentures | — | (177 | ) | (94,137 | ) | (90,945 | ) | ||||||||||
Repayment of current portion of long-term debt | (672,290 | ) | (831,802 | ) | (1,055,529 | ) | (1,019,736 | ) | |||||||||
Repayment of long-term debt | — | (315,775 | ) | — | — | ||||||||||||
Acquisition of treasury stock | (1 | ) | (4,317 | ) | (146,064 | ) | (141,111 | ) | |||||||||
Repayment of other non-current liabilities | (10 | ) | (19 | ) | (4 | ) | (4 | ) | |||||||||
(2,087,301 | ) | (5,282,090 | ) | (7,036,786 | ) | (6,798,170 | ) | ||||||||||
Net cash provided by (used in) financing activities | 888,907 | (578,649 | ) | 26,971 | 26,057 | ||||||||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (29,702 | ) | (10,921 | ) | 10,517 | 10,161 | |||||||||||
INCREASE (DECREASE) FROM CHANGES IN CONSOLIDATED SUBSIDIARIES | 124,895 | (116,210 | ) | — | — | ||||||||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR | 52,362 | 147,555 | 20,424 | 19,731 | |||||||||||||
CASH AND CASH EQUIVALENTS, END OF YEAR | W | 147,555 | W | 20,424 | W | 30,941 | $ | 29,892 | |||||||||
A-7
Translation into | |||||||||||||||||
Korean Won | U.S. Dollars (Note 2) | ||||||||||||||||
2002 | 2003 | 2004 | 2004 | ||||||||||||||
(In thousands) | |||||||||||||||||
(In millions) | |||||||||||||||||
TRANSACTIONS NOT INVOLVING CASH: | |||||||||||||||||
Transfer of trade accounts and notes receivable to long-term investment securities | W | 43,430 | W | 119,168 | W | 30,831 | $ | 29,786 | |||||||||
Transfer of debentures to current portion of long term debt | 571,103 | 994,014 | 1,014,556 | 980,153 | |||||||||||||
Transfer of long-term obligation under capital lease to current portion of long-term debt | 2,235 | 550 | 15,732 | 15,199 | |||||||||||||
Transfer of interest expense to construction in progress | 34,116 | — | — | — | |||||||||||||
Transfer of long-term debt to current portion of long-term debt | 216,994 | 100,000 | — | ||||||||||||||
Transfer of long-term loans to short-term loans | 17,672 | 26,752 | 34,534 | 33,363 | |||||||||||||
Transfer of long-term investment securities to trade accounts and notes receivable | — | 22,332 | — | — | |||||||||||||
Transfer of long-term investment securities to short-term investment securities | — | 1,420 | — | — | |||||||||||||
Transfer of property and equipment to accounts receivable-other | — | — | 12,030 | 11,622 | |||||||||||||
Retirement of treasury stock | — | — | 149,853 | 144,772 | |||||||||||||
Recognition of loss on valuation of investment securities using the equity method as capital adjustments | 296 | 58,197 | 2,117 | 2,045 |
A-8
1. | GENERAL: |
(1) KT Freetel Co., Ltd. |
Number of | Percentage of | |||||||
Shares | Ownership (%) | |||||||
KT Corporation | 89,640,088 | 48.70 | ||||||
Qualcomm Incorporated | 4,416,350 | 2.40 | ||||||
HyoSung Corp. | 3,017,276 | 1.64 | ||||||
Microsoft Corp. | 2,030,000 | 1.10 | ||||||
SSB-WTCO NA | 1,580,690 | 0.86 | ||||||
NTC-GOV SPORE | 1,118,240 | 0.61 | ||||||
Others | 82,264,675 | 44.69 | ||||||
184,067,319 | 100.00 | |||||||
(2) Consolidated Subsidiary |
Ownership Percentage(%) | |||||||||||||||||||
Year Control | |||||||||||||||||||
Subsidiary | Was Obtained | 2002 | 2003 | 2004 | Primary Business | ||||||||||||||
KTF Technologies Co., Ltd. | 2002 | 57.40 | 57.40 | 70.75 | Developing and manufacturing | ||||||||||||||
(“KTF Technologies”) | of PCS handsets |
A-9
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: |
Basis of Financial Statement Presentation |
Adoption of Newly Effective Statements of Korea Accounting Standards |
Use of Estimates |
Revenue Recognition |
Allowance for Doubtful Accounts |
A-10
2002 | 2003 | 2004 | ||||||||||
Beginning of year | W176,313 | W163,617 | W167,730 | |||||||||
Write-offs | (36,734 | ) | (48,375 | ) | (50,077 | ) | ||||||
139,579 | 115,242 | 117,653 | ||||||||||
Provision | 23,555 | 52,488 | 25,485 | |||||||||
Increase from changes in consolidated subsidiaries | 483 | — | — | |||||||||
End of year | W163,617 | W167,730 | W143,138 | |||||||||
Inventories |
Investment Securities Other than those Accounted for Using the Equity Method |
(1) | Classification of Securities |
(2) | Valuation of Securities |
A-11
(3) | Reclassification of Securities |
Investment Securities Using the Equity Method |
Property and Equipment |
A-12
Estimated Useful Lives | ||||
Buildings and structures | 15 30 years | |||
Machinery and equipment | 8 years | |||
Vehicles | 4 8 years | |||
Other | 4 8 years |
Capitalization of Financing Costs |
Long-Lived Assets |
Leases |
Intangibles |
Estimated Useful Lives | ||||
Frequency use rights | 13 years | |||
Goodwill | 5 years | |||
Intellectual property rights | 5 10 years | |||
Facility use rights | 10 20 years | |||
Development costs | 4 5 years | |||
Other | 5 years |
A-13
Long-term Accounts and Notes Receivable |
Convertible bonds |
Discounts on Debentures |
Accrued Severance Indemnities |
2002 | 2003 | 2004 | ||||||||||
Beginning of year | W | 25,792 | W | 31,604 | W | 33,897 | ||||||
Severance payments | (9,487 | ) | (13,873 | ) | (8,219 | ) | ||||||
16,305 | 17,731 | 25,678 | ||||||||||
Provision | 15,100 | 12,311 | 13,076 | |||||||||
Increase due to merger | 18 | 3,292 | 52 | |||||||||
Increase from changes in consolidated subsidiaries | 181 | 563 | — | |||||||||
End of year | W | 31,604 | W | 33,897 | W | 38,806 | ||||||
Accounting for Foreign Currency Transactions and Translation |
A-14
Accounting for Derivative Instruments |
Income Tax |
Stock Compensation Expense |
Basic and Diluted Ordinary Income per Share and Earnings per Share |
A-15
Number of | |||||||||
Common Shares | |||||||||
Exercise Period | to be Issued | ||||||||
Convertible bonds | Nov. 29, 2003—Nov. 29, 2005 | 9,946,236 | |||||||
Stock options | March 29, 2004—March 28, 2009 | 18,000 | |||||||
” | March 25, 2005—March 24, 2010 | 44,800 | |||||||
” | Sep. 9. 2005—Sep. 8. 2010 | 629,500 |
3. | RESTRICTED DEPOSITS: |
4. | DISPOSAL OF TRADE ACCOUNTS AND NOTES RECEIVABLE: |
5. | LOANS TO EMPLOYEES: |
A-16
6. | SHORT-TERM INVESTMENT SECURITIES: |
2003 | 2004 | ||||||||
Trading securities: | |||||||||
Beneficiary certificates | W | 516 | W | — | |||||
Available-for-sale securities: | |||||||||
Listed equity securities | 7,272 | 6,551 | |||||||
W | 7,788 | W | 6,551 | ||||||
(2) | Listed equity securities as of December 31, 2003 and 2004 are as follows (won in millions): |
2003 | 2004 | |||||||||||||||
Acquisition | Gain on | |||||||||||||||
Fair Value | Cost | Fair Value | Valuation | |||||||||||||
Listed equity securities | W | 7,272 | W | 2,918 | W | 6,551 | W | 3,633 |
7. | LONG-TERM INVESTMENT SECURITIES: |
2003 | 2004 | ||||||||
Available-for-sale securities: | |||||||||
Listed equity securities | W | 5,391 | W | 4,687 | |||||
Non-listed equity securities | 8,500 | 11,040 | |||||||
Investments in funds | 40,633 | 38,382 | |||||||
Debt securities | 21,341 | 2,191 | |||||||
Held-to maturity securities: | |||||||||
Beneficiary certificates | 99,914 | 88,667 | |||||||
W | 175,779 | W | 144,967 | ||||||
2003 | 2004 | |||||||||||||||
Acquisition | Gain (Loss) on | |||||||||||||||
Fair Value | Cost | Fair Value | Valuation | |||||||||||||
Wide Telecom Co. | W | 24 | W | 300 | W | 11 | W | (289 | ) | |||||||
Gaeasoft Co., Ltd. | 913 | 532 | 514 | (18 | ) | |||||||||||
KRTnet Corp. | 4,454 | 1,954 | 3,634 | 1,680 | ||||||||||||
Beneficiary Certificates | — | 503 | 528 | 25 | ||||||||||||
W | 5,391 | W | 3,289 | W | 4,687 | W | 1,398 | |||||||||
A-17
2003 | 2004 | |||||||||||||||||||
Book | Ownership | Acquisition | Net Asset | Book | ||||||||||||||||
Value | (%) | Cost | Value | Value | ||||||||||||||||
Mondex Korea Co., Ltd. | W | — | 6.02 | W | 920 | W | — | W | — | |||||||||||
Internet Metix Inc. | 23 | 2.00 | 200 | 21 | 23 | |||||||||||||||
Geotel Co., Ltd. | 263 | 10.55 | 263 | 498 | 263 | |||||||||||||||
Inews24. Co., Ltd. | — | 3.58 | 350 | — | — | |||||||||||||||
ENtoB Corp. | 500 | 3.13 | 500 | 483 | 500 | |||||||||||||||
The Radio News Co., Ltd. | — | 10.73 | 624 | — | — | |||||||||||||||
Prime Venture Capital Co., Ltd. | 1,000 | 10.00 | 1,000 | — | 93 | |||||||||||||||
Onse Telecom Corp. | 105 | 0.17 | 2,148 | 162 | 105 | |||||||||||||||
NAZCA Entertainment Co., Ltd. | 46 | 11.74 | 500 | 111 | 46 | |||||||||||||||
Toysoft Co., Ltd | 80 | 8.78 | 500 | 41 | 80 | |||||||||||||||
Ohmylove Co., Ltd. | 1,200 | 12.06 | 1,200 | 131 | 131 | |||||||||||||||
Vacom Wireless, Inc. | 1,880 | 16.77 | 1,880 | 719 | 719 | |||||||||||||||
Citylover Co., Ltd. | 38 | 3.45 | 38 | — | — | |||||||||||||||
MDS Planning Co., Ltd. | 120 | 4.00 | 120 | — | — | |||||||||||||||
Directmedia Co., Ltd. | — | 16.09 | 435 | 233 | 435 | |||||||||||||||
KTFMhows Co., Ltd. | 51.00 | 2,550 | 2,550 | 2,550 | ||||||||||||||||
Harex Info Tech Ltd. | 23.12 | 3,375 | 1,896 | 3,375 | ||||||||||||||||
Others | 3,245 | — | 3,423 | 3,202 | 2,720 | |||||||||||||||
W | 8,500 | W | 20,026 | W | 10,047 | W | 11,040 | |||||||||||||
2003 | 2004 | |||||||||||||||||||||||
Ownership | Acquisition | Net Asset | Ownership | Acquisition | Net Asset | |||||||||||||||||||
(%) | Cost | Value | (%) | Cost | Value | |||||||||||||||||||
CEC Mobile Ltd. | 16.67 | W | 4,456 | W | 4,456 | 16.67 | W | 4,456 | W | 4,456 | ||||||||||||||
PT. KTF Indonesia | 99.00 | 234 | 234 | 99.00 | 234 | 234 | ||||||||||||||||||
Korea IT Fund | 10.00 | 30,000 | 30,000 | 10.00 | 30,000 | 30,000 | ||||||||||||||||||
Korea Telecom Strategy Fund | 10.00 | 2,000 | 2,000 | 10.00 | 2,000 | 2,000 | ||||||||||||||||||
KT Freetel Internal Venture | 95.00 | 950 | 950 | — | — | — | ||||||||||||||||||
Others | — | 2,993 | 2,993 | — | 1,692 | 1,692 | ||||||||||||||||||
W | 40,633 | W | 40,633 | W | 38,382 | W | 38,382 | |||||||||||||||||
A-18
2003 | 2004 | |||||||||||||||
Acquisition | Book | Acquisition | Book | |||||||||||||
Cost | Value | Cost | Value | |||||||||||||
KTF Second Securitization Specialty Co., Ltd. | W | 19,254 | W | 19,254 | W | — | W | — | ||||||||
Government bonds | 1,587 | 1,587 | 1,691 | 1,691 | ||||||||||||
Convertible bonds | 500 | 500 | 500 | 500 | ||||||||||||
W | 21,341 | W | 21,341 | W | 2,191 | W | 2,191 | |||||||||
2-5 Years | 6-10 Years | |||||||
Government bonds | W | 1,688 | W | 3 | ||||
Convertible bonds | 500 | — | ||||||
W | 2,188 | W | 3 | |||||
2003 | 2004 | |||||||||||||||
Acquisition | Book | Acquisition | Book | |||||||||||||
Cost | Value | Cost | Value | |||||||||||||
Beneficiary certificates | W | 99,914 | W | 99,914 | W | 130,745 | W | 88,667 |
8. | INVESTMENT SECURITIES USING THE EQUITY METHOD: |
2003 | 2004 | |||||||||||||||||||
Ownership | Acquisition | Book | Acquisition | Book | ||||||||||||||||
(%) | Cost | Value | Cost | Value | ||||||||||||||||
Korea Digital Satellite Broadcasting Co., Ltd. | 2.38 | W | 9,954 | W | 3,178 | W | 9,954 | W | — |
Beginning of | Loss on | End of | ||||||||||||||
Year | Valuation | Other Changes | Year | |||||||||||||
Korea Digital Satellite Broadcasting Co., Ltd. | W | 3,178 | W | (1,042 | ) | W | (2,136 | ) | W | — |
A-19
9. | PROPERTY AND EQUIPMENT: |
Increase | Decrease | Changes in | ||||||||||||||||||||||||||
Beginning | Consolidated | End of | ||||||||||||||||||||||||||
of Year | Acquisition | Other | Disposal | Other | Subsidiaries | Year | ||||||||||||||||||||||
Land | W | 124,401 | W | 2,388 | W | — | W | 4,077 | W | — | W | — | W | 122,712 | ||||||||||||||
Buildings and structures | 284,979 | 25,484 | 479 | 8,128 | — | 29 | 302,843 | |||||||||||||||||||||
Machinery and equipment | 5,563,211 | 465,831 | 351,079 | 134,058 | 243 | 14,543 | 6,260,364 | |||||||||||||||||||||
Vehicles | 10,099 | 295 | 501 | 506 | — | 1,334 | 11,723 | |||||||||||||||||||||
Other | 461,027 | 111,869 | 20,806 | 10,072 | 1,802 | 113 | 581,363 | |||||||||||||||||||||
Construction in progress | 514,108 | 329,480 | — | 130,306 | 370,820 | 12,206 | 354,668 | |||||||||||||||||||||
W | 6,957,825 | W | 935,347 | W | 372,865 | W | 287,147 | W | 372,865 | W | 28,225 | W | 7,633,673 | |||||||||||||||
Increase | Decrease | Changes in | ||||||||||||||||||||||||||
Beginning | Consolidated | End of | ||||||||||||||||||||||||||
of Year | Depreciation | Other | Disposal | Other | Subsidiaries | Year | ||||||||||||||||||||||
Less: Accumulated depreciation | ||||||||||||||||||||||||||||
Buildings and structures | W | 39,232 | W | 10,079 | W | 4 | W | 1,656 | W | — | W | — | W | 47,659 | ||||||||||||||
Machinery and equipment | 1,910,743 | 726,207 | 10,963 | 70,701 | 9,721 | (697 | ) | 2,566,794 | ||||||||||||||||||||
Vehicles | 4,576 | 1,786 | — | 304 | — | (71 | ) | 5,987 | ||||||||||||||||||||
Other | 231,521 | 101,358 | — | 5,519 | 162 | (706 | ) | 326,492 | ||||||||||||||||||||
Accumulated impairment loss | 577 | — | 250 | — | — | — | 827 | |||||||||||||||||||||
2,186,649 | 839,430 | 11,217 | 78,180 | 11,096 | (1,474 | ) | 2,947,759 | |||||||||||||||||||||
W | 4,771,176 | W | 4,685,914 | |||||||||||||||||||||||||
Increase | Decrease | |||||||||||||||||||||||
Beginning | End of | |||||||||||||||||||||||
of Year | Acquisition | Other | Disposal | Other | Year | |||||||||||||||||||
Land | W | 122,712 | W | 88 | W | — | W | 960 | W | — | W | 121,840 | ||||||||||||
Buildings and structures | 302,843 | 3,182 | 5,773 | 3,408 | 76 | 308,314 | ||||||||||||||||||
Machinery and equipment | 6,260,364 | 357,825 | 671,977 | 32,472 | 70,607 | 7,187,087 | ||||||||||||||||||
Vehicles | 11,723 | 402 | — | 242 | — | 11,883 | ||||||||||||||||||
Other | 581,363 | 53,195 | 104,724 | 6,367 | 65 | 732,850 | ||||||||||||||||||
Construction in progress | 354,668 | 540,427 | 51 | — | 711,867 | 183,279 | ||||||||||||||||||
W | 7,633,673 | W | 955,119 | W | 782,525 | W | 43,449 | W | 782,615 | W | 8,545,253 | |||||||||||||
A-20
Increase | Decrease | |||||||||||||||||||||||
Beginning | End of | |||||||||||||||||||||||
of Year | Depreciation | Other | Disposal | Other | Year | |||||||||||||||||||
Less: Accumulated depreciation | ||||||||||||||||||||||||
Buildings and structures | W | 47,659 | W | 10,816 | W | — | W | 779 | W | — | W | 57,696 | ||||||||||||
Machinery and equipment | 2,566,794 | 846,067 | — | 8,857 | 30,799 | 3,373,205 | ||||||||||||||||||
Vehicles | 5,987 | 1,859 | — | 116 | — | 7,730 | ||||||||||||||||||
Other | 326,492 | 139,274 | 30,798 | 4,704 | — | 491,860 | ||||||||||||||||||
Accumulated impairment loss | 827 | 447 | — | — | — | 1,274 | ||||||||||||||||||
2,947,759 | 998,463 | 30,798 | 14,456 | 30,799 | 3,931,765 | |||||||||||||||||||
W | 4,685,914 | W | 4,613,488 | |||||||||||||||||||||
10. | INTANGIBLES: |
Increase | Decrease | Changes in | ||||||||||||||||||||||||||
Beginning of | Consolidated | |||||||||||||||||||||||||||
Year | Acquisition | Other | Amortization | Other | Subsidiaries | End of Year | ||||||||||||||||||||||
Goodwill | W | 1,951 | W | 12,798 | W | — | W | 1,608 | W | — | W | — | W | 13,141 | ||||||||||||||
Intellectual property rights | 1,038 | 608 | — | 311 | 1 | — | 1,334 | |||||||||||||||||||||
Facility use rights | 9,832 | 814 | — | 1,044 | 2,070 | — | 7,532 | |||||||||||||||||||||
Frequency use rights | 1,208,854 | 7,369 | — | 7,794 | — | — | 1,208,429 | |||||||||||||||||||||
Development costs | 4,639 | 12,535 | — | 4,193 | 3,254 | (4,314 | ) | 5,593 | ||||||||||||||||||||
Organization cost | 3,645 | — | — | — | 3,645 | — | — | |||||||||||||||||||||
Other | 1,655 | 6,707 | — | 1,528 | 640 | — | 6,194 | |||||||||||||||||||||
Negative goodwill | (3,258 | ) | — | — | (668 | ) | — | — | (2,590 | ) | ||||||||||||||||||
W | 1,228,356 | W | 40,831 | W | — | W | 15,810 | W | 9,610 | W | (4,314 | ) | W | 1,239,633 | ||||||||||||||
Increase | Decrease | |||||||||||||||||||||||
Beginning | End of | |||||||||||||||||||||||
of Period | Acquisition | Other | Amortization | Other | Year | |||||||||||||||||||
Goodwill | W | 13,141 | W | 3,565 | W | 90 | W | 3,626 | W | 209 | W | 12,961 | ||||||||||||
Intellectual property rights | 1,334 | 768 | — | 387 | — | 1,715 | ||||||||||||||||||
Facility use rights | 7,532 | 2,112 | — | 1,252 | 31 | 8,361 | ||||||||||||||||||
Frequency use rights | 1,208,429 | — | — | 92,433 | — | 1,115,996 | ||||||||||||||||||
Development costs | 5,593 | 15,488 | 11,046 | 277 | 9,758 | |||||||||||||||||||
Other | 6,194 | 3,359 | 2,498 | 7,055 | ||||||||||||||||||||
Negative goodwill | (2,590 | ) | — | — | (647 | ) | — | (1,943 | ) | |||||||||||||||
W | 1,239,633 | W | 25,292 | W | 90 | W | 110,595 | W | 517 | W | 1,153,903 | |||||||||||||
A-21
11. | LEASED ASSETS: |
Operating | ||||
Year | Lease Payment | |||
2005 | W | 61,307 | ||
2006 | 60,527 | |||
W | 121,834 | |||
12. | BORROWINGS: |
Interest Rate | ||||||||||||
per Annum (%) | ||||||||||||
2004 | 2003 | 2004 | ||||||||||
General loans | 4.18,4.19 | W 60,000 | W 105,000 | |||||||||
Discounted promissory notes | 3.96,4.02 | 213,000 | 205,000 | |||||||||
Usance | 0.60,1.80 | 10,185 | 8,208 | |||||||||
US$ | (8,503 | ) | US$ | (7,863 | ) | |||||||
0.60,1.80 | 10,154 | 8,078 | ||||||||||
JPY(907 | ) | JPY(798 | ) | |||||||||
W 293,339 | W 326,286 | |||||||||||
Interest Rate | |||||||||||||
per Annum (%) | |||||||||||||
2004 | 2003 | 2004 | |||||||||||
Long-term debt in local currency: | |||||||||||||
General loans | — | W | 50,000 | W | — | ||||||||
Less: Current portion | (50,000 | ) | — | ||||||||||
W | — | W | — | ||||||||||
A-22
13. | DEBENTURES: |
Interest Rate | |||||||||||||
per Annum (%) | |||||||||||||
2004 | 2003 | 2004 | |||||||||||
General debentures | 2.64-7.00 | W | 2,213,666 | W | 2,472,147 | ||||||||
Convertible bonds | 1.00 | 375,080 | 374,800 | ||||||||||
2,588,746 | 2,846,947 | ||||||||||||
Less: Current portion | (1,005,274 | ) | (1,019,922 | ) | |||||||||
Discount on debentures | (11,608 | ) | (7,843 | ) | |||||||||
Add: Long-term accrued interest | 8,089 | — | |||||||||||
W | 1,579,953 | W | 1,819,182 | ||||||||||
Interest Rate | ||||||||||||||||
per Annum (%) | ||||||||||||||||
Due Date | 2004 | 2003 | 2004 | |||||||||||||
20th | Feb. 9, 2006 | 6.00 | W300,000 | W300,000 | ||||||||||||
21st | Mar. 19, 2004 | 6.00 | 400,000 | — | ||||||||||||
22nd | Apr. 18, 2004 | 2.70 | 104,994 | — | ||||||||||||
JPY (9,391 | ) | — | ||||||||||||||
23rd | Apr. 20, 2006 | 3.13 | 52,492 | 47,025 | ||||||||||||
JPY(4,695 | ) | JPY(4,695 | ) | |||||||||||||
28th | Apr. 8, 2004 | 7.00 | 200,000 | — | ||||||||||||
37th | May 24, 2005 | 2.64 | 106,180 | 95,122 | ||||||||||||
JPY(9,497 | ) | JPY(9,497 | ) | |||||||||||||
38th | July 16,2004 | 6.00 | 300,000 | — | ||||||||||||
40th | Feb. 18, 2005 | 6.00 | 350,000 | 350,000 | ||||||||||||
41st | Aug. 26, 2005 | 5.92 | 200,000 | 200,000 | ||||||||||||
42nd | Nov. 14, 2007 | 5.94 | 200,000 | 200,000 | ||||||||||||
44th | Feb. 19, 2009 | 5.66 | — | 360,000 | ||||||||||||
45th | Mar. 15, 2008 | 5.24 | — | 320,000 | ||||||||||||
46th | May 10, 2007 | 4.61 | — | 300,000 | ||||||||||||
47-1st | July 13, 2009 | 4.95 | — | 230,000 | ||||||||||||
47-2nd | July 12, 2011 | 5.32 | — | 70,000 | ||||||||||||
W2,213,666 | W2,472,147 | |||||||||||||||
JPY(23,583 | ) | JPY(14,192 | ) | |||||||||||||
A-23
Interest Rate | ||||||||||||||||||||
per Annum (%) | ||||||||||||||||||||
Conversion | ||||||||||||||||||||
Due Date | Coupon | Guaranteed | Price | Amount | ||||||||||||||||
3rd | Sep. 11, 2005 | — | 9.00 | 33,202 | W | 4,800 | ||||||||||||||
43rd | Nov. 29, 2005 | — | 3.00 | 37,200 | 370,000 | |||||||||||||||
�� | W | 374,800 | ||||||||||||||||||
Year | Amount | |||
2005 | W | 1,019,922 | ||
2006 | 347,025 | |||
2007 | 500,000 | |||
2008 | 320,000 | |||
2009 | 590,000 | |||
2011 | 70,000 | |||
W | 2,846,947 | |||
14. | DERIVATIVES: |
Exercisable Exchange | ||||||||||||||||
Term | Contract Amount | Type | Rate (JPY/W) | |||||||||||||
Shinhan Bank | 2004.05.10-2005.5.24 | JPY2,000,000,000 | JPY Call/JPY Put | 10.3-10.85 | ||||||||||||
2004.05.10-2006.4.20 | JPY2,000,000,000 | JPY Call/JPY Put | 10.65-13.4 |
15. | LONG-TERM ACCOUNTS PAYABLE-OTHER: |
A-24
2003 | 2004 | |||||||
Long-term account payable-other | W | 650,000 | W | 650,000 | ||||
Discount | (131,239 | ) | (111,793 | ) | ||||
W | 518,761 | W | 538,207 | |||||
Year | Amount | |||
2007 | W | 90,000 | ||
2008 | 110,000 | |||
2009 | 130,000 | |||
2010 | 150,000 | |||
2011 | 170,000 | |||
W | 650,000 | |||
16. | SHAREHOLDERS’ EQUITY: |
(1) | Capital stock |
(2) | Treasury stock |
(3) | Stock Option Plan |
Number of | Exercise | |||||||||||||||||||
Grant Date | Employee | Shares | Price/Share | Methods | Exercise Period | |||||||||||||||
2001. 3.29 | Former CEO | 18,000 | W | 41,273 | New stock issue | 2004.3.29,2009.3.28 | ||||||||||||||
2002. 3.25 | Senior managers | 44,800 | 45,178 | New stock issue | 2005.3.25,2010.3.24 | |||||||||||||||
2003. 9. 8 | CEO, Senior managers | 541,900 | 30,000 | New stock issue | 2005.9.9,2010.9.8 |
A-25
(4) | Dividends |
17. | INCOME TAX AND DEFERRED INCOME TAXES: |
2002 | 2003 | 2004 | |||||||||||
Income before income tax | W | 612,443 | W | 455,656 | W | 315,588 | |||||||
Adjustments: | |||||||||||||
Permanent differences | 8,163 | 16,624 | 17,458 | ||||||||||
Temporary differences, net | (5,949 | ) | 46,499 | 20,402 | |||||||||
2,214 | 63,123 | 37,860 | |||||||||||
Taxable income before tax loss carryforward | 614,657 | 518,779 | 353,448 | ||||||||||
Tax loss carryforward | (150,653 | ) | (135,600 | ) | (109,860 | ) | |||||||
Taxable income | 464,004 | 383,179 | 243,588 | ||||||||||
Tax rate (%) | 29.7 | 29.7 | 29.7 | ||||||||||
Tax calculated on taxable income | 137,809 | 113,804 | 72,346 | ||||||||||
Tax credit | (55,505 | ) | (42,485 | ) | (28,402 | ) | |||||||
Income tax currently payable | 82,304 | 71,319 | 43,944 | ||||||||||
Foreign income tax | — | 35 | — | ||||||||||
Decrease (Increase) in deferred income taxes: | |||||||||||||
Temporary differences | 1,767 | (12,978 | ) | (4,486 | ) | ||||||||
Utilization of accumulated tax losses carried forward | 5,518 | — | (13,750 | ) | |||||||||
Utilization of accumulated tax credit carried forward | (9,309 | ) | (7,674 | ) | (142 | ) | |||||||
Income tax expense | W | 80,280 | W | 50,702 | W | 25,566 | |||||||
2002 | 2003 | 2004 | ||||||||||
Beginning of year | W | 75,657 | W | 68,508 | W | 97,464 | ||||||
Increase | 9,309 | 37,261 | 18,377 | |||||||||
Decrease | (7,285 | ) | — | — | ||||||||
Decrease from changes in consolidated subsidiaries | (9,173 | ) | (8,305 | ) | (1,397 | ) | ||||||
End of year | W | 68,508 | W | 97,464 | W | 114,444 | ||||||
A-26
18. | ASSETS AND LIABILITIES DENOMINATED IN FOREIGN CURRENCIES: |
2003 | 2004 | |||||||||||||||
Account | U.S. Dollars | Won Equivalent | U.S. Dollars | Won Equivalent | ||||||||||||
Cash and cash equivalents | $ | 163 | W | 195 | $ | 1,026 | W | 1,075 | ||||||||
Trade accounts and notes receivable | 1,447 | 1,733 | — | — | ||||||||||||
Long-term loans | 1,450 | 1,737 | 7,185 | 7,500 | ||||||||||||
Trade accounts and notes payable | 6,623 | 7,933 | 6,205 | 6,477 | ||||||||||||
Accounts payable- other | 3,019 | 3,616 | 19,289 | 20,134 |
19. | OPERATING REVENUE AND EXPENSES: |
2002 | 2003 | 2004 | ||||||||||
PCS service | W | 4,208,409 | W | 4,246,131 | W | 4,695,733 | ||||||
Sales of PCS handsets | 1,111,619 | 877,481 | 1,247,159 | |||||||||
W | 5,320,028 | W | 5,123,612 | W | 5,942,892 | |||||||
A-27
2002 | 2003 | 2004 | ||||||||||
Salaries and wages | W | 133,695 | W | 146,271 | W | 175,541 | ||||||
Provision for severance indemnities | 15,100 | 12,257 | 12,485 | |||||||||
Employee welfare | 23,686 | 27,041 | 29,665 | |||||||||
Rent | 80,885 | 100,925 | 114,220 | |||||||||
Lease | 50,383 | 40,839 | 61,307 | |||||||||
Commissions | 353,628 | 424,255 | 439,524 | |||||||||
Depreciation | 723,667 | 838,747 | 996,044 | |||||||||
Amortization | 1,832 | 15,288 | 108,243 | |||||||||
Tax and dues | 41,451 | 47,887 | 45,400 | |||||||||
Interconnection charges | 462,117 | 464,264 | 506,982 | |||||||||
Leased line charges | 367,800 | 355,936 | 357,257 | |||||||||
Ordinary development costs | 19,991 | 13,146 | 9,583 | |||||||||
Sales promotion | 173,646 | 131,394 | 180,574 | |||||||||
Sales commissions | 553,015 | 457,760 | 718,089 | |||||||||
Advertisements | 144,938 | 123,842 | 135,663 | |||||||||
Bad debt | 23,555 | 52,488 | 25,485 | |||||||||
Water and electricity | 39,521 | 43,980 | 49,686 | |||||||||
Communications | 28,125 | 29,397 | 28,907 | |||||||||
Repairs and maintenance | 71,597 | 59,373 | 58,456 | |||||||||
Cost of PCS handset sales | 1,102,273 | 881,678 | 1,268,367 | |||||||||
Other | 64,932 | 75,192 | 81,267 | |||||||||
W | 4,475,837 | W | 4,341,9600 | W | 5,402,745 | |||||||
20. | RELATED PARTY TRANSACTIONS: |
Transaction | 2002 | 2003 | 2004 | |||||||||||||
KT Corporation | Interconnection charges and others | W | 549,493 | W | 599,176 | W | 631,544 | |||||||||
KT Solutions | Interconnection charges and others | 5,671 | 9,683 | 8,772 | ||||||||||||
KT Hitel | ” | 25 | — | 43 | ||||||||||||
Others | ” | 511 | 775 | 1,478 | ||||||||||||
W | 555,700 | W | 609,634 | W | 641,837 | |||||||||||
A-28
Transaction | 2002 | 2003 | 2004 | |||||||||||||
KT Corporation | Leased line charges and others | W | 1,270,716 | W | 475,648 | W | 482,900 | |||||||||
KT Solutions | Interconnection charges and others | 261 | 2,437 | 8,258 | ||||||||||||
KT Hitel | ” | 539 | 280 | 6,933 | ||||||||||||
Others | ” | 1,196 | 3,591 | 2,191 | ||||||||||||
W | 1,272,712 | W | 481,956 | W | 500,282 | |||||||||||
(2) | Receivables and payables with related parties as of December 31, 2003 and 2004 are as follows (won in millions): |
Receivables | Payables | |||||||||||||||
2003 | 2004 | 2003 | 2004 | |||||||||||||
KT Corporation | W | 160,042 | W | 155,301 | W | 354,893 | W | 389,725 | ||||||||
KT Solutions | 150 | 300 | 201 | 377 | ||||||||||||
KT Hitel | — | — | 28 | 2,584 | ||||||||||||
Others | 17 | 384 | 1,323 | 293 | ||||||||||||
W | 160,209 | W | 155,985 | W | 356,445 | W | 392,979 | |||||||||
21. | COMMITMENT: |
22. | SEGMENT INFORMATION: |
IMT 2000 | PCS | |||||||||||||||
2002 | PCS Service | Service | Handsets | Total | ||||||||||||
Operating revenue | W | 5,320,028 | W | — | W | — | W | 5,320,028 | ||||||||
Operating income | 844,191 | — | — | 844,191 | ||||||||||||
Ordinary income | 612,443 | — | — | 612,443 | ||||||||||||
Depreciation | 723,667 | — | — | 723,667 | ||||||||||||
Property and equipment, net(*) | 4,241,471 | 11,732 | 3,865 | 4,257,068 |
A-29
IMT 2000 | PCS | |||||||||||||||
2003 | PCS Service | Service | Handsets | Total | ||||||||||||
Operating revenue | W | 5,076,526 | W | — | W | 47,086 | W | 5,123,612 | ||||||||
Operating income | 782,231 | — | (579 | ) | 781,652 | |||||||||||
Ordinary income | 459,084 | — | (3,428 | ) | 455,656 | |||||||||||
Depreciation | 837,971 | — | 1,459 | 839,430 | ||||||||||||
Property and equipment, net(*) | 4,272,653 | 49,714 | 8,879 | 4,331,246 |
IMT 2000 | PCS | |||||||||||||||
2004 | PCS Service | Service | Handsets | Total | ||||||||||||
Operating revenue | W | 5,830,818 | W | — | W | 112,074 | W | 5,942,892 | ||||||||
Operating income | 528,987 | — | 11,160 | 540,147 | ||||||||||||
Ordinary income | 308,610 | — | 6,978 | 315,588 | ||||||||||||
Depreciation | 992,900 | — | 3,144 | 996,044 | ||||||||||||
Property and equipment, net(*) | 4,340,936 | 76,679 | 12,594 | 4,430,209 |
(*) | construction in progress is not included. |
23. | EVENT OCCURRING AFTER BALANCE SHEET DATE: |
24. | MERGER: |
(1) | Relation of the two companies |
(2) | Schedule of merger |
(3) | Exchange rate of shares |
(4) | Result of the merger |
A-30
(5) | Summarized financial statements of KT ICOM are as follows (won in millions): |
Summarized Balance Sheets |
2003.3.5 | 2002.12.31 | ||||||||
Current assets | W | 1,080,950 | W | 1,114,766 | |||||
Non-current assets | 1,378,039 | 1,349,660 | |||||||
Total assets | W | 2,458,989 | W | 2,464,426 | |||||
2003.3.5 | 2002.12.31 | ||||||||
Current liabilities | W | 196,745 | W | 130,625 | |||||
Long-term liabilities | 510,417 | 515,619 | |||||||
Total liabilities | 707,162 | 646,244 | |||||||
Capital stock | 500,000 | 500,000 | |||||||
Capital surplus | 1,300,000 | 1,300,000 | |||||||
Accumulated retained earnings | 18,604 | 18,182 | |||||||
Capital adjustments | (66,777 | ) | — | ||||||
Total shareholders’ equity | 1,751,827 | 1,818,182 | |||||||
Total liabilities and shareholders equity | W | 2,458,989 | W | 2,464,426 | |||||
2003.1.1-2003.3.5 | 2002.1.1-2002.12.31 | |||||||
Operating revenue | W | — | W | — | ||||
Operating expenses | 14,570 | 61,303 | ||||||
Operating loss | (14,570 | ) | (61,303 | ) | ||||
Other income | 10,571 | 60,058 | ||||||
Ordinary loss | (3,999 | ) | (1,245 | ) | ||||
Extraordinary item | — | — | ||||||
Loss before income tax | (3,999 | ) | (1,245 | ) | ||||
Income tax benefits | (8,038 | ) | (359 | ) | ||||
Net income (loss) | W | 4,039 | W | (886 | ) | |||
25. | RECONCILIATION TO ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES: |
A-31
(1) | Capitalization of foreign currency translation gain (loss) |
(2) | Interest Capitalization |
(3) | Licensing Cost |
(4) | Deferred Charges |
(5) | Revenue Recognition |
A-32
(7) | Merger with KT ICOM |
(8) | Goodwill and Other Intangibles |
Amortization Expense | ||||||||||||||||||||
Initial Amount | 2002 | 2003 | 2004 | |||||||||||||||||
KTM.Com | Goodwill | W | 558,505 | W | — | W | — | W | — | |||||||||||
Subscriber base | 605,563 | 126,159 | 162,204 | 162,204 | ||||||||||||||||
License cost | 83,875 | — | — | — | ||||||||||||||||
KT ICOM | Frequency use right | 1,209,883 | — | 7,753 | 91,945 |
(9) | Disposal of Trade Accounts and Notes Receivable |
(10) | Minority Interests in Consolidated Subsidiary |
(11) | Accrued Severance Benefits |
A-33
Year | Amount | |||
2012 | W | 439 | ||
2013 | 207 | |||
2014 | 1,029 | |||
W | 1,675 | |||
(12) | Comprehensive Income |
Korean Won | |||||||||||||
2002 | 2003 | 2004 | |||||||||||
(In millions) | |||||||||||||
Net income as adjusted in accordance with U.S. GAAP | W | 460,679 | W | 332,756 | W | 173,856 | |||||||
Other comprehensive income, net of tax: | |||||||||||||
Unrealized gain (loss) on investments, net of tax of W745 million in 2002, W1,540 million in 2003 and W697 million in 2004 | 1,762 | 3,646 | (1,649 | ) | |||||||||
Reclassification adjustment | — | (548 | ) | — | |||||||||
Comprehensive income as adjusted in accordance with U.S. GAAP | W | 462,441 | W | 335,854 | W | 172,207 | |||||||
A-34
(13) | Effect on Net Earnings and Shareholders’ Equity |
2002 | 2003 | 2004 | |||||||||||
Net income under Korean GAAP | W | 532,163 | W | 406,029 | W | 287,863 | |||||||
Adjustments: | |||||||||||||
(1) Capitalization of foreign currency translation gain (loss), net | 1,278 | 820 | 820 | ||||||||||
(2) Interest capitalization | 4,398 | 75,867 | 12,402 | ||||||||||
(4) Deferred charges | 248 | (3,210 | ) | (3,693 | ) | ||||||||
(5) Revenue recognition | 4,482 | 4,150 | (1,075 | ) | |||||||||
(7) Merger with KT ICOM | — | 240 | 2,884 | ||||||||||
(8) Amortization of subscriber base | (126,159 | ) | (162,204 | ) | (162,204 | ) | |||||||
(9) Disposal of trade accounts and notes receivable | 14,068 | (7,357 | ) | (6,385 | ) | ||||||||
Deferred tax effect of U.S. GAAP adjustments | 30,201 | 18,421 | 43,244 | ||||||||||
(71,484 | ) | (73,273 | ) | (114,007 | ) | ||||||||
Adjusted net income under U.S. GAAP | W | 460,679 | W | 332,756 | W | 173,856 | |||||||
Basic earnings per share | W | 2,514 | W | 1,776 | W | 946 | |||||||
2003 | 2004 | ||||||||
Shareholders’ equity under Korean GAAP | W | 3,143,038 | W | 3,190,149 | |||||
Adjustments: | |||||||||
(1) Capitalization of foreign currency translation gain (loss), net | (2,246 | ) | (1,427 | ) | |||||
(2) Interest capitalization | 57,386 | 69,789 | |||||||
(3) Licensing cost | 44,953 | 44,953 | |||||||
(4) Deferred charges | (3,210 | ) | (6,903 | ) | |||||
(5) Revenue recognition | (1,743 | ) | (2,818 | ) | |||||
(6) Merger with KTM.Com | 793,800 | 631,596 | |||||||
(7) Merger with KT ICOM | (37,249 | ) | (34,365 | ) | |||||
(9) Disposal of trade accounts and notes receivable | 6,711 | 326 | |||||||
(10) Minority interests in consolidated subsidiary | (3,300 | ) | (8,040 | ) | |||||
Deferred tax effect of U.S. GAAP adjustments | (237,247 | ) | (194,003 | ) | |||||
617,855 | 499,108 | ||||||||
Shareholders’ equity under U.S. GAAP | W | 3,760,893 | W | 3,689,257 | |||||
A-35
2003 | 2004 | ||||||||
Assets: | |||||||||
Current assets | W | 1,770,935 | W | 1,986,830 | |||||
Property and equipment | 4,710,105 | 4,653,296 | |||||||
Intangible assets | 2,127,992 | 1,876,382 | |||||||
Other assets | 358,894 | 399,296 | |||||||
W | 8,967,926 | W | 8,915,804 | ||||||
Liabilities: | |||||||||
Current liabilities | W | 2,604,848 | W | 2,414,635 | |||||
Long-term liabilities | 2,600,613 | 2,805,940 | |||||||
5,205,461 | 5,220,575 | ||||||||
Minority interest in consolidated subsidiaries | 1,572 | 5,972 | |||||||
Shareholders’ equity | 3,760,893 | 3,689,257 | |||||||
W | 8,967,926 | W | 8,915,804 | ||||||
A-36
KT CORPORATION | |
(Registrant) | |
/s/Yong-Kyung Lee | |
Name: Yong-Kyung Lee | |
Title: President and Chief Executive Officer |
1 | Articles of Incorporation of KT Corporation (English translation) | |||
2 | .1* | Form of Common Stock Certificate of KT Corporation, par value Won 5,000 per share (including translation in English) (incorporated herein by reference to Exhibit 4.3 of the Registrant’s Registration Statement (Registration No. 333-7630) on Form F-1). | ||
2 | .2* | Deposit Agreement dated as of May 25, 1999 entered into among KT Corporation, Citibank, N.A., as depositary, and all Holders and Beneficial Owners of American Depositary Shares evidenced by the American Depositary Receipts issued thereunder, including the form of American depositary receipt (incorporated herein by reference to Exhibit (a)(i) of the Registrant’s Registration Statement (Registration No. 333-13578) on Form F-6). | ||
2 | .3* | Form of Amendment No. 1 Deposit Agreement dated as of May 25, 1999 entered into among KT Corporation, Citibank, N.A., as depositary, and all Holders and Beneficial Owners of American Depositary Shares evidenced by the American Depositary Receipts issued thereunder, including the form of American depositary receipt (incorporated herein by reference to Exhibit (a)(ii) of the Registrant’s Registration Statement (Registration No. 333-13578) on Form F-6). | ||
2 | .4* | Letter from Citibank, N.A., as depositary, to the Registrant relating to the pre-release of the American depositary receipts (incorporated herein by reference to the Registrant’s Registration Statement (Registration No. 333-10330) on Form F-6). | ||
7 | .1 | Computation of ratio of earnings to fixed charges | ||
8 | .1 | List of subsidiaries of KT Corporation | ||
12 | .1 | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
12 | .2 | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
13 | .1 | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
15 | .1 | Consent of KPMG Samjong Accounting Corp. with respect to the financial statements of KT Corporation | ||
15 | .2 | Consent of Deloitte HanaAnjin LLC with respect to the financial statements of KT Freetel Co., Ltd. | ||
15 | .3 | The Telecommunications Basic Law (English translation) | ||
15 | .4 | Enforcement Decree of the Telecommunications Basic Law (English translation) | ||
15 | .5 | The Telecommunications Business Law (English translation) | ||
15 | .6 | Enforcement Decree of the Telecommunications Business Act (English translation) |
* | Filed previously as indicated. |